Custody models explained
Whoever controls the private keys controls the funds. When a business accepts blockchain payments, it has to decide whether it holds those keys itself, lets a custodian hold them, or uses a processor that converts payments to Canadian dollars so the business never holds crypto-assets at all. Each model shifts cost, control, risk and regulatory questions in a different direction.
Key points
- Self-hosted means your business holds the keys and carries the full security burden.
- Custodial means a third party holds the keys on your behalf, so you depend on that provider.
- A processor that converts to fiat can keep crypto-assets off your books, usually for an added fee.
- FINTRAC excludes a business that solely accepts payment for its own goods or services from MSB status; doing more may change that.
Three models at a glance
The labels vary by provider, but arrangements generally fall into one of three patterns. The table describes them in general terms; any real arrangement needs its contract read closely.
| Self-hosted wallet | Custodial account | Processor converts to fiat | |
|---|---|---|---|
| Who holds the private keys | Your business | The custodian | The processor, briefly, or no one on your side |
| What you receive | Crypto-assets in your wallet | A balance in your account with the custodian | Canadian dollars in your bank account |
| Main risk you carry | Losing keys or having them stolen | Provider failure, freezes or access restrictions | Provider failure before payout; fee and rate terms |
| Conversion to CAD | You arrange it | Often offered by the custodian | Handled by the processor |
| Operational load | Highest | Medium | Lowest |
Self-hosted wallets
In a self-hosted (non-custodial) model, your business generates and controls the keys, typically using hardware devices or a multi-signature arrangement. Payments land directly in addresses you control, and no third party can freeze or move them.
That independence comes with responsibility. If keys are lost, the funds are generally unrecoverable; if keys are stolen, transfers are irreversible. You also need your own process to convert to Canadian dollars, and your own records of every receipt. Wallet security for businesses covers the controls involved.
This is the model behind the site's default stablecoin assumptions: no processor fee, a network fee per payment, and your own conversion and off-ramp costs.
Custodial accounts
A custodian holds keys on your behalf and shows you an account balance. Day-to-day security of keys becomes the custodian's job, and a custodian may also offer conversion and withdrawal to a bank account.
In exchange, you rely on the custodian's solvency, security, terms of service and availability. A custodian may restrict withdrawals, freeze funds in some circumstances, or change its terms. Ask how client assets are held, whether they are segregated from the custodian's own, and what happens in a wind-down. The vendor evaluation checklist and questions to ask a payment provider help structure those conversations.
Processors that convert to fiat
Some processors accept a crypto-asset or stablecoin from the customer and pay the business in Canadian dollars. The business may never hold crypto-assets, which can simplify accounting, reduce price exposure and remove key management from the business's side.
The trade-off is cost and dependence. Suppose a processor charged an assumed 1% fee on top of the default stablecoin costs. On $50,000 a month in $120 payments, 15% cross-border, the site's illustrative defaults put the self-hosted stablecoin cost at about $771 a month (1.54%) and the processor version at about $1,271 (2.54%). That gap is the price of handing off custody and conversion, and it should be weighed against the staff time and risk you would otherwise carry.
In this illustration, the only difference between the two figures is the assumed 1% processor fee: $500 a month on $50,000. Real processor terms vary, so substitute written quotes in the payment cost comparison.
FINTRAC and the MSB question
FINTRAC treats dealing in virtual currency as a money services business (MSB) activity, covering both virtual currency exchange and virtual currency transfer services. Its MSB registration questions page (modified August 22, 2024) lists exclusions, including a person or entity that solely accepts a payment for goods or services that they supplied to their own customer.
The word solely matters. A business that only takes payment for its own sales, in any custody model, may fit that exclusion. A business that also converts crypto-assets for others, holds value for others or moves payments on behalf of third parties may not. FINTRAC's notice of July 21, 2022 says it treats payment service providers for invoices and goods and services as remitting or transmitting funds or dealing in virtual currency.
MSBs must register with FINTRAC before offering MSB services. As of October 30, 2026, these are the positions stated on FINTRAC's pages; for a specific model, read FINTRAC MSB registration and put your questions to FINTRAC directly. Separately, payment service providers may fall under the Bank of Canada's Retail Payment Activities Act; see the RPAA page.
Using a registered provider does not settle your own obligations, and a provider's registration is not an endorsement. Check both sides separately.
Choosing a model
No model is right for every business. Working through these questions, ideally with your accountant and a lawyer, usually makes the choice clearer.
- Decide whether you want to hold crypto-assets at all, or only Canadian dollars.
- Estimate monthly volume and the staff time you can give to key management and reconciliation.
- Compare total costs with written fee terms for each option you are considering.
- Ask each provider how client assets are held and what happens if it stops operating.
- Map your intended activities against FINTRAC's MSB guidance and note any questions for FINTRAC.
- Write down who in the business can move funds, and under what approvals, in the chosen model.
Questions people ask
What does "not your keys, not your coins" mean?
It means that whoever controls the private keys controls the funds. In a custodial model, the custodian holds the keys and you hold a claim against it.
Do I need to register as an MSB if I accept crypto for my own sales?
FINTRAC lists an exclusion for a business that solely accepts payment for goods or services it supplied to its own customer. If you do anything more, check FINTRAC's guidance and ask FINTRAC.
Is a processor that pays me in Canadian dollars cheaper?
It may add a fee, but it can save staff time and remove price and key-management risk. Compare total cost with written quotes.
Sources
- FINTRAC — MSB registration questions
- FINTRAC — Notice on crowdfunding platforms and certain payment service providers (2022-07-21)
- FINTRAC — Register an MSB
- Bank of Canada — Retail payments supervision
Reviewed October 30, 2026. Educational information only; not financial, legal, tax or investment advice. This site does not process payments or hold funds.