As cryptocurrency and blockchain technologies become increasingly popular, many Canadians are seeking to learn more about crypto and how they can get involved. Canada has not taken as many steps as has, for example, the United States, when it comes to regulating and defining digital currency. Nor have Canada’s regulatory agencies found any strong reason to crack down on digital currency trading. They have instead adopted a fairly friendly stance towards them.
The Canadian government’s page on crypto outlines its position on digital currencies and provides helpful tips for transacting and storing crypto. Like many other countries, the government warns that citizens proceed at their own risk when purchasing Bitcoin (BTC) and other assets. Users of cryptocurrency generally lack access to any insurance or legal protections and must face the risks of fraud, cyber theft and price volatility head on.
Canada has had some controversial moments with crypto. Infamously, QuadrigaCX — once Canada’s largest crypto exchange — left investors without any means of accessing their funds after the company’s CEO died in suspicious circumstances. However, Canadians usually purchase and trade crypto safely every day on reputable exchanges. Well-known developers, such as Ethereum founder Vitalik Buterin, have paved the way for blockchain innovation in Canada.
This beginners’ guide will cover the legal and regulatory landscape for crypto in Canada and offer some tips about where Canadians can safely buy digital currencies.
Is Cryptocurrency Legal in Canada?
Yes, crypto is completely legal in Canada. The country provides little in the way of crypto regulation and hasn’t made any moves to deter investors. The government has also itself engaged in experimental blockchain-based projects for the National Research Agency and Canada Border Services Agency. The Bank of Canada has also explored issuing a digital currency via the central bank.
“You can use digital currencies to buy goods and services on the Internet and in stores that accept digital currencies. You may also buy and sell digital currency on open exchanges, called digital currency or cryptocurrency exchanges. An open exchange is similar to a stock market.” [Government of Canada website]
Even though the Canadian government is relatively tolerant of digital currencies, it has nonetheless set a few rules.
In Canada, digital assets are primarily overseen by the Canadian Securities Administrators (CSA). Regulations are largely targeted at exchanges or entities that plan to launch Initial Coin Offerings (ICOs) or open up shop for traders.
Regulation from the Canadian government aims to establish an understanding of what constitutes an exchange and common rules that must be adhered to in order to protect investors and deter illegal practices. Canada also implements strict anti-money laundering regulations and stipulates that all money services businesses must be transparent, especially when it comes to transactions across borders.
Key points about the crypto regulatory and legal landscape in Canada:
- Cryptocurrency is completely legal in Canada
- The Canadian government has itself explored applications of blockchain technologies
- The Canadian Securities Administrators is the main regulatory organization overseeing crypto-related activities
- Canada implements strict anti-money laundering measures
Are Crypto Assets Taxed in Canada?
Yes, cryptocurrency is taxed in Canada by the Canada Revenue Agency (CRA). Proceeds on crypto investments are subject to either capital gains tax or income tax rules. If you are a regular investor trading via a crypto exchange, you will need to pay a capital gains tax on 50% of any profits.
If you are paid in Bitcoin (BTC) or any other cryptocurrency, you will be subject to income tax on 100% of your salary. Moreover, if crypto forms a part of your business activities, it will all be taxable.
You will need to pay taxes after making the following transactions:
- Selling your crypto assets for CAD
- Trading one digital asset for another (e.g., trading BTC for ETH)
- Using digital currency to pay for goods or services
- Gifting or selling crypto peer-to-peer (P2P)
Come tax season, Canadians simply report their capital gains or losses as they would with other investments.
Taxes on Mining
The CRA has stipulated that cryptocurrency mining should be treated as a barter transaction: miners’ hardware provides a service and they are rewarded for this. If mining operations form part of a business venture, the operator will be required to pay taxes on 100% of any earnings, as per the previous section.
However, if a Canadian citizen is mining crypto as a hobby, he or she may not have to pay taxes on any earnings. There is a grey area when it comes to this issue: mining may or may not be classified as a business venture for tax purposes depending on whether or not profit is taken to be the only motive of the activity, the individual’s level of technical expertise, and whether or not he or she has taken out loans to buy sophisticated mining equipment. It’s best to talk with a tax lawyer to make sure you are clear about any tax obligations.
Do Any Businesses Accept Crypto in Canada?
Although crypto isn’t considered to be legal tender in Canada, some Canadian businesses do accept crypto (usually Bitcoin (BTC)) payments. For example, a number of small cafes and pubs, as well as larger companies, have decided to accept Bitcoin for goods and services. These include:
- Vancouver: Waves Coffee House, Steamrollers, SFU Bookstore, and more than 100 others.
- Montreal: Bar La Caverne, Super Marche Brito, Nectar Flowers, Cafe Aunja, and over 100 others.
- Calgary: Sandman Hotel, Music Center Canada, Colour Bee Painting, and several others.
Where Can You Buy Crypto in Canada?
Investors can purchase digital assets by setting up an account with a trusted exchange. Most popular United States-based and international exchanges are available to Canadians and there are excellent Canadian exchanges as well. Many of these options will directly support CAD deposits.
Crypto in Canada
Canada offers investors the opportunity to invest in top cryptocurrencies like Bitcoin (BTC) and Ether (ETH), alongside thousands of altcoins. Canadians have the freedom to purchase, stake, or mine any digital currency as they please, provided they comply with tax laws and anti-money laundering regulations.
Bitcoin in Canada
As Bitcoin (BTC) continues to rise in value, Canadian investors have the chance to purchase Bitcoin online or mine it themselves. There are also Bitcoin ATMs in many large cities in Canada, where investors can exchange CAD for BTC. However, these ATMs can charge hefty transaction fees of between 5% and 10%.