Canada: Taxation Of Cryptocurrencies In Canada: What Business Leaders Need To Know

Last Updated: March 27 2019
Article by Alexander Demner

In these heady days of cryptocurrency investment, the market can seem like a gold rush: offering promise, but at the expense of predictability. The taxation of cryptocurrencies is no different. In this article, a collaboration between the Fintech Team at EKB and Alexander Demner at Thorsteinssons LLP, we consider the tax implications for cryptocurrency investment in Canada.

"In this world nothing can be said to be certain, except death and taxes."

—Benjamin Franklin

Digital Currency or Taxable Commodity?

Despite its name, cryptocurrency's status as a "currency" remains very much in question. In 2013, the Canada Revenue Agency (the CRA) took the position that Bitcoin and other cryptocurrencies are not currencies and should instead be viewed as commodities.

To date, no country has recognized a cryptocurrency as a form of domestic legal tender. However, there are strong signs that this may change in the near future.

Assuming the CRA's characterization of cryptocurrencies is correct, what are the tax implications of their being treated as commodities? Among other things, it means that people using crypto to buy goods and services are undertaking "barter" transactions in the eyes of the CRA. Thus, a value (in Canadian dollars) has to be determined for both ends of the transaction (i.e., the crypto as well as the item bought/sold). In other words, accepting Bitcoin as payment does not exempt merchants from recognizing income on a sale. Similarly, those who swap crypto for merchandise would need to report income or a capital gain (or loss) on the disposition of their crypto asset.

Perhaps less obviously, the barter analysis also likely applies to "crypto-for-crypto" trades. That is, the crypto world is largely centered around a few well-known bellwether coins like Bitcoin and Ethereum, which can be traded through intermediaries for legal tender (or "fiat" currency as it is known in the crypto world). There are also a large number of smaller cryptocurrencies, sometimes called "alt-coins", which for the most part can only be purchased with one of the more established coins or tokens (like the aforementioned Bitcoin or Ethereum). Barter treatment means that each alt-coin purchase, or even a Bitcoin for Etherum trade, potentially creates a taxable event. This is at odds with the commonly held myth that crypto-investors only need to compute realized income or gains when "cashing out" in crypto-for-fiat trades.

Internet Anonymity: A False Hope?

Cryptocurrency investors in Canada may feel that they enjoy relative anonymity, with minimal detection risk by the CRA. A glance across the border at our American neighbours, however, reveals the steps that taxation authorities can take to investigate crypto-holders.

In United States v Coinbase Inc., the IRS brought a successful petition against Coinbase, a digital currency wallet and platform for trading digital currencies, to release: (1) the name, taxpayer ID number, address and birth date of account holders; (2) account records (including transaction activity and account balances); and (3) periodic account statements or invoices, for all accounts with at least one transaction of USD$20,000 in any one transaction type (i.e., buy, sell, send, or receive) during any of 2013, 2014, or 2015. The IRS brought the petition on the basis that, while Coinbase boasted 5.9 million customers served and more than $6 billion in transactions, only 800-900 taxpayers reported dispositions involving properties related to Bitcoin in the 2013 through 2015 years.

It doesn't take much imagination to picture the CRA – which has similar investigative powers – to make a similar request of Canadian cryptocurrency exchanges. Conceivably, such enforcement action could also extend to Canadian entities who have undertaken an Initial Coin Offering (ICO) or Initial Token Offering (ITO), or have otherwise facilitated crypto-transactions. In our increasingly globalized world, we may even see the CRA attempt to reach beyond our borders and request data from foreign institutions or governments.

Mining can be Taxing

Crypto-miners potentially face a markedly different tax treatment than passive investors. Although there is no court decision on point (and may not be for years to come), there is a significant risk that miners – whether rewarded based on proof of work or proof of stake – must pay full income tax rates on all profits realized. In dedicating significant time, energy, and resources towards maximizing return from crypto-mining activities, miners could be characterized as engaged in a business. The result: income tax of up to 49.8% (in 2018) on any profits realized by B.C.-resident individuals. Passive investors in crypto could be subject to tax at only half that rate as realizing capital gains, rather than business income.

GST Collection/Remittance

The CRA has also commented that accepting cryptocurrencies as payment for goods or services can require the vendor to collect and remit GST/HST, based on the fair market value of the crypto received. As the Government of Canada does not yet accept Bitcoin (or other cryptocurrencies) as payment – contrary to what some recent telemarketing scams would have you believe –GST remitters would need to make an equivalent Canadian dollar remittance on any cryptocurrency transactions attracting GST (to the extent not offset by input tax credits). The GST consequences to those disposing of crypto is currently uncertain, and it is anticipated that that the CRA will provide their administrative views on that topic in the near future.

Unsettled Issues

The cryptocurrency world is replete with vagaries and uncertainties. Investors and traders face a veritable tax minefield in undertaking digital currency transactions. Holding assets outside Canada (even mere backup copies held in cold storage) may give rise to "specified foreign reporting" obligations – investors be warned, circumventing these obligations may result in draconian penalties. Suffering a theft or loss of crypto may result in the doubly-punitive outcome of economic loss coupled with tax penalization. Each of those, and many others, are nuanced issues in a fluid and ever-evolving industry. Professional tax advice is always strongly recommended.

The Future is Regulated

Increasing scrutiny from all types of regulators, including tax authorities, seems inevitable for the crypto sector. While this may diminish some of the potential profits when compared to the early boom days of crypto, it will likely add structure, transparency and legitimacy over the long term. Industry participants are well served to stay up to date on developments, as the CRA addresses the topics discussed above and others. As Ben Franklin said, however, they should not expect the government to fail to ask for its share of any profits.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions