Bitcoin Regulation In Canada 2024: Is it Legal Tender Yet?

Bitcoin Regulation In Canada

Bitcoin is known for being the first and most popular cryptocurrency in the world. The digital currency has been with us since 2009 and has since grown into a legitimate currency for some countries.

While Canada does not recognize it as a legal tender, there are many places within its borders that accept Bitcoin as a form of payment.

Of course, despite its status as a non-legal currency, Bitcoin is used by people in Canada for a variety of purposes. This (among other reasons) is why Bitcoin and other cryptocurrencies are regulated by the Canadian government.

So, exactly what type of regulation does Canada have in place for Bitcoin? And how does it impact buyers, sellers, and traders of this popular crypto? We’ll dive into these questions and more in our guide to Bitcoin regulation in Canada.

Non-Legal Tender

Before we get too deep into how Bitcoin is regulated by Canada, we first want to let you know that Bitcoin is not a legal currency in Canada. The government does not recognize it as a valid currency type.

The only legal tender in Canada is the coins and notes distributed by the Royal Canadian Mint Act and the Bank of Canada.

As a result, the Canadian government nor any of its centralized agencies or bureaus supports Bitcoin. Additionally, Bitcoin is not recognized by financial institutions – like credit unions or banks – as a legitimate currency.

How Does Canada Regulate Bitcoin?

Bitcoin Regulation In Canada

Canada labels Bitcoin as a security. That means Bitcoin is subject to all the securities laws that exist within the country. As a tradable asset, Bitcoin holds the same traits as bonds, stocks, shares, ETFs, futures, and options.

Most investors buy these types of assets with the hopes that they will rise in value.

Now that we’re clear on how Canada defines Bitcoin and what securities are, we need to discuss how the country regulates Bitcoin. Before we get into all that, we’ll discuss the history behind Bitcoin in Canada.

Canada and Bitcoin Regulation

Bitcoin has been around for over a decade, which isn’t a very long time when it comes to the history of currency. However, during that time, Canada has been at the forefront of how governments view and regulate Bitcoin.

For example, Canada was the very first government to pass AML (Anti-Money Laundering) regulations for Bitcoin.

Canada has been taxing Bitcoin since 2013 when it started creating and implementing regulations that were catered toward Bitcoin and other money service businesses. With these policies in place, Canada then established two more acts that focused on Bitcoin: The Terrorists Financing Act and the Proceed of Crime Act.

Both were created specifically for Bitcoin and other cryptocurrencies and were considered to be the first laws that addressed these types of digital currency.

While these rules obviously apply to crypto exchanges that reside within the country, they also must be followed by any external business that offers services to those who reside in Canada.

Additionally, in 2017 the Canadian Securities Administration (CSA) announced that Bitcoin and any other cryptocurrency would be regulated by the country’s securities guidelines and laws.

Mining Bitcoin

Mining Bitcoin

If you’re considering mining Bitcoin, you should know that it requires a lot of electricity and a fairly powerful computer. The good news is that you can mine as much as you want in Canada, so long as your electric company doesn’t shut you off.

There are no restrictions imposed by the Canadian government when it comes to mining Bitcoin. However, there are a few companies, like Hydro-Quebec, that restrict their miners to 300 megawatts.

Don’t be surprised if some other electric companies decide to follow suit in the coming months and years.

Paying taxes on Bitcoin rewards

If you manage to earn rewards from mining Bitcoin in Canada, the good news is that you don’t have to pay taxes on them…yet. The caveat is that once you sell your Bitcoin, you’ll have to pay taxes on them.

When tax season arrives, you’ll have to report any profits or losses you experienced to the Canadian government. These are taxed as capital gains, which means you don’t have to report it as income.

It works the same way when you buy and sell stock. You aren’t required to pay taxes on the investment until you sell it and recognize a profit or loss. That’s how Bitcoin works.

Of course, there are those who are always looking for a loophole when paying taxes on their mined Bitcoin.

For example, there are some people who will move their Bitcoin profits into their Tax-Free Savings Account (TFSA). Unfortunately, this is illegal in Canada. Currently, paying taxes on your Bitcoin is pretty straightforward.

Once you claim profits on your mined Bitcoin, it’s treated as capital gains. Pay the corresponding taxes. It’s that simple.

Exchange Regulation in Canada

For those not interested in earning Bitcoin through mining, there’s also the option to purchase Bitcoin on a crypto exchange. For exchanges that operate in Canada, the restrictions, regulations, and guidelines for money services apply.

That means these platforms are required to provide reporting, record-keeping, and verification documentation in the event the Canadian government needs that information.

As of June 2021, all Bitcoin and cryptocurrency exchanges located within the borders of Canada are required to register with FinTRAC (Financial Transactions and Reports Analysis Centre of Canada).

Exchanges also have to follow all margin restrictions or market valuations that are put into place by the regulating authorities. The announcement was made in June 202, which gave platforms nearly a year to meet these requirements.

New Bitcoin Updates and Regulations

New Bitcoin Updates and Regulations

In March 2021, the Canadian Investment Industry Regulatory Organization (IIROC) and the CSA released a statement that reiterated guidelines and regulations on Bitcoin.

This statement also gave additional details in regard to how exchange operators should remain compliant with Canadian regulations. For the most part, these new updates are directed toward business and crypto exchanges.

The intent behind the message is to remind crypto exchanges that they will continue to regulate Bitcoin and other cryptocurrencies and will enforce its regulations as needed.

Future Regulations

While there are no planned regulations for Bitcoin on the horizon, there are some within the financial industry who believe that new guidelines and framework is needed.

Bitcoin continues to become more popular with investors, traders, and holders, which means there are more people who own this popular digital coin.

As Bitcoin continues to attract new users, the belief is that new requirements are needed to protect those who don’t understand the volatility and risk associated with the crypto market as a whole.

Many see Bitcoin as a small sector of our society but expect it to grow rapidly over the next several years. That means it makes sense to get regulation in place before Bitcoin gets too big to control.

Bitcoin Taxes in Canada

You may not know that Canada was the first government to require its citizens to pay taxes on their Bitcoin. This requirement was enacted in 2013 and has been in place since.

In Canada, all Bitcoin is taxed as either business income or capital gains. The way you pay taxes on them depends on how you earned your Bitcoin.

In 2017, the CRA created a department dedicated entirely to Bitcoin and other cryptocurrencies. This was done to ensure that if you earned Bitcoin profits, you pay the appropriate amount of taxes on it.

The department also performs random crypto audits, so be sure you’re doing your crypto taxes correctly.

One thing to remember is that before you report your Bitcoin losses on gains on your tax return, you’ll need to convert your BTC into CAD (fiat currency).

There’s no requirement for how you do this, and the CRA does not have a suggested process, but you must use the same method and it must be reasonable. Otherwise, you might catch the eye of the CRA.

Barter transaction

Barter transaction

When you purchase a product or sign up for a service using Bitcoin, the CRA calls it a ‘barter transaction.’ When declaring a barter transaction, Canadians have to convert Bitcoin into CAD using the current value of BTC.

Any revenue you earn from cryptocurrency is considered income, which is taxes based on what you earn. By comparison, Bitcoin capital gains are only taxed for half of your profit.

However, keep in mind that you still need to keep detailed records of all your Bitcoin transactions.

Keep records

Canada highly suggests that you keep track of all your Bitcoin transactions, that way, you have them when its time to pay taxes. You’ll want to have the date the transaction took place and Bitcoin’s value in CAD at the time.

Keeping detailed records is necessary since you’re required to claim only the Bitcoin you sell. So if you bought or mined Bitcoin and you’re still holding on to it, you don’t have to report it on your taxes.

You will, however, need to have information about the value of Bitcoin when you sold it, so make sure you’re making a note of that.

Conclusion

Bitcoin Regulation In Canada

If you own Bitcoin or you plan to buy Bitcoin in the future, you should know that there are regulations set by the Canadian government that you are required to follow.

The biggest thing to know is that Bitcoin is treated as a security when tax time arrives.

Follow these regulations, and you’ll have no problem with the government when you decide to buy, sell, or trade Bitcoin.

Our Verdict
Coinbase: Leading Cryptocurrency Platform
9.5

Coinbase: Leading Cryptocurrency Platform

 

               ✔️ Buy, sell, transfer, and store cryptocurrencies easily.
               ✔️ No fees for transactions between Coinbase users.
               ✔️ Enhanced security ensures your digital assets are protected.
               ✔️ Comprehensive services including an exchange and merchant tools.
               ✔️ Accessible via web and mobile apps.

Leave a Reply

Your email address will not be published. Required fields are marked *

Wealth Awesome

Get a clear path to your financial goals

Copyright: © 2024 Wealth Awesome

Index