Table of contents
- General State of Crypto in Canada
- Legal Tender and Taxation
- Canada and Bitcoin Mining
- Crypto Regulations in Canada
- Bill C-31 (An Act to Implement Certain Provisions of the Budget Tabled in Parliament on February 11, 2014, and Other Measures)
- CSA Staff Notice 46-307: Cryptocurrency Offerings
- Buying Bitcoin and Cryptocurrencies in Canada
- Spending Bitcoin in Canada
- Exchange list
Best Canada Bitcoin Exchanges
General State of Crypto in Canada
As a nation, Canada can be described as very progressive and is always on the lookout for new technologies. Despite this openness, they are still vigilant to protect their citizens from malicious activities. As for the cryptocurrencies, Canada has already been discussing it as early as 2015 saying that “a regulatory approach is needed in the digital currency sector. On the other hand, it is critical that government action does not stifle innovation in digital currencies…”.
There are also many initiatives in place between public and private companies such as the one involving the Bank of Canada, Payments Canada, and R3, a distributed database technology company. They partnered up on a research initiative called Project Jasper. The goal was to understand how distributed ledger technology (DLT) could transform the wholesale payments system. Although in 2017, the research concluded that current versions of DLT are not yet capable, Project Jasper is still continuously being supported by the different parties to see how DLT and blockchain can benefit or be used in Canada. Currently, the central bank is in the early stages of exploring the use of blockchain and cryptocurrency technology themselves. They are studying the feasibility of issuing their own Central Bank Digital Currency (CBDC).
On the other hand, they also err on the side of caution especially for emerging technologies such as cryptocurrencies. They constantly look after and warn investors of potential scams and malicious activities. Canadian and U.S. authorities have formed an alliance called the North American Securities Administrators Association’s (NASAA) and have launched probes under Operation “Cryptosweep”. This has resulted in the investigation of hundreds of crypto related products and projects.
Legal Tender and Taxation
Canada allows the use and transactions of digital currencies such as Bitcoin and other cryptocurrencies. You can use it to buy goods and services or trade them on exchanges. However, as with most countries, Bitcoin and other cryptocurrencies are not considered legal tender. Only the Canadian dollar is considered legal tender in Canada. The Canada Revenue Agency treats cryptocurrencies as a commodity and not as a money. Using it to pay for goods or services are treated as barter transactions. This means that Canada’s tax laws and rules, such as the Income Tax Act applies to cryptocurrency transactions. When traders trade cryptocurrencies, any resulting gains or losses are considered taxable income for the taxpayer.
Canada and Bitcoin Mining
Since cryptocurrencies are legal in Canada, mining is also legal. Mining of cryptocurrencies can be categorized into two categories, as a commercial enterprise or as a personal hobby. For the hobbyist, Bitcoin mining is a nontaxable event. But if it is done in a commercial manner, the income will be taxed accordingly just like any regular business. One of the largest mining farms in Canada is a company called Hut 8. Their $100 million mining farm is situated in Southeast Alberta.
Cryptocurrency exchanges are allowed to operate in Canada and are regulated by the Canadian Securities Exchange. They will have to adhere to the laws set by the regulators. In January of 2020, new guidelines have been issued covering cryptocurrency exchanges and will determine which exchanges will fall under derivatives law. Right now, there are two main ways exchanges operate. The first is immediate delivery of crypto assets to its users once a trade has been done and the second are those that hold the crypto until it has been requested by the user. Those that fall into the second category will be subject to derivatives laws in Canada.
Crypto Regulations in Canada
Bill C-31 (An Act to Implement Certain Provisions of the Budget Tabled in Parliament on February 11, 2014, and Other Measures)
Canada passed one of the first national laws involving digital currencies (i.e. cryptocurrencies). It is also the first to treat digital currency financial transactions as part of its national anti-money laundering law. In it, Bitcoin is treated as a money service business for purposes of anti-money laundering laws. Companies dealing with Bitcoin and other cryptocurrencies are overseen and are required to register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). Registered companies are required to report suspicious and possibly terrorist-related transactions. The passed law also prevents banks from opening and maintaining accounts with companies dealing with virtual currencies unless registered otherwise.
CSA Staff Notice 46-307: Cryptocurrency Offerings
This notice responds to the inquiries sent by different fintech businesses asking for guidance on the applicability of securities laws to cryptocurrency offerings. This provided the law requirements that apply to initial coin offerings (ICOs), cryptocurrency investment funds and the cryptocurrency exchanges trading these products. On February 1, 2018, the country’s first blockchain fund—Blockchain Technologies ETF was approved by the Ontario Securities Commission.
Buying Bitcoin and Cryptocurrencies in Canada
There are currently a handful of major cryptocurrency exchanges that serve the Canadian market. This includes both international players as well as homegrown exchanges. They have made it very easy for you to buy and sell directly with your Canadian dollars by partnering with local banks. You can transfer Canadian dollars directly into your preferred exchange accounts through normal bank transfers and buy Bitcoin and other cryptocurrencies offered by their exchange. Credit cards and debit cards are also a widely available option offered by these crypto exchanges.
As an alternative, Bitcoin ATMs are another option to buy Bitcoin and other major cryptocurrencies. Coin ATM Radar reveals that there are hundreds of Bitcoin ATM machines spread all over the country making it more accessible especially to those that prefer the anonymity some crypto ATM machines provide. Most of these are located in Montreal and Vancouver.
Spending Bitcoin in Canada
As one of the hotbeds of Bitcoin, many merchants are starting to accept Bitcoin as an alternative form of payment for their goods and services. Right now, people can spend Bitcoin in different places in Canada. Even small local businesses have opened to the idea of Bitcoin and began accepting it as a form of payment. This includes local restaurants, bars, shops and salons. There are even some campaigns such as the one done by KFC Canada that decided to accept Bitcoin in early 2018. This was done through their partner payment processor Bitpay.