Regulation of Cryptocurrency: Canada
Regulation of Cryptocurrency in Canada
When you are dealing in cryptocurrencies, it is important to know about the laws and regulations that govern their use. Since cryptos are a new phenomenon, it is even more important to tread lightly as the laws are still evolving. The Canadian regulators have done a very good job in understanding the crypto space.
As a result, the Canadian cryptocurrency market has become very important. Bitcoin trading in Canada has seen a huge jump in recent times. The following goes into greater detail about the regulations pertaining to crypto in Canada.
Legality of Cryptocurrencies
Even after clearer laws from regulators, Canadians are often asking “Is bitcoin legal?”. Regulators have made it clear that cryptocurrencies are totally allowed in Canada. They have even specified the activities that crypto can be used for.
You can buy, sell and hold cryptocurrencies. You can trade in them against other cryptos on global or Canadian crypto exchange. You can also buy goods and services with them online as well as in physical stores. The one thing that regulators want to make it absolutely clear is the cryptos are not legal tender.
Only the banknotes issued by the Bank of Canada under the Bank of Canada Act and coins issued under the Royal Canadian Mint Act are considered legal tender.
Tax on Bitcoin Cryptocurrency
If you are dealing in cryptocurrencies, then Canadian tax laws will apply for those transactions. So, if you were confused about whether there is a tax on cryptocurrency, the answer is yes. Also important to note is that the Canada Revenue Agency (CRA) has classified cryptocurrency as a commodity. Therefore, the use of cryptos to pay for goods or services is treated as a barter transaction.
For taxation purposes, the gains from cryptocurrencies are basically divided into two categories. It could be a business income or capital gain. The CRA has issued guidelines to help you determine in which category your activities fall. All of your business income is taxable while only 50% of your capital gains will be taxable.
As a seller of products, if you receive digital currencies as payment, you have to include those in your income. The same applies if you engage in the business of cryptocurrency trading in Canada or investing in cryptos. You will have to include those in your income.
As far as mining of cryptocurrencies is concerned, it can be treated in two ways. If you are mining for profit, it will be considered business income. If you are only doing it as a hobby, then it is nontaxable.
These guidelines make it clear for the general public that there is indeed a tax on bitcoin and other cryptocurrencies. You should see what scenarios apply to you and report your income accordingly.
Anti-Money Laundering on Bitcoin Cryptocurrency
Combating money laundering and terrorist financing are two of the most important aspects of cryptocurrency regulations. This has been the overarching headache for regulators all around the globe. Since crypto can be transferred freely across borders and can be stored locally, it can have some grave implications. This is what regulators have wanted to address for so many years.
Canadian regulators have specifically designed an anti-money laundering regime for cryptos. They have stated that for this purpose, they will treat virtual currencies as money service businesses. Therefore, any companies dealing in crypto have to register with the Financial Transactions and Reports Analysis Centre of Canada (Fintrac).
They will also have to put into effect compliance programs like, keeping and retaining prescribed records, reporting suspicious or terrorist-related property transactions, and determine if any of their customers are “politically exposed persons.” This will not only apply to Canadian bitcoin exchanges but also other global exchanges that provide Canadians with their services.
The regulators have gone one step ahead when it comes to banking relationships with crypto companies. The law also prohibits banks from opening and maintaining accounts or having a “correspondent banking relationship” with companies dealing in virtual currencies, unless that person or entity is registered with the Centre.
Canada has a record of being the first nation to address cryptocurrencies in any law whatsoever. This shows their forward-thinking and ability to deal with new technologies swiftly.
Securities Law On Bitcoin and cryptocurrency
The Canadian Securities Administrators (CSA) published a notice on August 24, 2017, for cryptocurrencies. It outlines how securities law requirements may apply to initial coin offerings (ICOs), initial token offerings (ITOs), cryptocurrency investment funds and the Canadian cryptocurrency exchange.
In March of 2019, the regulatory body published additional guidelines. The guidelines are meant to help cryptocurrency platforms determine when securities law may apply to them.
The first thing to take note of is that if a crypto is itself security, securities law will apply. They will also apply if the purchased cryptocurrencies are not immediately delivered to the purchaser or user. For more such scenarios, you can check out the list in this article.
Future Of Bitcoin and Cryptocurrency
The future looks quite bright for Canadian bitcoin and crypto market. There is so much innovation going in this place and Canada remains an important market. The regulators have already done a great job of understanding the crypto space. This will only make things much smoother in the future.
Several large crypto companies have partnered with Canadian companies for blockchain and crypto projects. This should yield great results for Canada in terms of jobs, investment, innovation, etc. Embracing blockchain technology, distributed ledger technology, cryptocurrencies will revolutionize payments and financial infrastructure of Canada.
Canadians are set to gain immensely with clearer regulations as well. It will become clearer what they can invest in and what their obligations are. All of this has the potential to create immense wealth and prosperity for the average Canadian.
– Regulation of Cryptocurrency in Canada
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