CRA Continues To Seek Information On Cryptocurrency Holders

written on behalf of Feigenbaum Law

As cryptocurrencies continue to play a growing role in the economies of both Canada and the United States, it makes sense that government bodies are trying to get a better understanding of who owns cryptocurrencies and how much those holdings are worth. We wrote in March of this year about the tax obligations people have in relation to cryptocurrencies. Today we wanted to talk a little bit about how the Canadian government is attempting to learn more about how much cryptocurrency is held by Canadians.

CRA sought to learn the identities of account holders

In November, the National Post reported that the Canada Revenue Agency had asked a judge to force a Toronto-based cryptocurrency trading platform, Coinsquare, to provide it with information about its clients.

The move was the first of its kind in Canada, with the CRA stating it was looking to ensure Coinsquare’s clients “complied with their duties and obligations.” The CRA indicated that it was hoping to find out if any of the company’s clients had failed to declare income from cryptourrency, which could lead to audits.

Matter makes its way to court

Coinsquare resisted the request, and the request ended up being decided by the country’s Federal Court, with a decision issued this Spring.

The decision was brief. The court cited sections of Canada’s Income Tax Act and the Excise Tax Act. The former states that requests for the type of information sought by the CRA can be authorized if the court is satisfied that:

1. The group of unnamed persons is ascertainable; and
2. The requirements are made to verify compliance by persons in the group with their duties and obligations under the Income Tax Act;

The Excise Tax Act has similar language, which looks to determine two factors:

1. The group of unnamed persons is ascertainable; and
2. The requirements are made to verify compliance by persons in the group with their duties and obligations under the Excise Tax Act;

The court was satisfied that these requirements were met and ordered Coinsquare to hand over documents related to its Canadian customers.

As a result of the order, Coinsquare told the website Coindesk that it would end up disclosing information on an “estimated 5%-10% of its 400,000 customers. This includes only high-value accounts. The order stipulates that this would include exhaustive data on accounts that held $20,000 in cryptocurrency between 2014-2020.

Request was similar to that made by the IRS

Coindesk noted that the CRA’s request was similar to one made by the IRS to a company called Coinbase, which provides services similar to Coinsquare. In the end, the IRS was successful in securing documents related to accounts trading more than $15,800 USD.

If you have questions about how investing in Bitcoin or other emerging currencies will affect your current tax plan contact Feigenbaum Law.  Our team are leaders in the field of tax law, and offer services to clients in the US, Canada and around the world. Contact us to learn more about how we can help or call us at (416) 777-8433 or toll-free at (877) 275-4792.