Cryptocurrencies have already been around for almost a decade and a half. Yet most countries and institutions around the world still do not know exactly how to use, classify or regulate them, much less how to use them for the benefit of the population. However, Canada is a country that stands out and sets an example for how crypto should be treated.
This is not to say that everything about crypto laws in Canada is top-notch, as people on all sides of the crypto debate have gripes, even with the laws and policy of Canada. Yet there is no denying that Canada is leading the way in crypto legalization and regulation.
How permissive are crypto laws in Canada?
Canada has taken a distinct and well-balanced approach to cryptocurrencies for almost a decade, since 2014. There are clear rules, regulations and disclosure requirements for all legal entities dealing with cryptocurrencies, which some might consider as a little restrictive; however, they also ensure that blockchain-based businesses know how to operate within the confines of the law.
This has led to hundreds of crypto companies setting up shop in Canada over the past decade to offer their blockchain services and develop various decentralized applications. There is also the Canadian Securities Administrators (CSA) Center for Financial Innovation or the CSA Regulatory Sandbox, which welcomes cryptocurrency companies and allows them to operate under the supervision of the CSA.
Are cryptocurrencies legal tender in Canada?
Cryptocurrencies are not legal tender in Canada, but trading them is legal, meaning Canadian courts are not required to recognize cryptocurrencies as satisfactory payments for monetary debt. However, willing participants may buy, sell and trade cryptocurrencies if they wish, provided they comply with Canadian federal, state and provincial laws. Additionally, Canada has a large network of Bitcoin-enabled ATMs and generally processes these digital assets without much censorship.
Canada also led the famous Jasper Project, a collaboration between the Bank of Canada and private sector participants such as the National Bank of Canada (NBC), the Royal Bank of Canada (RBC), TD Canada Trust, the Bank of Montreal and the Canadian Imperial Bank of Commerce (CIBC). The goal of Project Jasper was to find ways to use distributed ledger technology (DLT) as a payment system, with the Bank of Canada acting as the notary for some crucial functions. The Bank of Canada also worked with the Digital Currency Initiative (DCI) at MIT Media Labs to study the impact of cryptocurrencies on central bank digital currencies (CBDCs).
Such collaborations have led to a series of laws aimed at regulating cryptography without restricting its use. A good example is the Proceeds of Crime Money Laundering and Terrorist Financing Act (PCMLTFA), which aims to help prevent money laundering through crypto. Under the PCMLTFA, businesses that deal in crypto are treated as money services businesses (MSBs) and are given a framework to operate in a legal and transparent manner.
As a result, many Canadian banks now process cryptocurrencies via Interac e-Transfers. In short, trading using crypto is largely legal in Canada, even though cryptocurrencies are not legal tender. However, it is always important to remember that provincial laws can sometimes differ, particularly when it comes to certain currencies.
What can cryptocurrency be used for in Canada?
Businesses and individuals in Canada can trade cryptocurrencies on open trading platforms, trade them with others, or use them as a high-risk investment. For example, you can find a detailed analysis of crypto investments here.
Essentially, as long as you respect Canada's legal framework and don't try to use crypto as legal tender, you can use cryptocurrencies relatively freely and securely. This gives people a lot of flexibility over the currencies they use for daily transactions. Do you want to use crypto the next time you go to play at an online casino? You can. You want to look for a fiat currency casino that has a good reputation and offers 25 currencies or more? You can still do that too.
Is crypto taxable in Canada?
Canadian tax law treats different cryptocurrency transactions differently, just as it does for gold or silver. There are many intricacies to become familiar with, but here are some of the basics.
Let's say you acquire cryptocurrency through mining or for services you provided. This would be considered a type of barter, and the Canada Revenue Agency treats it as such, meaning you will have to pay income tax. However, no tax is due if you purchased cryptocurrency in CAD for investment purposes. The amount you spent on the purchase will of course be noted, as the subsequent sale of the crypto will be counted as income.
Closing words
Overall, Canadian crypto laws can be extremely complex for some people's tastes. Some would even say that they defeat the original purpose of using cryptography. Yet the fact that Canada has become a hub for crypto business, trade and investment shows how important it is to create a strong legal framework. All the hard work of Canadian lawmakers over the past decade has obviously helped instill great confidence in crypto among many Canadians, which is why the country's market continues to grow and thrive.