Cryptocurrencies have already been around for close to a decade and a half. Yet, most countries and institutions worldwide still don’t know exactly how to work with or classify or regulate them, let alone how to use them for people’s benefit. However, one country that stands out and sets an example of how crypto should be dealt with is Canada.
This isn’t to say that everything about the crypto laws in Canada is top-notch, as people on all sides of the crypto discussion have their gripes even with Canada’s laws and politics. Yet, there is no denying that Canada is leading the way in crypto legalization and regulation.
How Permissive Are the Crypto Laws in Canada?
Canada has had a distinct and well-balanced approach to crypto for almost a decade, ever since 2014. There are clear rules, regulations, and disclosure requirements for all legal entities dealing with cryptocurrencies that some might view as a bit restrictive; however, they also ensure that blockchain-based companies know how to operate within the bounds of the law.
This has led to hundreds of crypto companies moving to Canada over the past decade to offer their blockchain services and develop various decentralized apps. There is also the Canadian Securities Administrators (CSA) Financial Innovation Hub or the CSA Regulatory Sandbox, which welcomes cryptocurrency businesses and allows them to operate under the CSA’s surveillance.
Are Cryptocurrencies Considered Legal Tender in Canada?
Cryptocurrencies are not legal tender in Canada but are legal to trade with – meaning Canadian courts of law are not required to recognize cryptocurrencies as satisfactory payments in case of monetary debt. However, willing participants can buy, sell, and exchange cryptocurrencies if they choose to as long as they follow Canada’s federal, state, and provincial laws. Moreover, Canada has a vast network of Bitcoin-friendly ATMs and typically treats such digital assets without much censure.
Canada also conducted the famous Project Jasper, which was a collaboration between the Bank of Canada and private-sector participants such as the National Bank of Canada (BNC), Royal Bank of Canada (RBC), TD Canada Trust, Bank of Montreal, and the Canadian Imperial Bank of Commerce (CIBC). The purpose of Project Jasper was to find ways to use distributed ledger technology (DLT) as a payment system, with the Bank of Canada serving as a notary for certain crucial functions. The Bank of Canada also worked with the MIT Media Labs’ Digital Currency Initiative (DCI) to study how cryptocurrencies affect central bank digital currencies (CBDCs).
Such collaborations have led to a series of laws that aim to regulate crypto 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 dealing with crypto are treated as money services businesses (MSBs) and given a framework for operating legally and transparently.
As a result, many Canadian banks now deal with cryptocurrencies through Interac e-Transfers. In short, trading using crypto is widely legal in Canada even if cryptocurrencies aren’t legal tender. However, it’s still important to remember that provincial laws can differ at times, especially with regard to specific currencies.
What Can You Use Cryptocurrency for in Canada?
Businesses and individuals in Canada can trade with crypto on open exchange trading platforms, exchange it with other people, or use it as a high-risk investment. For example, you can find a detailed crypto investment analysis here.
In essence, as long as you follow Canada’s legal framework and you’re not trying to use crypto as legal tender, you can use cryptocurrencies relatively freely and securely. This gives people much flexibility in which currencies they use for daily transactions. Want to use crypto the next time you go to play at an online casino? You can. 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?
Canada’s tax law treats different cryptocurrency transactions differently, just as is the case with gold or silver. There are many subtleties to become familiar with, but here are some basics.
Suppose you acquire cryptocurrency via mining or for services you’ve provided. This would be considered a type of barter, and the Canada Revenue Agency treats it as such, meaning that you’ll owe income tax. However, no tax is owed if you’ve purchased cryptocurrency with CAD for investment purposes. The amount you’ve spent on the purchase will be noted, of course, as selling the crypto afterwards will be counted as income.
Closing Words
Overall, Canada’s crypto laws can be annoyingly intricate for some people’s tastes. Some would even say they partially defeat the purpose of using crypto in the first place. Yet, the fact that Canada has become such a central hub for crypto businesses, trading, and investment shows how important it is to create a solid legal framework. All the hard work of Canada’s legislature over the past decade has evidently helped inspire a great deal of confidence toward crypto in many Canadians, which is why the country’s market continues to grow and thrive.
