Cryptocurrencies and You

As cryptocurrencies become more and more mainstream, the price of bitcoin and some other cryptos have soared following the long-awaited executive order by the Biden administration, regarding regulating digital currencies. The order called for a ‘coordinated and comprehensive approach to digital asset policy”, a move that has given much relief to traders and investors, marking a landmark towards the recognition of cryptocurrencies as legitimate digital assets.

Bitcoin trading has been becoming increasingly popular worldwide - and let’s face it, quite profitable - in the past couple of years. While there is always resistance to change, there is a steady movement towards a total reform of the financial systems, converting to digital currencies. It is undeniable that the crypto advocates who have an innovative foresight for this change have been cashing in nicely on their investments, and going strong.

So what is going on in Canada, and what should You - the Canadian taxpayer – know about it? Cryptocurrencies are a type of independent virtual asset protected by cryptography, using a blockchain system to keep track of transactions. They do not rely on governments, central banks, or other central authorities for backing and they can be used for a wide range of activities, such as buying goods, paying bills, or investing.

While cryptocurrencies are not yet legal tender in Canada, the Bank of Canada, the country's central bank, has been experimenting with token-based digital currencies (CBDC). Some cryptocurrencies for example are approved by the Ontario Securities Commission, and registered with FINTRAC as a money services business.

The value of a cryptocurrency changes with supply and demand and can go up and down in value, similar to stocks or currency exchange rates, which makes it a good trading and investment asset.

It is important to note that transactions involving cryptocurrencies have tax implications. While cryptocurrency holdings are not taxed, making a profit or loss on buying or selling them, must be reported on your income tax return. Profit earned on the sale or trade of cryptocurrency is considered capital gains or business income.

Are you a crypto investor or crypto-curious? Talk to us! We can help you understand how to keep books and records, how to value cryptocurrencies either as capital property or inventory and how to treat the GST/HST implications of your crypto transactions. Minimize taxes on your crypto gains? That, too!

President Joe Biden’s long-awaited executive order about cryptocurrency is finally here. While the order is the first major attempt to bring the government together around regulating crypto, it’s not quite the crackdown some expected from an administration that has spent months warning about impending oversight. In fact, a lot of people with crypto are even happy about the new order, so much so the price of bitcoin is going up.

The executive order doesn’t change how the US approaches crypto in the immediate future, but it will start the process of creating regulations for digital currencies. As part of this effort, Biden has ordered federal agencies to dig into many of the problems that crypto created as it became more mainstream, including its role in money laundering and terrorist groups. Despite the government’s plans to explore some of crypto’s most contentious issues — and the many open questions about crypto’s future in the US — the fact that the White House is giving bitcoin and other cryptocurrencies some real recognition is cause for many crypto advocates to celebrate.

Cryptocurrencies are not legal tender in Canada. Only coins issued by the Royal Canadian Mint and notes issued by the Bank of Canada are legal tender. However, the Bank of Canada, the country's central bank, is experimenting with token-based digital currencies (“CBDCs”).

Written by: Christa Lazar