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Cryptocurrency Regulations in Canada

With the explosion of the digital assets industry and an exponential increase in using and investing in cryptocurrencies, having a clear understanding of the current and evolving cryptocurrency regulations in Canada is paramount to ensuring safe transactions.

A cryptocurrency is a digital or virtual currency that is decentralized and is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. While most people are familiar with Bitcoin and Ethereum, there are more than 5,000 different cryptocurrencies in circulation.

Some of the most well-known cryptocurrency exchanges in Canada are Coinbase, Netcoins, Newton, Coinberry and Binance Canada.

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Main regulatory facts everyone involved in cryptocurrency trading in Canada should know:

  1. Cryptocurrency is not a legal tender in Canada
  2. The Canada Revenue Agency has been taxing cryptocurrencies since 2013 under Canadian tax laws.
  3. Cryptocurrencies are regulated under provincial securities law and are characterized as a commodity for income tax purposes.
  4. Cryptocurrency service providers are regulated under provincial securities laws as money service businesses (MSBs) 
  5. Starting 2014 anyone dealing in virtual currencies falls under the regulations of Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) in Canada
  6. The British Columbia Securities Commission registered the first cryptocurrency-only investment fund in 2017.
  7. Starting June 2020 all cryptocurrency exchanges need to be registered with the Financial Transactions and Reports Analysis Centre of Canada (FinTRAC) and comply with margin and market valuation requirements.
  8. Starting February 2020, the Virtual Currency Travel Rule requires all financial institutions and money services businesses (MSB) to keep a record of all cross-border cryptocurrency transactions and EFTs.
  9. In February 2022 a private member’s bill on cryptocurrencies was introduced to the House of Commons, Bill C-249 aimed at encouraging growth of the crypto-asset sector. The bill is in its Second reading (House) as of April 5, 2022.