With the announcement of stricter reporting rules in the 2024 federal budget, Canada has taken strong steps to improve oversight of its cryptocurrency industry. The April 16 budget includes the Crypto-Asset Reporting Framework (CARF), a set of rules approved by the Organization for Economic Co-operation and Development (OECD) in August 2022.
This action is in response to a 2021 order from the G20 that told the OECD to create a system that would make it easier for tax details about cryptocurrency assets to be shared automatically.
Canada mandates full crypto disclosure.
As a result of the new rules, cryptocurrency service providers like exchanges, brokers, dealers, and ATM owners must follow stricter reporting guidelines and give the government all of their transactional data once a year.
Key reporting factors include both deals involving different cryptocurrencies and exchanges between cryptocurrencies and regular money. Notably, these rules don’t apply to trades that use central bank digital currencies (CBDCs). Service providers must also give specific information about their clients, like their full names, home addresses, dates of birth, places where they live, and taxpayer identification numbers. This rule applies to both Canadian residents and people who don’t live in Canada.
The budget gives the Canada Revenue Agency (CRA) CA$51.6 million ($37.3 million) over five years, starting in 2024-25, to help put CARF into action. Every year, CA$7.3 million ($5.2 million) is set aside to pay for ongoing operating and administrative costs.
The Canadian government plans to enforce these rules by 2026, and the first time that service companies will share information is set for 2027. In addition, the budget includes measures to stop crypto tax evasion, including fines for people who don’t follow the rules for disclosure.
The budget shows that new rules are needed to protect middle-class Canadians from the financial risks that crypto-assets pose and to stop people from avoiding paying their taxes. This shows that the government is serious about keeping the tax system fair even as market conditions change.
In the past few months, Canada’s regulators have paid more attention to the growing crypto market. Securities regulators suggested new rules for public investment funds that work with cryptocurrency assets in January 2024. These rules, which say that alternative investment funds and non-redeemable investment funds are the only ones who can trade or store crypto assets directly, show that the government is taking the initiative to regulate this quickly changing field. This happens after a Coingecko report on November 3 said that Canada was one of the main markets for Bitcoin ETFs. This shows how important the country is in the global crypto scene.
