Canada’s Service providers focusing on cryptocurrencies are getting ready for stricter government control after new laws were introduced in the country’s 2024 federal budget. These steps, announced on April 16, show that the Canadian government is working hard to make the growing crypto business more open and accountable.
The Crypto-Asset Reporting Framework (CARF) is the main part of these rules. The Organization for Economic Co-operation and Development (OECD) agreed with this method in August 2022. This move is in line with the G20’s order from 2021, which asked the OECD to develop a way to make it easier for tax information about crypto assets to be automatically shared.
Canada Enforces Stringent Reporting Requirements Under CARF
Under the CARF, exchanges, brokers, dealers, ATM companies, and other cryptoasset service providers will have to follow strict reporting rules. These rules require giving the government full information about all transactions once a year.
In particular, service providers need to record deals involving multiple cryptocurrencies, changes between cryptocurrencies and regular funds, and transfers of cryptocurrencies. Notably, deals that use central bank digital currencies (CBDCs) are not subject to these rules.
Service providers will also have to give information about each client, such as full names, home addresses, dates of birth, places where the clients live, and taxpayer identification numbers. These duties apply to everyone in Canada, whether they live there or not.
Because implementing CARF will require significant funds, the budget gives the Canada Revenue Agency (CRA) CA$51.6 million ($37.3 million) over five years, starting in 2024-25. A budget of CA$ 7.3 million ($5.2 million) has also been set aside each year to cover ongoing administrative and running costs.
The Canadian government wants to ensure these rules are followed by 2026, but service providers won’t be able to share information for the first time until 2027.
The budget also includes measures to stop people in the country from using cryptocurrency to avoid paying taxes. If taxpayers don’t follow the sharing rules, they will be punished.
“Just as crypto-assets pose financial risks to middle-class Canadians, the rapid growth of crypto-asset markets poses significant risks of tax evasion,” says a budget statement that clarifies the need for these steps. To keep the tax system fair, rules and the sharing of tax data between countries need to keep up with the risks of tax evasion.
The heightened regulatory scrutiny on Canada’s crypto landscape reflects a broader trend of regulatory intervention. In January 2024, the nation’s securities regulators proposed new rules governing public investment funds involved in crypto assets. These regulations restrict direct trading or custody of crypto assets to alternative investment funds and non-redeemable investment funds.
These developments follow a Coingecko report on November 3, which identified Canada as one of the primary markets for Bitcoin ETFs, indicating the growing prominence of cryptocurrencies within the nation’s financial landscape.
