Canada strengthens cryptocurrency reporting measures in 2024 budget
New regulations introduced in Canada’s 2024 federal budget will impose stricter requirements on service providers in the cryptocurrency industry. These regulations, known as the Crypto-Asset Reporting Framework (CARF), were approved by the Organisation for Economic Co-operation and Development (OECD) in August 2022. The implementation of CARF is a response to the G20’s mandate in 2021, which called for the development of a framework to facilitate the automatic exchange of tax information involving crypto assets.
Under the new regulations, cryptoasset service providers, including exchanges, brokers, dealers, and ATM operators, will be obligated to comply with reporting requirements and provide the government with complete transaction details on an annual basis. These reporting criteria cover transactions between different cryptocurrencies, between cryptocurrencies and fiat currencies, and transfers of cryptocurrencies. However, transactions made with central bank digital currencies (CBDCs) are exempt from these requirements.
In addition to transaction details, cryptocurrency service providers will also be required to report client-specific information, such as full names, residential addresses, dates of birth, jurisdictions of residence, and taxpayer identification numbers. These requirements will apply to both Canadian residents and non-residents.
To support the implementation of CARF, the budget has allocated CA$51.6 million ($37.3 million) to the Canada Revenue Agency (CRA) over a five-year period starting from 2024-25. An annual budget of CA$7.3 million ($5.2 million) has also been set aside to cover ongoing administration and operational costs.
The Canadian government plans to enforce these mandates in 2026, with the initial exchange of information from service providers scheduled for 2027.
The budget also includes provisions aimed at combating crypto tax evasion. Taxpayers who fail to meet the disclosure requirements will face penalties. The government recognizes that the rapid growth of crypto-asset markets poses significant risks of tax evasion and believes that regulation and international tax information exchange must keep pace with these threats to ensure a fair tax system.
Canadian regulators have recently turned their attention to the expanding crypto economy in the country. In January 2024, securities regulators proposed new rules for public investment funds dealing with crypto assets. These rules restrict the trading and custody of crypto assets to alternative investment funds and non-redeemable investment funds.
This development follows a report from Coingecko on November 3, which revealed that Canada is one of the primary markets for Bitcoin exchange-traded funds (ETFs).
In summary, the Canadian government is implementing stricter regulations for cryptocurrency service providers to ensure compliance with tax reporting requirements and combat tax evasion. These regulations are part of a global effort to exchange tax information involving crypto assets.
