What is cryptocurrency?

January 26, 2022

Ottawa, Ontario

Canada Revenue Agency

A cryptocurrency is a type of virtual asset that is protected using cryptography. It typically uses a system called a blockchain to record and keep a history of transactions. Cryptocurrencies, such as Bitcoin and Ether, are independent, meaning they do not rely on governments, central banks, or other central authorities for backing. You can obtain cryptocurrency in many ways, and new methods are being developed all the time. You can use cryptocurrencies for a wide range of activities, such as buying goods, paying bills, or investing. Transactions involving cryptocurrencies often have tax implications.

Disposing of cryptocurrencies

In general, possessing or holding a cryptocurrency is not taxable. However, there may be tax implications when you dispose of your cryptocurrency. Examples of this could include:

Examples of the tax consequences

The types of taxes that apply to your cryptocurrency transactions include taxes on:

To ensure correct reporting, keep accurate records of your purchases and sales dealing with cryptocurrency, including records that show how you calculated the fair market value.

How to correct your tax affairs

If you did not report your income or capital gains from transactions in cryptocurrency, you may have to pay tax, penalties and interest on that income or capital gain. You can avoid or reduce penalties and interest by voluntarily correcting your tax affairs. To correct your tax affairs (including corrections to GST/HST returns) and to report income that you did not report in previous years, you may:

More information

You can find more information on your tax obligations related to your cryptocurrency activities in the Canada Revenue Agency's Guide for cryptocurrency users and tax professionals.

Contacts

Media Relations
Canada Revenue Agency
613-948-8366
cra-arc.media@cra-arc.gc.ca

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