The Canada Revenue Agency (CRA) is intensifying its efforts to reclaim $54 million in suspected unpaid taxes linked to cryptocurrency transactions, signaling a pivotal moment in the regulation of digital currencies within the country.
In an exclusive interview on Monday, Sahil Behal, a Director General of CRA’s compliance branch, disclosed that the agency is currently conducting approximately 400 audits or examinations related to crypto assets. This initiative complements the CRA’s reassessment of $54 million in unpaid taxes associated with undeclared cryptocurrency transactions during the fiscal year 2023-2024.
However, despite these measures, seasoned tax lawyer and cryptocurrency specialist David Rotfleisch characterized the CRA’s actions as merely a “drop in the bucket,” emphasizing the need for extensive educational campaigns to clarify the tax obligations of cryptocurrency owners and traders.
“Fifty-four million, that’s pocket change,” Rotfleisch remarked, highlighting the magnitude of potential tax liabilities within the crypto space. He criticized the lack of clear guidance from the CRA in previous years, attributing widespread non-compliance to the absence of comprehensive tax regulations for cryptocurrencies.
Behal acknowledged the challenges posed by the “high level of ambiguity” surrounding crypto assets in Canada, citing a poll commissioned by the CRA that revealed significant gaps in public awareness regarding tax obligations related to digital currencies. The poll indicated that one-third of respondents lacked a firm understanding of their tax responsibilities, with over 10% erroneously believing that cashing out cryptocurrencies into government-issued currency was exempt from taxation.
To address these shortcomings, the CRA has initiated targeted interventions, including the issuance of “intent to audit” letters to individuals suspected of underreporting income from cryptocurrency trading on platforms such as Coinsquare, Canada’s largest crypto exchange. Behal explained that these letters afford taxpayers an opportunity to rectify any discrepancies within 45 days, thereby avoiding penalties or interest payments.
Moreover, the CRA has leveraged legal mechanisms such as Unnamed Persons Requirements (UPRs) to obtain transaction data from cryptocurrency exchanges like Coinsquare. This data serves as a crucial tool for identifying potential instances of non-compliance and guiding audit efforts.
Looking ahead, Behal emphasized the importance of the forthcoming Crypto-asset Reporting Framework, slated for implementation in 2027. This framework will mandate crypto exchanges and service providers to report comprehensive data on crypto asset transactions to the CRA, streamlining regulatory oversight and enhancing compliance measures.
As Canada navigates the evolving landscape of cryptocurrency regulation, the CRA’s concerted efforts underscore the government’s commitment to ensuring tax compliance and safeguarding the integrity of the financial system in the digital age.
