CRYPTOCURRENCY IN CANADA
A cryptocurrency is an:
electronic money, and it is not available as bills or coins
digital asset/currency that can be used to buy goods and services or trade them to make a profit
ownership records are stored in online ledger with strong cryptocurrency to secure online transactions
no single organization for instance Bank of Canada creates digital currencies
Cryptocurrencies work using a technology called blockchain. Blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system.
TYPE OF CRYPTOCURRENCIES
There are more than 6,700 different cryptocurrencies are traded publicly. Most popular ones:
9. Bitcoin Cash
In order to buy cryptocurrencies, you will need a wallet, an online app that can hold your currency. Generally, you create an account on an exchange, and then you can transfer real money to buy cryptocurrencies.
You need to have a public and a private key to use your wallet. Public keys are used to identify your wallet and Private keys are used to unlock your wallet and access your money. All transactions are recorded to a public ledger or “blockchain” that everyone can see.
With digital currencies you can by goods and services on the internet or in stores that accept digital currencies. And also you can buy and sell currencies in digital or cryptocurrency exchanges like stock market.
REGULATION OF CRYPTOCURRENCY IN CANADA
Canada allows cryptocurrencies, meaning that you can use digital currencies to buy goods and services on the Internet or in stores that accept digital currencies. You may also buy and sell digital currency on open exchanges, called digital currency or cryptocurrency exchanges.
On the other hand, cryptocurrencies are not considered legal tender in Canada which means cryptocurrency is not considered official currency in Canada only the Canadian dollar is considered official currency and digital currencies are not supported by any government or central authority, such as the Bank of Canada.
REPORTING AND TAXATION OF CRYPTOCURRENCY IN CANADA
The Canada Revenue Agency (CRA) treats cryptocurrency like a commodity for purposes of the Income Tax Act. Any income from transactions involving cryptocurrency is generally treated as business income or as a capital gain, depending on the circumstances.
If you use cryptocurrency to pay for goods or services, the CRA treats it as a barter transaction for income tax purposes. A barter transaction occurs when two parties exchange goods or services and carry out that exchange without using legal currency.
When you file your tax returns, you must report any gains or losses from selling or buying digital currencies. Not reporting income from such transactions is illegal. And, GST/HST applies on the fair market value of any goods or services that you buy using digital currency.
KEEPING BOOKS AND RECORDS FOR CRYPTOCURRENCY TRANSACTIONS
You should keep the following records for cryptocurrency transactions:
the date of the transactions
the receipts of purchase or transfer of cryptocurrency
the value of the cryptocurrency in Canadian dollars at the time of the transaction
the digital wallet records and cryptocurrency addresses
a description of the transaction and the other party
the exchange records
accounting and legal costs
the software costs related to managing your tax affairs
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