Canada Bitcoin Laws

Canada has been proactive in its stance on bitcoin with the Parliament of Canada approving, on June 19, 2014, what is believed to be the first national law on digital currencies.

The Canada Revenue Agency see virtual currencies as a commodity, which means that Bitcoin can be used to pay for a good or service, but it is treated like a barter system. However virtual currency in Canadian dollars is required to be included in business income for the year.

The CRA also see buying and selling digital currency as a commodity, which means that if you buy digital currency and profit from its sale it is a fully taxable income.Bitcoin Laws
The actual laws that the Canadian government amended to include bitcoin was the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, S.C. 2000.

While the government has amended these laws it is still a grey area as to how they will be policed because of the anonymous nature of bitcoin.

Bitcoin Tax in Canada

The Canadian government is on record as saying that bitcoin will be taxed in one of two ways.

If Bitcoin is used to pay for a goods or service it will be treated under its barter transaction rules, which means if you pay for a car with Bitcoin, you are basically swapping one item for another. But any profits made from the sales of commodities would be treated as income or capital.

The Canada Revenue Agency has stated it will review each personal circumstance on a case-by-case basis, with the differences between personal and business activities playing a major role in the decided outcome.

If the CRA believe that the sale or exchange of bitcoins was for profit the tax payer will be forced to reference their sales with inventory at the end of the financial year.

However the laws in Canada also state that losses of digital currency through theft or embezzlement may be tax deductible.

Is it safe for Canadians to use Bitcoin?

It’s not illegal for Canadians to use Bitcoin and if it ever does become illegal, good luck catching people. The entire idea behind bitcoin is anonymity and cutting out the centralised part of an economy.

While it’s more than likely that the Canadian government wishes Bitcoin would fade into obscurity, like most governments around the world, it is here to stay and even the strange wording of Bitcoin laws acknowledge this.

As long as you exercise the correct caution when firstly, choosing a Bitcoin wallet and researching which are the best Bitcoin exchanges to make purchases, there is no reason not to use it as your digital currency of choice.

Remember once you own Bitcoins, there is no physical component, so if you lose or forget your number sequence you are losing your money. Just like if you lost your wallet.