It’s hard to go very long without hearing about cryptocurrency these days. Whether it’s in the news, on the internet, or casually spoken about with your friend group, it seems like cryptocurrency is everywhere with the popularity of this digital asset system expanding rapidly.
Frequently Asked Questions
Yes. In fact, depending on the extent of your actions, you may be engaged in business activity in the eyes of the CRA and will be taxed accordingly. Both mining (i.e., creating new crypto to enter into circulation) and staking (earning rewards as a result of holding certain types of cryptocurrency) will be considered taxable income by the CRA. Whether or not the crypto earnings generated from mining or staking will be considered business income or capital gains will be evaluated on a case-by-case basis. Both methods of engaging in cryptocurrency are historically used to generate passive income, which will always be taxed.
The simple act of buying and keeping crypocurrency on its own is not taxable. However, once you sell, trade, or otherwise profit off of your cryptocurrency, you will be taxed for either business income or as capital gains. The system under which you’re taxed will be evaluated by the CRA on a case-by-case basis. Your accountant can help you parse out and understand what your cryptocurrency transactions fall under in the eyes of the government.
Yes. In fact, the only situation in which you don’t have to pay taxes on cryptocurrency is when you are holding crypto or if you have been gifted crypto in some capacity (provided that it is under the CRA gift limit which is usually around $15,000 or $16,000). When you sell crypto, you will be taxed either as business income or as capital gains, depending on the circumstances of your transaction.