Canada currently has a bittersweet relationship with web3, cryptocurrencies, and related blockchain technologies. That’s partially confirmed by the fact that only 3.2% of Canadians hold some form of crypto. The Canadian Securities Commission has some of the strictest regulations surrounding the custody and nature of assets, use of margin, and leverage in trading, investors, exchanges, and disclosure of user data. For advocates and enthusiasts who may be wondering, read on to find out all you need to know about how Bitcoin-friendly Canada is.
Banking Bitcoin in Canada
Canadian banks are generally mindful about letting their customers’ purchase and trade digital assets. None of them will allow you to buy Bitcoin or any cryptocurrency with a credit card, leaving debit cards, wire transfers, or e-Transfers as the only options to purchase crypto. It is particularly challenging when dealing with certain banks like President’s Choice Bank, Laurentian Bank, and Tangerine; which have been reported to block crypto-related transactions, and sometimes accounts. Avoiding these banks if you actively purchase crypto or fund your trading account would be best.
Canada also boasts around 3000 Bitcoin ATMs scattered across its provinces for those looking to spend their Bitcoin. These machines offer withdrawals of your crypto assets in fiat and even allow you to deposit cash for Bitcoin or other assets to be sent to your wallet. If you live close to such an ATM, you may be able to replace your bank account with your digital wallet completely.
How Canadians Spend Their Bitcoins
Around 31.68% of millennials own cryptocurrency, making them the biggest group of crypto owners. If we look at that data, it’s easier to conclude how the majority of Canadian Bitcoin owners spend their money. Despite popular belief, millennials are good with their money. It’s just that they have less than previous generations, so food and housing expenditures take a large portion of their spending. However, one thing sets millennials apart from older generations, and that’s gaming. The research shared by GWI suggests that gaming has a major impact on millennials. But that’s not just any gaming.
Unlike their parent generation, millennials are not interested in the games of chance, like casino games. So while they will not search for online casino slots, they will search for PlayStation games, streaming services and buy the majority of their things online. According to the Bank of Canada’s report from 2021, 70% of Bitcoin owners hold small amounts, which goes in hand with our previous conclusion.
Regulations and Taxes
Earlier this month, Binance — one of the world’s largest exchanges — had to wind down operations in Canada, citing that they disagreed with new regulations concerning user information sharing and limited access to cryptocurrencies for users and investors. Another crypto exchange, Kucoin, was fined $2 million and then banned by the Ontario Securities Commission for failing to meet regulations.
Bitcoin and other cryptocurrency advocates share in Binance’s dissatisfaction, however. They argue that the whole point of cryptocurrencies is to remove the middlemen as blockchain-powered networks and assets function as a self-policing technology, and the stringent compliance measures starkly contrast the anonymity, security, and tamper-proof features that make cryptocurrencies attractive.
Is Crypto Taxable in Canada?
The Canada Revenue Agency (CRA) considers cryptocurrency as property. Thus, any gains earned from it are taxable, categorized as either business income or capital gains, depending on the income tax rates. According to the CRA, crypto is taxable under Income Tax laws. This means that you will need to pay Income Tax on 50% of any profits from selling crypto and any extra income earned from crypto activities such as staking or receiving payments in crypto.
How much tax do you pay on crypto in Canada?
The tax you owe on your cryptocurrency transactions will vary depending on the type of transaction (income or capital gain) and your earnings. If your transaction is considered income, you will be subject to Income Tax at your standard Federal and Provincial tax rate. However, if your transaction is considered a capital gain, you will owe Income Tax at the standard Federal and Provincial tax rate but only on half of the gain.
Trading and Exchanges
In the past, crypto institutions didn’t always have a hard time in Canada. The wave of new regulations, sanctions, and the hard-line OSC drew was a consequence of the collapse of the exchange Quadriga CX in 2019, leading to 76,000 Canadians losing a total of $215 million. The situation was further worsened by the collapse of FTX and the subsequent fraud charges levelled against its founder.
The commission hopes that tightened measures will make exchanges accountable and avoid losses suffered in the past. The securities commission website lists crypto trading platforms authorized to do business in Canada, including Bitbuy, Bitvo, Coinberry, Coinsmart, and Virgo CX. The Canadian Securities Commission also keeps a “blacklist” of banned cryptocurrency platforms and exchanges or those currently facing enforcement investigations or charges.
Holding and Using Bitcoin in Canada
Currently, the best course of action for holding Bitcoin in Canada is self-custody, just as Satoshi Nakamoto intended. By using cold wallets or hardware wallets, you can have complete control over your crypto without being coerced into compliance terms or risking centralized institutions that may fail. Be careful, though, as more relaxed regulations around decentralized exchanges also mean more bad actors are in the space, resulting in a higher possibility of financial losses or scams. LocalBitcoins, for instance, is a popular marketplace for buying and selling cryptocurrencies over peer-to-peer networks, but you need to carry out due diligence and follow the platforms’ guidelines to avoid getting scammed.
With Canada’s rigid policies, any individual or company trying to hold, manage, or trade cryptocurrencies over centralized channels has to comply with several constraints that are perceived to be against the true spirit of Bitcoin as a transparent, trustless, and decentralized money system.
Last Updated on by alishbarehman
