Canada Tightens Crypto Reporting in 2024 Budget

Canada’s federal budget for 2024 has unveiled stricter regulations for cryptocurrency service providers, necessitating annual transaction and client detail reports to the government. This decision aligns with the G20’s directive from 2021, which tasked the Organisation for Economic Co-operation and Development (OECD) with creating a framework to support the automatic exchange of tax-related information on crypto assets. The OECD established the Crypto-Asset Reporting Framework (CARF) in August 2022, which Canadian authorities will now implement.

The CARF requires crypto exchanges, brokers, dealers, and ATM operators to annually report multiple types of transactions. These include exchanges between various cryptocurrencies, swaps between cryptocurrencies and fiat currencies, and cryptocurrency transfers. However, transactions involving central bank digital currencies (CBDCs) are not included under these regulations.

Moreover, these service providers must also report detailed client information. This includes names, residential addresses, birth dates, jurisdictions of residence, and taxpayer identification numbers for both Canadian residents and non-residents.

To support these new requirements, the Canadian government plans to allocate CA$51.6 million ($37.3 million) to the Canada Revenue Agency (CRA) over the next five years, starting from 2024-25. An additional annual budget of CA$7.3 million ($5.2 million) will cover the ongoing administration and operational expenses.

Implementation and Impact

Set for implementation in 2026, with the first reports expected in 2027, these measures aim to curb tax evasion and enhance transparency in the cryptocurrency sector. The 2024 budget also includes penalties for those failing to comply with the new disclosure mandates, reinforcing the government’s commitment to a fair tax system amid the rapid growth of crypto markets.

This regulatory update follows recent initiatives by Canadian securities regulators, who in January 2024 proposed new guidelines restricting public investment funds from directly trading or holding crypto assets, except for alternative and non-redeemable investment funds. These changes reflect Canada’s proactive stance following its recognition as a leading market for Bitcoin ETFs, as reported by Coingecko on November 3.