Canada: Cryptocurrency: More Than Just Money?

The topic of cryptocurrency has transcended niche discussion and is currently gaining mainstream interest or, at least, curiosity, turning arcane technological jargon into household buzzwords after only a few years of existence. Some have dubbed Bitcoin the "Napster of finance", i.e. a transformative technology and approach that, whether or not successful in the long term, has the potential to forever change how we view and use money.

Business leaders are entering uncharted territory as cryptocurrencies slowly permeate traditional markets. Certain retailers are facing increased pressure from consumers to accept bitcoins and other cryptocurrencies as forms of payment. Venture capital firms and investment funds are speculating on cryptocurrency start-ups and related rapid-growth businesses. As with many other technologies, this is all happening faster than regulators are able to adapt. Is it possible for businesses to strike a balance between protecting themselves from the legal risks associated with cryptocurrencies — particularly from a tax and securities perspective — and not miss the boat on this new technology?

Bitcoin vs. bitcoins?

So what are bitcoins? Since the Bitcoin (capital B) platform with its unit, the bitcoin (lowercase b), constitutes the most well-known and widely accepted cryptocurrency, it often serves as the common ground in the discussion of cryptocurrencies.

From a legal perspective, there are two main ways to look at Bitcoin. First, bitcoins are created through a process called mining, wherein a party devotes computing power to solve increasingly complex mathematical equations, which serves to verify anonymous bitcoin transactions in a decentralized manner. As an incentive for dedicating computing power to the network, the software protocol automatically rewards miners with newly minted bitcoins. Second, bitcoins are bought and sold through exchanges and transferred in day-to-day transactions in exchange for goods and services.

Tax considerations

The main tax questions that arise when dealing with bitcoin-denominated transactions are the following:

The Canada Revenue Agency (the "CRA") recently published certain technical interpretations on bitcoins. The CRA has confirmed that transactions conducted with bitcoins would be treated as barter transactions for income tax purposes (meaning that each party would be considered to transact based on the fair market value of the consideration they paid) and that general principles would apply in determining whether a transaction is on capital or income account. Thus, the CRA does not treat bitcoins as money, but as one type of property that may be used as a means of exchange for another type of property. Moreover, the CRA suggested that income from the mining of bitcoins could constitute "business" income, and that proper reporting would be required in all cases.

For GST purposes, bitcoins exchanged in the supply of goods and services are treated by the CRA as barter transactions as well, meaning that a GST-registrant merchant would be required to charge GST on the fair market value of the goods or services sold. One key question that is not yet explicitly answered by the CRA is whether the acquisition of bitcoins for, say, Canadian dollars, constitutes a "financial service" (which, like all purchases of money, is not subject to GST).

While bitcoins are not generally considered a currency in Canada since they are not legal tender in any country, it remains to be seen whether they could be considered "money" for GST purposes since, under the relevant legislation, "money" is defined only as including a currency. Moreover, if any country were to adopt bitcoins as a currency, same would be deemed to be "money" for GST purposes. If bitcoins do not constitute "money" for GST purposes, then a consumer paying in bitcoins may be required to pay GST twice: first on the acquisition of bitcoins and, second, on the purchase of goods and services with said bitcoins.

Another important practical GST issue is that services can be rendered within the Bitcoin network, such as supplying computing power or verifying transactions in exchange for transaction fees, paid in bitcoins by anonymous users or paid in newly-issued bitcoins. To the extent that those services constitute a taxable supply made in Canada by a person who is registered or required to register, it will often be practically impossible for the supplier of such services to collect tax from the recipient given the relative anonymity built into the Bitcoin protocol.

Securities considerations

The volatility and speculative nature of bitcoins, as well as their potential implications with money laundering, has led to significant debate over the government's regulatory oversight surrounding cryptocurrencies. While no specific directives have been proposed, the Autorité des marches financiers (the "AMF"), Québec's securities regulator, issued a warning following the unveiling of the first bitcoin ATM in Montreal in March 2014. The AMF provided some clarity by affirming that cryptocurrencies are not covered by the Fonds d'indemnisation des services financiers of the Fonds d'assurance-dépôt. In addition, the AMF announced that it intends to monitor cryptocurrencies with regard to the Securities Act, Derivatives Act and Money-Service Business Act.

The Ontario Securities Commission (the "OSC") was similarly prudent in its initial publication on cryptocurrencies, refraining from discussing any of their potential advantages. Instead, the OSC warned that all cryptocurrencies should be approached with extra caution, emphasizing instances of fraud and exchange shutdowns and their potential connection with money laundering and terrorist financing. The OSC did state that it will closely monitor investment activity related to cryptocurrencies and will take action where violations of the Ontario Securities Act are concerned.

To date, no Canadian securities regulator has come forward to suggest whether cryptocurrencies should or would be considered a "security" or "derivative" for the purposes of securities laws.

It is important to note that despite the lack of clarity surrounding government oversight of cryptocurrencies, users have not found themselves beyond the reach of the law.

Although Saskatchewan's securities watchdog, the Financial and Consumer Affairs Authority (the "FCAA") may not have taken action so far to specifically regulate Bitcoin or the mining of Bitcoin, it has taken action against a Bitcoin-related business. In early May, the FCAA issued a temporary cease-trading order against Dominion Bitcoin Mining Company Ltd., a Regina-based mining company that was soliciting investors through its website. The FCAA said that regardless of the property used to pay for shares, be it Canadian dollars, bitcoins or other, securities laws apply to the sale of shares. Since the company was not registered in Saskatchewan to trade in securities, the FCAA alleged that Dominion Bitcoin Mining may be in violation of Saskatchewan securities laws.

In 2013, the United States Securities and Exchange Commission (the "SEC") brought an enforcement action against Trendon T. Shavers, who offered and sold bitcoin-denominated investments on the Internet using his company, Bitcoin Savings & Trust ("BTCST"). The U.S. District Court for the Eastern District of Texas ruled in favour of the SEC, stating that BTCST investments constituted investment contracts and were therefore securities as defined by US federal securities laws. Although this was a step forward in clarifying the landscape surrounding cryptocurrencies, the Court was clear that it is the investments that constitute a security and not the bitcoins themselves.

Other Important Legal Areas

In Federal Budget 2014, it was announced that the Federal government intends to adapt certain aspects of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act in order to specifically and clearly deal with cryptocurrencies. Under this act, activities that constitute a "money services business" must comply with extensive reporting requirements aimed at deterring (or, alternatively, identifying) money laundering and related illicit activities.


Cryptocurrencies and their underlying software protocols may manifest themselves in a number of different forms in the very near future as developers continue to build on the technology. Whether cryptocurrencies ultimately revolutionize how we see and use money or whether they remain a preferred mechanism for fraudsters and money launderers remains to be seen. The legal landscape is likely to remain unclear for some time, so it is best to heed regulators' warnings, remain cautious and carefully plan cryptocurrency transactions, investments and other dealings, to avoid possible legal issues.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.