Cryptocurrency Tax
The CRA treats cryptocurrency as a commodity, not a currency (IT-490 and CRA folio S3-F11-C1). Every disposition is taxable; the only question is whether the gain is on capital or income account. Foreign exchange balances above $100k aggregate ACB trigger T1135 reporting.
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Guidance, not advice. We explain the rules, we don't assess your situation. Always seek financial or tax advice from your accountant, or contact CRA. Read our editorial scope →
1. Capital gains vs business income
The CRA applies the standard trader-vs-investor factors: frequency of transactions, period of holding, knowledge of crypto markets, time spent, financing, advertising. A long-term HODLer with occasional sales is on capital account (50% inclusion). A high-frequency day-trader or arbitrage operator is on income account (100% inclusion, T2125 reporting, but losses fully deductible).
2. Taxable events
- Sell crypto for fiat (CAD, USD, etc.)
- Trade one crypto for another (BTC → ETH is a disposition of BTC at FMV)
- Use crypto to buy goods/services (deemed barter — disposition at FMV)
- Receive crypto as payment for goods or services (business income at FMV)
- Gift crypto (deemed disposition at FMV to donor; recipient takes FMV ACB)
3. Non-taxable events
- Buying crypto with fiat — establishes ACB only
- Transferring between your own wallets — same beneficial owner
- Simply holding (HODL) — gain crystallises only on disposition
- Donating crypto to a registered charity in kind — deemed disposition but donation credit at FMV (since 2024, certain digital assets qualify)
4. Mining
Hobby miner: no income on receipt; capital gain on eventual disposition, ACB = $0. Business miner (commercial scale, intention of profit): business income at FMV when mined, included on T2125; subsequent disposition is a separate inventory-style transaction. Electricity, hardware (Class 50 CCA 55%), and cooling are deductible.
5. Staking, lending & DeFi
Rewards from staking, yield farming or lending protocols are almost alwaystaxable on receipt at FMV — as business income if active, otherwise as miscellaneous income. Wrapping, providing liquidity, and certain bridge transactions are likely dispositions (CRA has confirmed in several technical interpretations). Detailed records of each on-chain action are essential.
6. NFTs
- Creator/minter: sale revenue is business income on T2125; royalty receipts taxed when received.
- Investor: capital property in the same way as fungible crypto; minted with crypto = disposition of that crypto.
- Trader: NFT flipping at scale may push to business income.
7. T1135 foreign property reporting
Crypto held on a non-Canadian exchange (Binance, Coinbase, Kraken, etc.) or in self-custody outside Canada counts as "specified foreign property." If the aggregate cost amount of all specified foreign property at any time in the year exceeds CAD $100,000, file Form T1135. Failure penalty is $25/day to $2,500, with worse for gross negligence. Self-custody hardware wallets located outside Canada (most cold storage) are caught.
8. Superficial loss rules apply
Selling crypto at a loss and buying back identical property within 30 days denies the loss (s. 54). The denied amount is added to the ACB of the replacement property. This breaks naïve "tax loss harvesting" of BTC or ETH unless you genuinely stay out for 31 days or switch to a non-identical asset.
9. ACB tracking
Canada uses the average cost method per identical property (s. 47). Specialised software (Koinly, CoinTracker, CoinLedger, Crypto.com Tax) can ingest exchange API data and produce ACB-method reports. Maintain immutable monthly snapshots — exchange data quality degrades after delistings or platform shutdowns.
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