Canadian Bitcoin and Crypto Investors Under Government Scrutiny

The Canada Revenue Agency (CRA) is auditing and looking into individuals who invested or traded Bitcoin and Crypto. In-depth questionnaires were sent to investors dating 10 years back.


he Canadian Tax Authorities and the Canada Revenue Agency (CRA) are auditing and looking into individuals who have traded in Cryptocurrency. In 2017, the CRA started a Cryptocurrency unit to gather general information on digital assets and some individual users.

Sources say now targeting active crypto investors as a scheme to keep tabs on their cryptocurrency investments, including how they have purchased these assets. In the past years, the Internal Revenue Service (IRS) in the United States also targeted Cryptocurrency users by requesting COINBASE to turn over their data about its users.

Coinbase disputed the demands in court and in the end was able to limit the scope of the collection of data.

Photo by Franki Chamaki / Unsplash

Some Crypto users and investors in Canada have been sent in-depth questionnaires regarding trading in Cryptocurrency dating back 10 years. The questionnaire can be found "HERE" The booklet of questions total to 13 pages and 54 questions, many of which contains many sub-questions.

The questionnaire pries on an individuals investments, assets, mining histories, and ICOs. But it mainly focuses on the usage of services provided to anonymize transactions.

“Do you use any cryptocurrency mixing services and tumblers? If so, which services do you use?"
"Can you please provide us with the tracing history, along with all the cryptocurrency addresses you ‘mixed’? Why do you use these services?"
"Did you purchase bitcoin or cryptocurrencies privately from individuals?"
"How were these transactions facilitated? Location, procedure followed, etc.?"

The questionnaire asks.

It then continues to inquire about interests in using ShapeShift or Changelly, both of which have allowed users to exchange crypto assets without tying their trades to a real world identity.

ShapeShift recently changed it model and now requires for users to sign up for accounts and share personal information. Changelly still only requires an email to use its services.

And finally in the end, it reads, "The questions are not exhaustive and we may require additional information during the audit." The anonymity embedded in this technology makes it difficult for tax authorities to collect accurate records and data on cryptocurrencies.

Cryptocurrency research firm COINCENTER believes the tax system for crypto is "broken," and there is a lack of understanding on how these digital assets actually work.

Sites like "COINJOIN" adds a layer of protection to ones identity and privacy by combining many transactions from different users. LOCALBITCOINS facilitates non-custodial over the counter (OTC) trading of local currency for bitcoins.

BITQUICK and BITSQUARE are only some of the many exchanges that provide anonymity for the exchange of Bitcoins and other Cryptocurrencies.

The questionnaire also asks users “to list all personal crypto asset addresses that are not associated with their custodial wallet accounts.”

Sources confirm there are over 60 active ongoing audits in Canada.

When asked about specifically targeting Cryptocurrency users, the CRA responded:

"The Canada Revenue Agency understands that a vast majority of middle-class Canadians pay their fair share, but it remains committed to ensuring that without exception, every taxpayer abides by the same tax laws. As a world-class tax administration, the CRA is also committed to adapting its administration to keep pace with evolving global services and products, and making key investments to effectively address the new ways of doing business in the global economy."

According to a statement put out by the CRA, the active audits are to help the "taxpayers understand their tax obligations when using digital currencies."

"This unit has enhanced the CRA’s ability to monitor and enforce compliance in areas of emerging risk, including the cryptocurrency space.

There are currently over 60 active audits related to cryptocurrency.

The CRA is also committed to helping taxpayers understand their tax obligations when using digital currencies, and to remind them that using digital currency does not exempt consumers from their tax obligations.

The CRA has published educational material on its website regarding the tax treatment of dealing in Digital Currency.

Earlier this year on Twitter in response to a Bitcoin related company in Canada, CRA Project Oversight Director Jared Adams, implied how cryptocurrency could be used illegally for money laundering.

<blockquote class="twitter-tweet"><p lang="en" dir="ltr">Duly noted. <a href=""></a></p>&mdash; Jared Adams (@jared_adams613) <a href="">January 30, 2019</a></blockquote><script async src="" charset="utf-8"></script>

Aside from the lengthy questionnaire and audits, the Canadian government also warns everyone about Bitcoin fraud and schemes.

Canadian Television Network, CTV News, reported scammers were defrauding innocent individuals of hundreds of thousands of dollars by posing as CRA officials and asking them to pay their taxes in Bitcoins.

Toronto Police reports that scammers call from fake numbers with a daunting message. "You’re about to be arrested for tax fraud or deported from the country—unless you head immediately to a Bitcoin ATM and pay a fine or fee."

These fake numbers are created online through technology that allows the perpetrators to change phone numbers and spoof caller IDs. This makes it almost impossible for law enforcement to trace.

At this time, the police department does not have statistics on the total number of victims defrauded by this crime, but say that there has been an "uptick" in reports from victims.

The Canadian government reminds everyone that paying taxes thought Bitcoin is not possible at the moment.

Brandon Stewart

I am a risk manager and journalist. I write about business, technology, health, and whatever new thing happens in the world of crypto.