In September 2020, the Canada Revenue Agency (CRA) filed an application in Federal Court seeking an order to compel Coinsquare to provide information pertaining to all of our clients’ account history and trading data. The CRA stated that it requires this information for tax reporting and compliance purposes. For reference, this story was covered in the media and you can read it here. We expect that similar disclosures will soon be required from other Canadian digital asset exchanges.
Coinsquare negotiated to protect our client’s privacy, and limit any disclosure to only what was absolutely required by the CRA under Canadian tax law. Instead of providing the CRA with all client data dating back to 2013 as was initially requested, Coinsquare and the CRA have agreed that information relating to 90-95% of our clients will not be disclosed. The affected clients include those who have had accounts valued at CAD$20,000 or more on Dec. 31 in the years 2014 through 2020 and 16,500 of the largest client accounts by trading volume during those periods.
The negotiated agreement and court order legally compels us to provide the CRA with limited client information by April 6, 2021. We will be privately alerting all affected clients of the forthcoming disclosure by email. While we will work closely with affected clients to answer any questions or concerns they may have, we also recommend that clients with questions about tax reporting consult a professional tax advisor.
Under the Income Tax Act, the CRA has the authority to review and verify that all Canadians have met their ongoing tax obligations. Referencing the CRA’s cryptocurrency guidelines, they have stated ‘any income from transactions involving cryptocurrency is generally treated as business income or as a capital gain, depending on the circumstances. Similarly, if earnings qualify as business income or as a capital gain then any losses are treated as business losses or capital losses.’
We believe this agreement is a partial but significant victory for Coinsquare and the digital asset industry in Canada. We hope that our victory will set a precedent for other companies in the cryptocurrency industry to defend their clients’ privacy and to limit any disclosure to only what is absolutely required under Canada’s tax law.
How do I report cryptocurrency transactions to the CRA?
For your reference, the CRA has published a Guide for Cryptocurrency Users and Tax Professionals to assist Canadians with cryptocurrency tax filings.
There are a variety of cryptocurrency tax softwares available (Koinly, TokenTax, CoinTracker) to help calculate your potential gains and losses. We would also encourage you to read our summary on filing cryptocurrency taxes in Canada and to consult with a professional tax advisor.
Regards,
The Coinsquare Team
