Is Crypto Regulated in Canada?

Early Regulation

Canada was one of the first countries to officially pass laws about using crypto, starting with its 2014 amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA).

Although not always related to crime, these amendments included certain provisions that attempted to classify crypto. The regulations, as they appeared, failed to do this and only concretely made one thing clear: that crypto was not a form of legal tender in the country.

Under the PCMLTFA, only banknotes printed and coins minted by the official Bank of Canada can be considered legal tender. As crypto coins are created digitally by a decentralized blockchain, they cannot be seen as a form of legal tender and instead are identified as commodities (or securities).

This identification as securities comes from the Canada Revenue Agency (CRA) and limits how crypto can be used, how it can be traded, and what applicable taxes relate to it. However, this is where the regulatory framework ends under the guidance of the PCMLTFA and CRA.

Canadian Securities Administrators

All securities within Canada are subject to the regulations set out by the securities administrator of the province where they are traded. Each province is allowed to set its own rules and regulations. However, each securities regulator reports to and falls under the Canadian Securities Administrators (CSA). 

The CSA attempts to bring the securities frameworks of the various provinces closer together by issuing advice and guidance on certain matters. Crypto is one of these matters, with the CSA issuing interpretations of laws to provinces that have helped many provinces form relatively consistent frameworks regarding crypto.

In some cases where guidance is issued, the CSA works in tandem with the self-regulating body called the Canadian Investment Regulatory Organization (CIRO). CIRO is the governing body of investment brokers throughout the country and works to outline and enforce a strict code of conduct regarding investment portfolios. As such, it has a good understanding of crypto as a security. 

Is Crypto Regulated?

Based on the above, the answer to whether or not crypto is regulated is not clear-cut. In terms of the government making provision to regulate it, yes, there have certainly been attempts to create legal frameworks under which crypto can be utilized and exchanged.

This has been necessary as more people purchase or gain the coin and use it for purchases or to access entertainment online by visiting sites like casinos.com. In the same breath, however, crypto remains largely unregulated. 

Across all attempts to form structured and concise regulations surrounding cryptocurrencies (including new rules being discussed in 2024), Canada has only three final and deft crypto regulations.

Not Legal

The first rule we already mentioned earlier: cryptocurrency is not considered legal tender in Canada. However, the Bank of Canada is somewhat progressive and is considering the possibility of minting digital cash.

This digital cash will be equivalent to normal Canadian dollars and (in the future) could even replace them. However, regardless of its being a digital form of currency, because it is issued by the Bank of Canada, it can be legally considered a form of legal tender. This means that the currency will be treated as regular fiat currency, something not accessible to crypto.

Registered Exchanges

Aside from clarifying the legal tender of crypto, one other rule is clear: any company trading crypto for fiat currency and vice versa must be registered. This rule came into effect after a joint recommendation issued by the CSA and CIRO.

Because exchanges offer a claim in a specific coin or type of cryptocurrency, this claim is considered a security in the eyes of the law. As such, to trade, a vendor must be registered with the government and fulfill all fiduciary responsibilities required to be a vendor.

Any exchange must also register as a virtual currency trading platform (VCTPS) to ensure that any exchange Canadians use to trade their crypto is above board and unlikely to defraud them of their cash. 

Taxable

The final regulation surrounding crypto in Canada is least surprising: taxes are due on crypto. Despite the form of currency not being seen as legal tender, the Canadian government still believes it is owed a percentage of any amount gained through trading or dealing with crypto. 

This is because cryptocurrencies are seen as commodities/securities, which attract either business or capital gains taxes. For most citizens, the amount of crypto dealt with doesn’t warrant business levels, and taxes will be owed at capital rates. Therefore, you should discuss details with a tax consultant if you have made any exchanges or payments using crypto.