The number of Canadians holding cryptocurrency has grown significantly. About 1 in 10 of us now own Bitcoin or other digital assets according to recent Bank of Canada research. Yet despite this mainstream adoption, crypto taxation remains one of the most misunderstood areas we encounter in our practice.
Here's what we've learned from working with crypto investors and traders across Canada: tax mistakes in this space are rarely about getting the math wrong. They're about making incorrect assumptions about how the CRA views your activity, where the assets are located, what triggers a tax obligation, when that tax obligation occurs, and why intent and documentation matter as much as the numbers themselves. So the first principles of who, what, where, when, why, and how should drive your tax reporting.
The CRA has made it clear they're paying attention. In their 2025–26 Departmental Plan, the Commissioner explicitly identified crypto-assets as an "emerging high-risk area" and committed to "take all necessary measures to root out non-compliance." This isn't meant to scare you. It's simply the reality of where enforcement focus has shifted. And with that shift comes an opportunity: to get it right from the start, before issues arise.
This guide walks through what the CRA actually cares about when it comes to cryptocurrency taxation in Canada, why professional judgment often trumps software calculations, and when you might want to have someone in your corner who speaks both crypto and tax fluently.
We often see clients arrive with printouts from crypto tax calculators, confident they've done everything right. The numbers add up (most of the time)! The software said so. But here's the thing: the CRA doesn't just look at numbers. They look at context.
Consider two people who each buy Bitcoin at $30,000 and sell it at $45,000, realizing a $15,000 gain. Same transaction, same math. But Person A, who bought and held for a year as an investment, pays tax on 50% of that gain (the capital gains inclusion rate). Person B, who actively day-trades crypto as their primary income source, pays tax on 100% of the gain (business income). The calculator doesn't know which person you are. It can't assess your intent, your trading pattern, or how you approach crypto activity.
This is what makes cryptocurrency taxation more nuanced than many people realize. It's not just about plugging numbers into formulas. It's about understanding how the CRA classifies your activity, and that classification changes everything about your tax obligation.
Let's start with the foundation: the CRA treats cryptocurrency as a commodity, not currency. This means crypto falls under property taxation rules rather than being treated like cash.
What does that mean practically? Every time you dispose of crypto—whether selling for Canadian dollars, trading one coin for another, or buying something with Bitcoin—you've potentially triggered a taxable event. The CRA evaluates each transaction within the broader pattern of your behaviour, not in isolation.
This is where intent becomes critical. The CRA doesn't just look at a single Bitcoin sale and make a determination. They consider: How often do you trade? How long do you hold? Are you using sophisticated trading strategies? How much time do you spend on crypto activities? The answers to these questions help the CRA decide whether you're an investor (capital gains treatment) or whether your activity crosses into business territory (business income treatment).
And yes, the CRA has joined global enforcement initiatives specifically targeting cryptocurrency. Through their participation in the Joint Chiefs of Global Tax Enforcement (J5), they're coordinating with tax authorities in the US, UK, Australia, and Netherlands to identify unreported crypto income. As their Criminal Investigations Directorate noted, "we are operating in a digital world without borders... more important than ever to raise awareness of risk indicators tied to cryptocurrency assets." This isn't about creating fear—it's about recognizing that the infrastructure for crypto tax enforcement exists and is active.
This distinction is probably the most important decision in cryptocurrency taxation, and it's one many people don't realize they're making. Under the Income Tax Act, capital gains are taxed at a 50% inclusion rate, meaning only half of your gain is added to your taxable income. Business income, however, is 100% taxable. Crypto is not considered a “security” so there is no election available to taxpayers to have all trading transactions treated as capital gains.
The difference is significant. On a $20,000 crypto gain, capital gains treatment means $10,000 is taxable. Business income treatment means the full $20,000 is taxable. The tax on income is therefore at least double the tax on capital gains, depending on your marginal tax rate.
So how does the CRA decide? They use the principles from Interpretation Bulletin IT-479R, originally written for securities traders but applied to cryptocurrency as well. The factors include:
Frequency and volume of transactions. Occasional trades lean toward capital gains. Daily or weekly trading suggests business activity.
Period of ownership. Holding crypto for months or years indicates investment intent. Buying and selling within days or weeks suggests trading for profit.
Knowledge and sophistication. Using advanced trading platforms, margin, leverage, or sophisticated strategies indicates business-like activity.
Time spent. If you're monitoring markets constantly and crypto trading occupies significant time, that points toward business income.
Intention. Did you buy to hold long-term, or to profit from short-term price movements?
Most people assume their crypto gains automatically qualify as capital gains. That's not how it works. The CRA makes this determination based on the facts of your situation, court rulings, and if you've been actively trading, and you might not like the answer. We've seen clients shocked to learn their trading pattern over the past year pushed them into business income territory—and the higher tax bill that comes with it.
The Income Tax Act requires you to maintain records for six years from the end of the tax year they relate to. For cryptocurrency, that means keeping detailed transaction histories, wallet records, exchange statements, and adjusted cost base (ACB) calculations.
Here's what often trips people up: exchange statements alone aren't sufficient. They don't accurately capture transfers between wallets (both your own and third-party wallets), assets on multiple platforms, or crypto-to-crypto trades across different exchanges. The CRA expects you to track your ACB across all your holdings, regardless of where they sit. And if you've moved crypto between platforms over the years, reconstructing that history can be challenging without proper documentation.
This is where things get more practical. If you use multiple platforms—and most crypto holders do—getting the right documentation starts with understanding what each platform actually provides.
Canadian crypto investors commonly use several platforms, each offering different levels of tax documentation:
Wealthsimple Crypto provides annual tax summary reports directly through their mobile app. You'll find them under the account statements or tax documents section. These reports include your transaction history and preliminary capital gains/losses calculations, showing purchase prices, sale prices, and proceeds. It's a helpful starting point, though it's worth noting that Wealthsimple's reports may not capture external wallet transfers to or from your Wealthsimple account, and they don't integrate with other platforms for ACB tracking.
Binance allows you to export transaction history as a CSV file through "Wallet" → "Transaction History." If you trade across multiple platforms, though, you'll need to manually calculate your ACB—Binance provides the raw data but not the tax calculations themselves.
Coinbase offers tax reports through their Tax Report Center, showing preliminary gains and losses. One important note: Coinbase reports come in USD. If you're a Canadian taxpayer, you need to convert these amounts to CAD using Bank of Canada exchange rates using a calculation methodology approved by the CRA.
Crypto.com lets you export transaction history through their mobile app in CSV format. For simpler portfolios, this data might be sufficient. For complex activity involving staking, DeFi, or frequent trading, professional reconciliation typically makes sense.
Kraken provides detailed transaction history and ledger exports in multiple formats. They're known for comprehensive data export options that work well for tax preparation.
The key insight here: while these platforms provide transaction data, consolidating information across multiple exchanges, wallets, and DeFi protocols requires careful work. If your crypto journey has taken you across several platforms—and most people's has—getting everything aligned correctly matters. That's something our team helps clients with regularly as part of our cryptocurrency tax and accounting services.
Let's talk about the misconceptions we see most often.
Assuming all crypto gains are capital gains. As we covered earlier, the CRA looks at your activity pattern. High-frequency trading, short holding periods, or using leverage often pushes you into business income territory. The assumption that "I'm just investing" doesn't hold up if your behaviour looks like a business.
Believing no cash out means no tax. This one's widespread and completely wrong. The CRA explicitly states that "a disposition occurs when you trade or exchange crypto assets, including... the trade of one crypto asset for another." Trading Bitcoin for Ethereum? That's taxable. Using crypto to buy something? Also taxable. The misconception that you only owe tax when converting back to Canadian dollars has caught many people off guard.
Overlooking staking rewards, mining income, and airdrops. The CRA treats these as income when received. If you're staking crypto and earning rewards, that's income at the fair market value when you receive it (which then becomes your cost base for those coins). Mining rewards work similarly—they're income when earned, valued in Canadian dollars. Many people discover this only after receiving CRA correspondence.
Ignoring CRA review risk. The standard reassessment period is three years from your initial assessment. That extends to six years or more if the CRA believes there was misrepresentation. With crypto enforcement ramping up, assuming "they'll never find out" is increasingly risky. Canadian exchanges share data with the CRA, and the agency has made cryptocurrency compliance a stated priority.
Speaking of enforcement: the CRA has significantly increased its focus on cryptocurrency tax compliance. While they don't publish specific audit statistics, the direction is clear. The CRA has dedicated resources to cryptocurrency compliance, with specialized teams monitoring crypto transactions and coordinating with international enforcement efforts.
Their participation in the J5 (Joint Chiefs of Global Tax Enforcement) alongside the US, UK, Australia, and Netherlands signals sophisticated cross-border coordination. The CRA Criminal Investigations Directorate has publicly stated they're working to identify "risk indicators tied to cryptocurrency assets"—this isn't casual monitoring.
What might trigger CRA attention? We can't point to an official list because the CRA doesn't publish one. But based on how tax compliance works generally, certain patterns create risk:
Large unreported gains or losses. If the CRA receives data from exchanges showing significant crypto activity, and your return shows nothing, that's a red flag.
Inconsistencies between exchange data and your filing. Canadian exchanges report to FINTRAC and can be compelled to share information with the CRA. Mismatches between what exchanges report and what you file create obvious questions.
Missing T1135 forms. If you hold cryptocurrency for capital gains purposes, it is likely specified foreign property that needs to be reported on a T1135 Foreign Income Verification Statement. Many people miss this requirement. The CRA has released guidance that provide a limited exemption for assets held on a Canadian exchange in certain circumstances. Assets held on foreign exchanges (Binance, Coinbase, Kraken) do not have any reporting exemptions The penalties start at $25 per day, with a minimum of $100 and maximum of $2,500—plus potential gross negligence penalties if the CRA views the omission as intentional.
High-volume trading with minimal reporting. If you're making hundreds of trades but reporting minimal income—or none at all—the pattern doesn't make sense to auditors.
Let's talk about penalties, because they're substantial. Gross negligence penalties under Section 163(2) of the Income Tax Act equal 50% of the tax that was understated. Failure-to-file penalties start at 5% of your balance owing, plus 1% per month the return is overdue, up to 12 months (maximum 17%). These compound if you've filed late before. For T1135 late filing, you face $25 per day with a $2,500 maximum—though wilful concealment could trigger gross negligence penalties on top of that.
This isn't meant to alarm you. It's meant to be clear-eyed about what's at stake. The good news: being audit-ready from the start prevents these issues. That means maintaining transaction records for all purchases, sales, and transfers; documenting your ACB calculations with supporting math; keeping exchange statements and wallet records organized by tax year; and saving documentation of foreign exchange rates you used for USD-to-CAD conversions. CRA could still disagree with what you have done and reassess but at the intentional record-keeping and decision-making should prevent additional penalties being imposed.
For Canadians with holdings on international exchanges, or those with dual citizenship (particularly US-Canada), additional reporting may apply. T1135 requirements, potential US tax obligations for American citizens, and cross-border considerations add layers of complexity we address in our cross-border tax services. If this sounds like your situation, having someone who navigates both Canadian and international tax obligations regularly makes a real difference.
Here's something we tell clients often: the CRA's guidance on cryptocurrency covers a lot of ground, but it doesn't cover everything. DeFi (decentralized finance) transactions, for example, don't have explicit CRA guidance. Yield farming, liquidity pools, DeFi lending—these create tax questions the CRA hasn't specifically addressed. NFTs have limited guidance. Staking rewards get mentioned alongside mining as "rewards" but the nuances around hobby income versus business income thresholds aren't spelled out.
This is where "defensibility" matters. In tax, having a defensible position doesn't mean finding the lowest possible tax outcome. It means being able to support your position with the facts of your situation and a reasonable interpretation of existing rules. If you're dealing with DeFi transactions or NFT activity, documenting your reasoning for how you're treating these events matters as much as the treatment itself.
When does professional advice become particularly valuable? When you're making a significant number of trades per year. When you're active in DeFi. If you're mining or running staking operations. If you create or trade NFTs. If you hold crypto on international exchanges or have cross-border tax obligations. Or if you have prior year unreported income and need to address it proactively.
These situations involve judgment calls where having someone who's navigated these questions before—and knows how to document positions the CRA will accept—prevents costly mistakes down the road. Our business advisory practice works through these exact scenarios with clients regularly.
Let's be practical about what working with a crypto tax advisor actually involves.
First, there's the classification question. We assess your specific facts against the IT-479R factors to determine whether capital gains or business income treatment applies to your situation. Then we document that reasoning. If the CRA ever questions your classification, having that contemporaneous documentation matters.
Second, there's interpreting complex transactions. DeFi, staking, NFTs, airdrops—when CRA guidance is ambiguous or absent, we apply existing tax principles to create defensible positions. This isn't about being aggressive. It's about being reasonable while documenting your approach.
Third, reconciling multi-platform activity. Tracking ACB across several exchanges and wallets, handling USD-to-CAD conversions, identifying missing cost bases—this technical work takes time and precision. Mistakes here compound over multiple tax years.
Fourth, audit representation. Under the CRA Taxpayer Bill of Rights, you have the right to professional representation during audits or reviews. If the CRA sends you an information request or launches an audit, having someone who handles these regularly on your behalf reduces stress and typically leads to better outcomes.
Finally, proactive planning. Tax-loss harvesting strategies. Timing dispositions for optimal tax treatment. Structuring holdings to minimize future tax liability. This forward-looking work often saves more tax than the compliance work itself.
The relationship isn't transactional—"do my taxes, and we'll talk next year." It's ongoing. Crypto markets move fast, tax situations change, and questions come up throughout the year. Being able to reach out when you're considering a large transaction, or when you receive an airdrop and aren't sure how to treat it, prevents problems before they become problems.
Cryptocurrency taxation in Canada requires more than calculation accuracy. It requires understanding how the CRA views your activity, documenting your positions thoughtfully, and maintaining records that hold up under scrutiny.
The CRA focuses on behaviour patterns, classification decisions, and record completeness. They're not trying to trick you. They're applying established tax principles to a new asset class, and they expect you to approach compliance seriously.
When your crypto activity grows in volume or complexity—whether that's frequent trading, DeFi participation, mining operations, or holdings across multiple platforms—having clarity about your obligations beats guessing. Getting it right from the start is simpler than correcting years of issues after the fact.
If you're uncertain about how to classify your activity, concerned about past reporting, or dealing with situations where CRA guidance is ambiguous, our CPAs are here to help. Not to complicate things unnecessarily, but to provide straightforward answers grounded in both tax expertise and practical crypto knowledge.
Is cryptocurrency taxable in Canada?
Yes. Most crypto transactions trigger tax obligations, depending on your activity and how it's classified. The exception: simply holding crypto (HODLing) isn't taxable. But when you dispose of it—whether selling for Canadian dollars, trading for another cryptocurrency, or using it to buy something—that creates a taxable event.
Is crypto always treated as capital gains?
No. This is one of the most common misconceptions. While many investors qualify for capital gains treatment, it is also possible for your activity to be classified as business income. The CRA assesses this based on the IT-479R factors we covered earlier: frequency, holding periods, sophistication, time spent, and intent. Classification is fact-specific to your situation, not something you simply elect.
What records should I keep for crypto taxes in Canada?
You need all transaction records (purchases, sales, trades), exchange statements from every platform you've used, wallet addresses for all holdings, and ACB calculations showing your cost basis. Keep everything for six years from the end of the tax year. Documentation related to cost bases should be kept until the asset is disposed of, even if it was acquired longer than six years ago. If you've transferred crypto between wallets or exchanges, document those transfers. If you've converted USD amounts to CAD, save the exchange rates you used. The more platforms and wallets you've used, the more important thorough recordkeeping becomes.
When should I talk to a crypto tax professional?
When your activity increases beyond simple buying and holding. When you're dealing with DeFi, staking, NFTs, or mining. If you're uncertain how to classify your activity. If you have unreported crypto from prior years and want to address it properly. If the CRA contacts you about your crypto activity. Basically, when complexity or risk increases beyond what you're comfortable handling on your own.
How does the CRA know about my crypto transactions?
Canadian cryptocurrency exchanges are subject to various reporting requirements that are accessible to CRA. The CRA participates in international enforcement initiatives with access to blockchain analysis capabilities. They can issue information requests to foreign taxation authorities. And they can review your bank deposits that don't match reported income and issue assessments on that basis that you have to defend. The transparency of blockchain technology works against the assumption that crypto is anonymous.
What if I haven't reported crypto in previous years?
Canada's Voluntary Disclosures Program lets you come forward before the CRA contacts you. If you meet the program requirements and your disclosure is accepted, the CRA typically waives penalties and doesn't pursue prosecution—you pay the tax owing and possibly some interest. VDP applications must be voluntary (meaning you apply before the CRA contacts you about that specific issue) and complete. With crypto enforcement increasing, addressing unreported crypto sooner rather than later makes sense. Once the CRA contacts you, VDP is generally no longer available.
Cryptocurrency taxation doesn't need to be overwhelming, but it does require getting the fundamentals right. If you'd like to discuss your specific situation—whether that's understanding how your trading activity should be classified, addressing compliance questions, or simply getting a second opinion on your approach—our team is available to help.
At Forbes Andersen, we work with crypto investors and businesses across Canada, handling everything from straightforward holding strategies to complex DeFi portfolios and cross-border situations. We're here when you need us, not just in April, but whenever questions arise throughout the year.
Contact us for a free consultation and get guidance you can rely on.
This article provides general information about cryptocurrency taxation in Canada and should not be considered legal or tax advice. Tax situations vary based on individual circumstances. For specific guidance regarding your situation, please consult with a qualified tax professional.
