If you’re an adult, with a job, then you probably know what it’s like to have to give all of your money to the Tax Man. If you also have crypto assets, then you might be under greater scrutiny – especially if you live in Canada. Multiple sources have confirmed that Canadians with crypto assets are being targeted by the Canadian Revenue Agency (CRA). Those who have been targeted by the CRA have also been sent questionnaires to fill out. CRA wants to know what crypto-related activities these Canadians have been involved with over the past few years.
Earlier this year, CRA Project Oversight Director Jared Adams tweeted about Bitcoin possibly being used in money laundering schemes. I mean, that’s something that I think we all kind of figured would happen or is happening. Am I wrong? But where it gets interesting is with the fact that CRA has dealt with numerous scams which involve unsuspecting Canadians being called and demanded to make tax payments in Bitcoin. Can you imagine getting a phone call where the person on the other end says that you have to pay off your back taxes in Bitcoin?
In the United States, the Internal Revenue Service (IRS) has also targeted Bitcoin users, but by demanding Coinbase turn over large amounts of data about its users. Coinbase was eventually able to fight the demand for user data in court, and because of that, they were able to limit the scope of how much data is collected by the IRS.
But let’s get back to the Canadian situation because they’re actually targeting the cryptocurrency users themselves – which is much more interesting. CRA shared the following statement:
“The Canada Revenue Agency (CRA) 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.”
In order to follow through with these commitments, the CRA established a dedicated cryptocurrency unit in 2017 in order to build intelligence, and conduct audits focused on risks related to cryptocurrencies. One effort includes the Underground Economy Strategy, which includes a commitment to monitor emerging platforms and new business models – with a special focus on sharing economy and digital currencies.
But what about these audits? The questionnaire asks recipients to describe, in detail, their involvement with cryptocurrencies. You might be surprised to learn that the questionnaire is 13 pages long and includes a total of 54 questions. One of the questions that
“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?”
Regardless of how Canadians answer these questions, they may be subject to providing additional information throughout the auditing process. While cryptocurrencies have been gaining momentum as an alternative to traditional currencies, this is only the tip of the iceberg when it comes to how it will all be regulated.