Canada tightens crypto reporting measures in 2024 budget

Cryptocurrency-focused service providers in Canada will face stricter regulatory mandates after new laws were introduced in the nation’s 2024 federal budget.

Announced on April 16, the budget plans to enforce the Crypto-Asset Reporting Framework (CARF), a system approved by the Organisation for Economic Co-operation and Development (OECD) in August 2022. 

The move came in response to the G20’s mandate in 2021, which required the OECD to develop a framework supporting the automatic exchange of tax information involving crypto assets.

Cryptoasset service providers, including exchanges, brokers, dealers, and ATM operators, will have to comply with the new reporting requirements and disclose complete transaction details to the government every year.

The reporting criteria require service providers to report transactions between different cryptocurrencies, between cryptocurrencies and fiat currencies, and transfers of cryptocurrencies. However, transactions initiated using central bank digital currencies (CBDCs) are exempt from these requirements.

On top of these, cryptocurrency service providers will also be reporting client-specific information such as full names, residential addresses, dates of birth, jurisdictions of residence, and taxpayer identification numbers. Further, these requirements will apply to both Canadian residents and non-residents.

As the implementation of the CARF will require significant funding, the budget suggested allocating CA$51.6 million ($37.3 million) to the Canada Revenue Agency (CRA) over five years starting from 2024-25. Further, an annual budget of CA$7.3 million ($5.2 million) has been allocated to sustain the ongoing administration and operational costs.

The Canadian government plans to implement these mandates in 2026. The initial exchange of information from service providers is slated for 2027.

The budget also introduced provisions that aim to mitigate crypto tax evasion in the nation. These include penalties for taxpayers who fail to meet the disclosure requirements.

“Just as crypto-assets pose financial risks to middle class Canadians, the rapid growth of crypto-asset markets poses significant risks of tax evasion. Regulation and the international exchange of tax information must keep pace with tax evasion threats in order to ensure a fair tax system,” an excerpt from the budget reads.

Regulators in Canada have recently shifted their attention towards the growing crypto economy in the nation. Earlier in Jan. 2024, the nation’s securities regulators proposed new rules for public investment funds dealing with crypto assets. Under the new regulations, only alternative investment funds and non-redeemable investment funds would be allowed to trade or have crypto assets in custody directly.

The development closely followed a Nov. 3 Coingecko report that revealed Canada was one of the primary markets for Bitcoin ETFs.