Canada’s big banks are still staying cautious regarding cryptocurrencies

The financial market is a very complex industry that has a lot of branches and markets and all of them have their own rules and regulations, as well as purposes. One of the most popular and widely used markets is the foreign exchange markets and the stock market, and as of today, the crypto-industry is taking an important place next to them. The main characteristic of cryptocurrencies is that they do not exist in real shape and all of them are digital, without them having any physical form. This is considered to be its advantage as well as the disadvantage because if its digitized form makes it easier to execute the transactions, a lot of people do not risk investing a solid amount of money into something that does not inherit tights properly or another currency.

One of the most well-known cryptocurrencies is bitcoin, which system is dependent on cryptography to ensure that the transactions that were made, are safe and secured. Due to this fact, bitcoin transactions are having an advantage over fiat currencies because it does not require a third party involvement in the transaction process. Due to the fact that currencies are created by the central bank and the government executes the oversight, banks are usually the ones that should confirm online payment. Unlike the traditional system, the bitcoin system is created by data mining where a lot of computers are connected in one network, and with the help of special algorithms, the transactions are confirmed within minutes or seconds.

Canada’s view on Bitcoin

The general overview of one country on economic issues is the idea that is spread by the regulatory authorities. In this case, Canadian authorities are not considering cryptocurrencies to be either money or currency. In 2014 an official report was released concluding that after the observation it is clear that bitcoin does not meet the general requirements to be considered as money.

Even the previous year, the Canada Revenue Agency stated that cryptocurrencies cannot be used for Canadian tax purposes, however, it concluded that bitcoin was more like an asset such as gold or oil. However, unlike the attitude of the official authorities, the general public seems to be keen on bitcoins and many other digital currencies since the demand on the market has massively increased. Those digital currencies are earned from many different sources, such as investing or trading on platforms that provide the proper service with the help of brokerage companies. Other than that, the demand for the online Bitcoin casinos in Canada was massively increased which is perceived to be one of the best ways to entertain yourself, especially during the global pandemic, when people were not able to go out and online bitcoin casinos appeared to be the solution to the offline casinos, which was even more convenient due to its easy and quick transactions.

Income-tax treatment of cryptocurrencies

Canada Revenue Agency, since it is considering bitcoin to be more like a commodity such as gold or oil, also considers digital currencies to be a commodity for income-tax purposes. The crypto transactions are considered in the same prism as barter transactions, meaning the process when one commodity is exchanged for another. This implies that profit or loss from bitcoin transactions will be considered as either for business or property revenue or capital gain or loss. The distinction has significant tax minification. Only half of capital gain is taxed, whereas the entire amount of company or property income is. In 2013 Agency explained that if someone is accepting bitcoin payment for the service that they obtained the clients with, they have to include the amount of payment received, in the income file of the company. However, there are some other activities other than payments associated with bitcoin, for example, trading, investing, in which it is quite difficult to differentiate between income and capital. The vague difference between the capital gains and loss which is caused by the investing and revenue of business or expenditure which is a result of trading has forced the officials to create the case laws in Canada, for that certain occasions.

Service Tax/Harmonized Sales Tax

According to the Canada Revenue Agency, sellers who are executing the commercial activities of selling goods and service, in case of accepting bitcoin payments, they are also obliged to collect Goods and Services Tax/Harmonized Sales Tax. For the purposes of calculating the GST/HST due for a steady supply of an item or service, the consideration for the supply is vivid to be equal to the fair market value of the bitcoins at the time the supply is made.

Tax Scams

A victim will be contacted by a fraudster posing as a Canada Revenue Agency official. The victim is told that he or she owes a tax debt that must be paid in order to avoid prosecution, the victim is then directed to settle the tax obligation using bitcoins by the fraudster. The Canada revenue agency will never request bitcoins as payment. If you are receiving an unauthorized phone call saying that it is on behalf of the Canada Revenue Agency, the first thing to do is to search for a valid number, contact them and ask about your status, whether there are some tax debts or not.

Tax Tips

While the Canadian government does not recognize bitcoins as money, anybody who accepts bitcoins as payment for products or services may be subject to taxation. The bitcoin payment may be required to be reported as income on the tax return of the recipient. He or she may also be required to gather and send GST.HST on behalf of the buyer.

You could believe that the ostensible anonymity of a bitcoin transaction will enable you to keep your revenue secret from the authorities. However, this is not true. According to recent press reports, some bitcoin exchanges readily provide user data with local authorities without a warrant. Furthermore, tax officials use tactics targeted at breaking the bitcoin system.

The internal Revenue Service is said to have bought software that may reveal the identity of bitcoin’s user. The program examines bitcoin transactions and identifies the source of bitcoin units. To put it another way, it tracks a bitcoin as it travels from one bitcoin wallet to the next. The creators of the software have already made comments that say that the program has already collected information on 25 % of users who are involved in bitcoins transitions or hold them.