As a Canadian, if you have ever considered buying Bitcoin, you have probably asked yourself this question: ‘Is it legal?’
The answer, reassuringly, is yes. It is perfectly legal to purchase and trade cryptocurrencies in Canada. The Government of Canada website has a page dedicated to digital currencies which states the following:
Using digital currencies
You can use digital currencies to buy goods and services on the Internet and in stores that accept digital currencies. You may also buy and sell digital currency on open exchanges, called digital currency or cryptocurrency exchanges. An open exchange is similar to a stock market.
It couldn’t be any clearer than that. As a Canadian resident, you are free to purchase, trade and spend Bitcoin anywhere you can find that will accept it. This provides the necessary peace of mind for anyone considering adding digital currencies to their investment portfolio, or indeed simply purchasing some Bitcoin to spend.
Shedding the darkness
Back when Bitcoin first entered the scene, the first few years were filled with stories of a dark and seedy underworld where drug dealers and hitmen operated with immunity because they traded their products and skills for Bitcoin. While this may have been true, it also holds true for the good ‘ol Canadian dollar today, and any other currency of value out there. Thankfully, this fear and doubt has lifted, and the world is now seeing Bitcoin, and cryptocurrencies in general, for what they are — the most advanced innovation to change our lives since the internet.
Blockchain technology will revolutionize the world
There is no doubt that blockchain technology will revolutionize the world. Whether this happens in 5 years or 50 years is anyone’s guess. But if the internet is anything to go by, mass adoption of cryptocurrencies will be a similarly rapid event. You cannot stop people from gravitating towards a technology that vastly improves their lifestyle, wealth and security.
As more and more advancements are made, such as the development of smart contracts which run on the Ethereum blockchain, the possibilities are endless.
Bitcoin as legal tender
It is worth noting, however, that digital currencies are not recognized as legal tender in Canada. So while you may be able to buy a pizza or a coffee, or send your friend in Ireland some money in an instant, you won’t be able to pay your taxes or your mortgage with Bitcoin.
Taxation of digital currencies in Canada
Like any investment, the gains or losses you make should be recorded in your annual tax return. The Government of Canada website does not make it clear how exactly you should account for digital currency on your tax return, only stating that you should:
How tax rules apply to digital currency
Tax rules apply to digital currency transactions, including those made with cryptocurrencies. Using digital currency does not exempt consumers from Canadian tax obligations.
This means digital currencies are subject to the Income Tax Act.
However, it is safe to assume that as soon as you convert any digital currency back into Canadian dollars, this is classed as income and needs to be declared as such.