![]() ![]() The income/capital distinction also comes with important tax implications. Likewise, if the account closure results in a crypto-for-crypto exchange (e.g., upon closing the account, you trade the cryptocurrency held within that account to acquire another type of cryptocurrency), the resulting profit will be taxed as a capital gain or as business income. For example, if the account closure results in the liquidation of any tokens or coins within the account, the cryptocurrency-for-fiat exchange constitutes a disposition, and any resulting profit is taxed, either as a capital gain or as business income. Hence, when forced to close a cryptocurrency-exchange account or switch an account from one exchange to another, a Canadian taxpayer might incur Canadian income-tax liability-depending on what happens to the cryptocurrency within the exchange account upon its closure. By implication, each intermediate crypto trade-e.g., purchasing Bitcoin for the sole purpose of acquiring a trading pair-includes a disposition and will thereby trigger a taxable transaction. ![]() It also includes a trade of tokens or coins in one type of cryptocurrency for tokens or coins in another cryptocurrency. In the context of transactions involving cryptocurrency, a “disposition” includes a sale of cryptocurrency for fiat currency. Theft, loss, or abandonment of a property.The expropriation or confiscation of a property.The redemption or cancellation of a loan.So, each of the following transactions constitutes a “disposition”: Basically, a “disposition” occurs whenever a person relinquishes all aspects of property ownership (e.g., possession, control, etc.)-regardless of whether the person does so voluntarily or involuntarily, and regardless of whether the person receives compensation. The Income Tax Act’s definition of “disposition” is also quite broad. Canada’s Income Tax Act gives a broad definition of the word “property.” In particular, for income-tax purposes, “property” includes intangible property, such as cryptocurrency and non-fungible tokens (NFTs). Canadian Income-Tax Implications for Canadian Taxpayers when Forced to Close or Switch a Cryptocurrency-Exchange AccountĪny “disposition” of a “property” will potentially trigger tax liability for the Canadian taxpayer who disposed of that property. This article concludes by offering pro tax tips to Canadian taxpayers engaging in cryptocurrency transactions. ![]() This article discusses the Canadian income-tax implications for Canadian taxpayers who have been forced to close a cryptocurrency-exchange account or switch an account from one cryptocurrency exchange to another. More Canadians could face similar tax issues if other cryptocurrency exchanges abandon Canadian markets to avoid securities regulation. ![]() Binance seemingly opted to pull out of the Ontario market altogether, rather than comply with securities law or face regulatory scrutiny.īinance’s departure from Ontario raises Canadian income-tax issues for Ontarians who must close their cryptocurrency-exchange accounts with Binance. The OSC claims that all three cryptocurrency exchanges failed to comply with Ontario’s Securities Act. In the weeks leading up to Binance’s departure, the OSC issued statements of allegation against three other cryptocurrency exchanges, Bybit, Poloniex, and KuCoin. The move follows the Ontario Securities Commission’s onslaught on cryptocurrency exchanges for their alleged failure to comply with securities law. In June 2021, facing the threat of regulatory sanctions by the Ontario Securities Commission (OSC), the cryptocurrency-exchange giant Binance updated its terms of use, declaring Ontario, Canada, a “restricted jurisdiction.” As a result, Binance has blocked services to Ontario and asked Ontario-based users to “take immediate measures to close out all active positions by December 31, 2021.” Introduction: Binance pulls out of Ontario Ontario-based users must close Binance accounts ![]()
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