One of the concerns that people have about cryptocurrency is its use in illegal and unauthorized activities. This can confuse people about the legality of cryptocurrency.
Furthermore, since cryptocurrencies are not regulated, it is difficult to understand what is allowed and what is not when it comes to cryptocurrency trading in Canada.
In this article we will answer the question: are cryptocurrencies legal in Canada?
Are cryptocurrencies legal tender in Canada?
Cryptocurrencies are not legal tender in Canada. You can’t pay your taxes or mortgage with cryptocurrency, and the Canadian government only recognizes the Canadian dollar as legal tender.
This does not mean that cryptocurrencies are illegal. In fact, the Canadian government considers bitcoin and other cryptocurrencies to be “digital currency,” but for tax purposes, cryptocurrencies are considered a commodity.
Can you pay for goods and services with cryptocurrency?
Yes, you can. Businesses, whether online or offline, can legally choose whether to accept cryptocurrencies as payment. Online businesses are more likely to accept cryptocurrencies as payment for goods and services, but each business can decide for itself what type of payment it accepts.
Provided that businesses report all their income and pay their taxes, they will be able to legally accept cryptocurrencies as a form of payment.
Remember, paying for goods or services with cryptocurrency is a taxable event because cryptocurrency is considered a commodity. When you exchange one commodity for another or trade it for a service or product, it is considered a barter transaction.
As a result, you may be subject to capital gains tax if the price has increased from the time you purchase the cryptocurrency to the time you exchange it for a product or service.
You can read our article on how to spend Bitcoin in Canada.
Is buying and selling cryptocurrency legal in Canada?
Yes, buying and selling cryptocurrencies is legal in Canada. There are many different ways to buy cryptocurrencies in Canada. You can use centralized exchanges, decentralized exchanges, peer-to-peer cryptocurrency exchanges, cryptocurrency ATMs, or trade cryptocurrencies in any other way. The most popular way is to simply use these reliable cryptocurrency exchanges that are compliant with regulations in Canada.
Government of Canada considers bitcoin and other cryptocurrencies to be commodities like gold or oil. Commodities can be bought and sold in the same way as stocks.
There is one exception to this rule, however. Binance is not allowed to operate in the province of Ontario because it does not meet the requirements Ontario Securities Commission regulations. Some may wish to bypass this restriction by using a VPN to redirect their IP address, which will allow them to access Binance, but this is not recommended.
However, the OSC does not allow Ontario residents to trade through Binance, so this is an example of illegal cryptocurrency trading in Canada.
Binance is allowed to operate in all other Canadian provinces and territories. There are currently no restrictions on Canadians using other cryptocurrency exchanges.
Is cryptocurrency staking legal in Canada?
Cryptocurrency staking is legal in Canada. You can stake your cryptocurrencies on exchanges, decentralized exchanges, wallets, or other means. Staking is a great way to earn interest on cryptocurrencies and grow your cryptocurrency holdings.
You must report rewards received from cryptocurrency staking as income on your tax return.
Is cryptocurrency mining legal in Canada?
Yes, cryptocurrency mining is legal in Canada. You can buy mining rigs and keep them at home or pay mining companies to host mining rigs.
You can also buy mining contracts, also known as cloud mining, where a mining company buys and hosts the miners and passes on a portion of the profit to you based on the terms of the contract.
It is also legal to buy shares of cryptocurrency mining companies. You can use any stock broker like Wealthsimple to buy shares of these mining companies.
Cryptocurrency mining income must also be reported on taxes. If you mine cryptocurrencies as a hobby, you report them as capital gains after selling your earned rewards. However, if you run a business, your mining rewards must be reported as business income.
Are crypto ETFs legal in Canada?
There are several crypto and bitcoin ETFs available in Canada. In fact, Canada was the first country to launch a bitcoin ETF in 2021.
Bitcoin ETF has a large bitcoin fund, and the share price will rise or fall based on the price of bitcoin. Your shares in the ETF represent a portion of the bitcoins held in the fund.
It’s important to remember that with a Bitcoin ETF, you only own the shares, not the Bitcoin itself. Canadian cryptocurrency ETFs are a great way for traditional investors to gain exposure to Bitcoin without buying the Bitcoin itself. Similar to mining stocks, you can buy shares of Bitcoin ETFs through a stockbroker like Wealthsimple.
Can I pay taxes and bills with cryptocurrencies in Canada?
Since the Canadian government does not recognize cryptocurrency as legal tender, you cannot pay your taxes using cryptocurrency.
However, you can pay your bills using cryptocurrency if the company accepts cryptocurrency payment or you use a third party.
In Canada, there are third-party companies that will accept your cryptocurrency, convert it to fiat currency, and then pay your bills, such as utilities and internet. These companies exist so that you can pay your bills in cryptocurrency, even if your bill provider does not accept cryptocurrency as a form of payment.
The third-party company charges a small commission, but this means you can pay for your media with cryptocurrency if you want.
This could be beneficial for people who get paid for their work in cryptocurrencies and want to pay for as many things as possible with them.
Application
Is cryptocurrency legal in Canada? Yes, it is! You can buy, sell, and trade cryptocurrencies wherever you see fit, whether on a centralized or decentralized exchange.
While cryptocurrencies are not considered legal tender, you can still pay for goods and services with cryptocurrencies if a business accepts them.
Remember that all cryptocurrency transactions and earnings must be reported on taxes. A cryptocurrency tax calculator like Koinly can help you file your cryptocurrency taxes easily.
