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There is no doubt even for CRA that cryptocurrencies are a growing part of the underground economy.
“Given the pseudo-anonymous nature of cryptocurrencies, the extent of non-compliance with Canadian tax obligations is difficult to measure; however, the CRA assumes the opportunity for non-compliance is high, “the CRA spokesperson said in an email.
Some of our investigations have a cryptocurrency component
According to Piccolo, CRA’s move is significant because it is the first time that the agency has actively sought out such a large amount of information from clients of a cryptocurrency trading platform.
But he says it will also be a test of the agency’s ability to process the likely massive amounts of data that generally accompany cryptocurrency transactions. Hopefully, he says we can expect more such requests from the tax agency.
“What’s actually relevant is that Coinsquare apparently has over 200,000 accounts,” Piccolo explained. “The CRA can approach this type of large-scale projects because it has increased its ability to handle large amounts of information.”
The tax expert also says that this type of request, if successful, can be a strong deterrent to other Canadian traders who think CRA will never find out they are engaging in virtual currency trading if they never declare it. Regardless of how Coinsquare responds, the agency’s request must be approved by a federal court judge.
Lately, the CRA has been warning more and more “crypto” users and merchants that they would be subjected to much more scrutiny due to the potential use of virtual currencies to hide revenue, launder money, and ultimately avoid paying taxes.
