One concern people have about cryptocurrency is its use in illegal and illicit activities. This can confuse people about the legality of cryptocurrency.
Additionally, since cryptocurrencies are not regulated, it can be difficult to understand what is allowed and what is not allowed when it comes to dealing with cryptocurrencies 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 cannot pay your taxes or your mortgage with crypto, and the Canadian government only recognizes the Canadian dollar as legal tender.
This does not mean that crypto is illegal. In fact, the Canadian government considers bitcoin and other cryptocurrencies as “digital currency” but for tax purposes, crypto is considered a commodity.
Can You Pay for Goods and Services with Cryptocurrency?
Yes, you can. It is legal for businesses, whether online or not, to choose whether to accept cryptocurrencies as payment. Online businesses are more likely to accept cryptocurrencies as payment for goods and services, but any businesses can decide for themselves what type of payments they accept.
As long as businesses report all their income and pay the taxes owed, it is legal for them to accept cryptocurrency as payment.
Keep in mind that paying for goods or services with crypto counts as a taxable event and this is because crypto is considered a commodity. When you exchange one commodity for another, or exchange it for a service or a product, that is considered a barter transaction.
Therefore, you could be liable for capital gains tax if there was an increase in price from the time you first bought the crypto to when you exchanged it for the product or service.
You can check our article on how to spend Bitcoin in Canada.
Is it Legal to Buy and Sell Cryptocurrency in Canada?
Yes, it is legal to buy and sell cryptocurrency in Canada. There are many different ways to buy cryptocurrency in Canada. You may use centralized exchanges, decentralized exchanges, peer-to-peer crypto exchanges, crypto ATMs, or trade crypto by any other means. The most popular way is simply using these reliable crypto exchanges that are compliant in Canada.
The Canadian government considers bitcoin and other cryptocurrencies a commodity like gold or oil. Commodities are allowed to be bought and sold in the same way that stocks can.
There is one exception to this, however. In the province of Ontario, Binance is not allowed to operate because it does not comply with the Ontario Securities Commission regulations. Some people may choose to get around this restriction by using a VPN to reroute their IP address, allowing them to access Binance but it’s not recommended.
However, the OSC does not permit Ontarians to trade using Binance, so this is an example of trading crypto illegally in Canada.
Binance is allowed to operate in all other Canadian provinces and territories, and there are currently no other restrictions to Canadians using other crypto exchanges.
Is Crypto Staking legal in Canada?
Crypto staking is legal in Canada. You may stake your cryptocurrencies on exchanges, decentralized exchanges, wallets, or any other way. Staking is a great way to earn interest on your cryptocurrencies and boost your crypto holdings.
You must declare the rewards you receive from crypto staking as income on your taxes.
Is Crypto Mining Legal in Canada?
Yes, crypto mining is legal in Canada. You may buy miners and keep them in your own home, or you can pay mining companies to host your miners for you.
You can also buy mining contracts, also known as cloud mining, where a mining company buys and hosts miners and gives you some of the profit depending on your contract terms.
It is also legal to buy stock in crypto mining companies. You can use any stock broker such as Wealthsimple, to purchase stocks in these mining companies.
Crypto mining income must also be reported on your taxes. If you mine crypto as a hobby then you report it as capital gains once you sell the rewards earned. If you are a business, however, 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.
A bitcoin ETF holds a large fund of bitcoin, and the price of the shares will go up or down depending on the price of bitcoin. Your shares in the ETF represent a portion of the bitcoin held in the fund.
Note, that with a bitcoin ETF, you only own the shares, not the bitcoin itself. Canadian crypto ETFs is a great way for traditional investors to gain exposure to bitcoin without buying bitcoin itself. As with mining companies, shares in bitcoin ETFs can be purchased using a stockbroker e.g. Wealthsimple.
Can You Pay Taxes and Bills with Crypto in Canada?
Since the Canadian government does not recognize cryptocurrency as legal tender, you cannot pay your taxes with cryptocurrency.
You can, however, pay bills with cryptocurrency if the company accepts crypto as payment, or you go through a third-party.
There are some third-party companies in Canada that will take your cryptocurrency, convert it to fiat, then pay your bills, such as utilities and internet. These companies exist so that you can pay your bills in crypto, even if the bill provider does not accept crypto as payment.
The third-party company takes a small cut, but it means you can use crypto to pay your utilities if you wish.
This can be beneficial for people who get paid for work in crypto and wish to use it to pay for as many things as possible.
Conclusion
Are cryptocurrencies legal in Canada? Yes, they are! You can buy, sell and trade crypto wherever you see fit, whether it’s a centralized exchange or a decentralized one.
While crypto is not considered legal tender, you can still pay for goods and services with crypto if the business accepts it.
Remember, that all cryptocurrency trades and income must be reported on your taxes. A crypto tax calculator such as Koinly can help you complete your crypto taxes easily.
