Canada Bolsters Crypto Regulatory Framework with Enhanced Reporting Measures in 2024 Budget

Canada has escalated its regulatory oversight of cryptocurrency operations as per its 2024 federal budget announced on April 16. The forthcoming legislation will implement the Crypto-Asset Reporting Framework (CARF), sanctioned by the Organisation for Economic Co-operation and Development (OECD) in August 2022. This initiative responds to the G20’s 2021 directive for the OECD to craft a framework to facilitate the automatic exchange of tax information related to crypto assets.

Under the new regulations, all entities engaged in crypto asset services, including exchanges, brokers, dealers, and ATM operators, must annually submit detailed transaction records to the government. The required disclosures encompass transactions across various cryptocurrencies, transactions between cryptocurrencies and fiat currencies, and transfers of cryptocurrencies, with the exception of those initiated via central bank digital currencies (CBDCs).

Additionally, these service providers are mandated to report client-specific data, such as full names, residential addresses, birth dates, jurisdictions of residence, and taxpayer identification numbers, applicable to both Canadian and non-resident clients.

To support the implementation of CARF, the budget proposes allocating approximately CA$51.6 million ($37.3 million) to the Canada Revenue Agency (CRA) over a span of five years starting from 2024-25, with a subsequent annual budget of CA$7.3 million ($5.2 million) dedicated to ongoing administrative and operational expenses. The enforcement of these mandates is scheduled for 2026, with the initial data exchange from service providers expected in 2027.

Furthermore, the budget introduces measures aimed at mitigating cryptocurrency tax evasion, establishing penalties for non-compliance with the reporting mandates. The budget document states, “Just as crypto-assets pose financial risks to middle-class Canadians, the rapid growth of crypto-asset markets poses significant risks of tax evasion. Regulation and the international exchange of tax information must keep pace with tax evasion threats in order to ensure a fair tax system.”

This regulatory shift aligns with actions taken earlier in January 2024 by Canada’s securities regulators, who proposed new rules restricting the direct trading and custody of crypto assets to certain types of investment funds. This follows a November 3 report by Coingecko, which identified Canada as a key player in the Bitcoin ETF market, underscoring the nation’s growing engagement with the crypto economy.

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