All about Digital Currency, Part 2

by in Tax Advice Information and Updates
All about Digital Currency, Part 2
In this 2nd part of our blog series on digital currencies, we’ll look at how Bitcoin ATMs are used, if they are considered legal tender in Canada and how they are taxed. Let’s start!

Automated Exchangers (Bitcoin ATMs)
There are automated exchangers commonly called Bitcoin ATMs available in many areas in Canada. These are vending machines that allow you to insert cash in exchange for bitcoins and in some cases bitcoins for cash.

These machines are not connected to any bank, credit union or the Interac network. There may be charges that will apply if you use a Bitcoin ATM.

Are digital currencies considered legal tender in Canada?
No, digital currencies such as Bitcoin are not legal tender in Canada where only the Canadian dollar is considered official currency.

These digital currencies are not supported by any government or central authority such as the Bank of Canada.

How are tax rules applied to digital currencies?
Digital currencies are subject to the Income Tax Act. Thus, tax rules apply to all digital currency transactions including those made with cryptocurrencies.

Goods purchased using digital currency must be included in the seller’s income for tax purposes. GST/HST also applies on the fair market value of any goods or services you buy using digital currency.

Any gains or losses from selling or buying digital currencies must be reported when you file your taxes.

Also, digital currencies are considered a commodity and are subject to the barter rules of the Income Tax Act.

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