Canadians using bitcoins, the decentralized crypto-currency that recently went mainstream, must report their incomes and pay taxes as with other earnings, Canada’s Revenue Agency (CRA) confirmed following a media request.
The issue was clarified in response to a letter by the Canadian Broadcasting Corporation (CBC) ahead of the country’s tax season.
Two separate tax rules are applicable to the electronic currency, CRA spokesperson Philippe Brideau told CBC in an email.
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Just in time for tax season, the Canada Revenue Agency says the users of Bitcoins will have to pay tax on transactions in the upstart digital currency.
BitCoins are a fringe online currency that entered the mainstream this year after speculators rushed in and caused their value to more than quadruple in value. Originally designed as a virtual currency alternative to conventional money, the cash value of a BitCoin jumped from under $50 US to above $250 and back earlier this month, as speculators flooded the market after awareness of them grew. They are currently worth about $90.
Price swings like that mean some BitCoin buyers and sellers likely made or lost a lot of money, which raises the question of how that will be handled come tax time.
Two Canadian businessmen recently got some bad news from their banks.
James Grant, owner of Canadian Bitcoins, got a letter.
Melvin Ng, proprietor of CADBitcoin, got a phone call.
Both men run online exchanges where you can purchase Bitcoins for Canadian dollars.
And both were informed their businesses’ accounts frozen by Canada’s largest banks.
“It’s a weird situation,” Ng told us by phone recently. “We’re a normal Canadian business, we’re registered with the government, and a Canadian bank can just block it off.”
Grant was more blunt: “They just don’t like Bitcoins.”