Canada’s 2024 federal budget aims stringent regulatory oversight for cryptocurrency-focused service providers, as the nation moves to implement comprehensive reporting mandates.
The budget outlines the enforcement of the Crypto-Asset Reporting Framework (CARF), an OECD-approved system forged in response to the G20’s 2021 directive.
This initiative, ratified by the OECD in August 2022, aligns with global efforts to facilitate the automatic exchange of tax information about crypto assets.
Under the CARF, a broad spectrum of crypto asset service providers, spanning exchanges, brokers, dealers, and ATM operators, are mandated to adhere to heightened reporting standards, disclosing detailed transactional information to governmental authorities annually.
The reporting criteria encompass a range of transactions, including those between different cryptocurrencies, between cryptocurrencies and fiat currencies, and cryptocurrency transfers.
Notably, transactions involving central bank digital currencies (CBDCs) are exempt from these stipulations.
In addition to transactional data, cryptocurrency service providers are obligated to furnish client-specific details, including full names, residential addresses, dates of birth, jurisdictions of residence, and taxpayer identification numbers.
These stringent requirements extend to both Canadian residents and non-residents alike.
Given the substantial resources required for CARF implementation, the budget earmarks CA$51.6 million ($37.3 million) for the Canada Revenue Agency (CRA) over five years commencing in 2024-25.
Additionally, an annual allocation of CA$7.3 million ($5.2 million) is designated to cover ongoing administrative and operational expenses.
The Canadian government aims to effectuate these mandates by 2026, with initial data exchange from service providers slated to commence in 2027.
The budget introduces provisions aimed at curbing crypto tax evasion, including penalties for taxpayers failing to adhere to disclosure requirements.
A passage from the budget cited the imperative of adapting regulatory frameworks to mitigate the burgeoning risks of financial malfeasance posed by rapid crypto market expansion.
In tandem with these measures, Canadian securities regulators proposed new rules in January 2024 targeting public investment funds engaged with crypto assets. These regulations restrict direct crypto asset trading or custody to alternative investment funds and non-redeemable investment funds.
