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Kc  · 09/01/22

5 Tips: How to Buy Crypto In Canada (incl. Tax Reference)

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Though there’s still some uncertainty surrounding cryptocurrency, there’s no denying that cryptocurrency has a place in a country’s economic system. This became even more apparent when the US and many other countries gave way for investors to circulate cryptocurrency in the financial market. Moreover, just recently, the US adopted crypto as a legal tender along with the US dollar.

While Canada has yet to do the same, one cannot deny that crypto is quite a popular topic in the country. But unfortunately, the regulations surrounding crypto are a bit dubious at the moment. For that reason, buying crypto in Canada might turn out to be a challenge.

However, if you’re planning on going through with your decision, the following tips should help streamline your transaction:

  1. Prepare everything you need beforehand

    Before you can take part in any cryptocurrency transaction, you must first create an account in a crypto exchange. Though not all platforms require credentials from users, you'll most definitely stumble upon several ones that do. That's precisely why you must prepare everything you need to create an account before starting with the process.

    Here's what you may need:

    • Your Canadian passport, driver's license, or any other acceptable ID
    • A bank account where you can withdraw and deposit Canadian dollars
    • A mobile device that you can use for two-factor authentication (2FA). 2FA may not be a requirement, but it's an excellent way to maximize the security of your platform.
    • A private internet connection

    Although it’s a basic step, not many people are aware of its importance when buying crypto in Canada. Not only does it speed up the transaction, but you can also prevent any issues that may arise due to a delay in registration. If you want to delve deeper into the steps involved when buying any type of cryptocurrency, you might want to look into Coinformant or other reputable sources for some in-depth guides. [1]

  2. Look for a crypto exchange platform registered in Canada

    Now that you have all the documents you need to buy crypto, the next step would be to look for a crypto exchange. Keep in mind that specific platforms may not comply with Canada’s rules and regulations on digital currencies. For that reason, refrain from choosing just about any exchange.

    What you should look for is an exchange that’s registered in Canada. That way, you can be certain that the platform is in compliance with the policies of Canada when it comes to crypto.

  3. Dispose of your crypto only when necessary

    A common mistake people make when buying crypto is that they often sell it pointlessly.

    For example, suppose you buy USD$5,000 worth of digital coins in Exchange A but then decide to use Exchange B. In such cases, one solution you may think of is selling the crypto immediately after purchasing it so you can get your money back. You'll then proceed to Exchange B and purchase the crypto there, perhaps because it has better rates and terms.

    While it may seem like you didn't lose anything from this transaction, you actually did. This is because, much like most assets, cryptocurrency is taxable, but only under certain circumstances.

    In this particular scenario, crypto is taxable once you dispose of it. Otherwise, there are no tax implications if you simply hold or buy cryptocurrency.

    ‘Disposing’ may refer to the following:

    • Selling a cryptocurrency on any platform
    • Gifting the cryptocurrency to any individual
    • Exchanging your crypto with another cryptocurrency
    • Converting the cryptocurrency to a government-issued currency, like Canadian dollars
    • Use cryptocurrency to purchase other goods or services

    By going through the transaction mentioned earlier, you'll be incurring a certain amount of tax without achieving anything. That’s why you must dispose of your crypto coins only when necessary. [2]

    For example, if there's an emergency requiring money, like an accident. Otherwise, hold your crypto as long as possible or until you can sell it for more money, which begs the question, 'How do you hold onto your crypto?'

  4. Have a crypto wallet/storage ready before your purchase

    Much like how you'd store your money on online payment platforms, like PayPal, you must also hold onto your crypto in a specific platform. This platform is what they call a crypto wallet. [3]

    It should be pretty easy to look for one on the internet. As for registration, you simply have to enter your desired login credentials, much like how you would when creating social media accounts.

    Naturally, since you plan to buy crypto in Canada, you need to have a wallet to store it. In this case however, a crypto wallet doesn’t need to be a product of a company registered in Canada.

    • A popular free-of-charge wallet is an app called Exodus, which also has staking and NFT capabilities.
    • A popular commercial wallet is Ledger Nano X, likewise supporting staking and NFTs.

    Commercial wallets have a bit better level of security, but they are not necessary if you can keep your computer virus-free.

  5. Avoid doing anything that may constitute business activity

    The Canada Revenue Agency (CRA) treats crypto much like it would any other commodity.

    So, income that comes from cryptocurrency transactions may be taxable either as a business income, if the transaction involves a business activity, or as capital gains, if it doesn't.

    Here's a look at what a business activity may look like:

    • You purchased the cryptocurrency for commercial reasons
    • You performed the transaction in a businesslike manner
    • You obtained the crypto by or while promoting a product or service
    • You intend to make a profit from cryptocurrency in the long term

    Generally, it's advisable to avoid any of these since that may mean you'll have to pay business income tax. So, why does it matter if your transaction yields a capital gain or business income?

    For starters, the tax rate for these two types of profit is different. The average business income tax rate in Canada is 12%, though this may vary from province to province. Meanwhile, the capital gains tax rate in the country may range from 10% to 30%. Again, the rate may vary according to your employment income (higher income = higher tax rate) and the province. [4]

    While the capital gains tax rate is indeed significantly higher in most cases than the business income tax rate, it's important to note that in Canada, only 50% of your capital gains are taxable. So, having to pay capital gains tax is much better as it's most likely going to be lower.

    Suppose you buy crypto worth USD$10,000 and sell it several months later for USD$50,000. If the transaction constitutes a business activity, you have to pay a corporate tax with a rate of around 12%, resulting in a USD$4,800 tax from the earnings of USD$40,000. On the other hand, if it wasn't a business activity, you must use the capital tax gains rate of around 20%. [4]

    Since you only have to count half of USD$40,000 (USD$20,000) as taxable gains, you'll only have to pay a tax of USD$4,000 for this particular transaction, so you're effectively saving USD$800.

    In conclusion, when buying crypto in Canada, you’d want to make it, so the transaction doesn’t involve any business activity for it to yield capital gains tax rather than business income tax.

Final words

This post explained how to buy cryptocurrency in Canada with full AML/KYC and how to make sense of the various taxation rates that you might incur.

If you plan to buy crypto as a Canadian, this is all you need to know to go ahead with your buy-and-hold plan.

While crypto trading is indeed profitable, one must also remember that there’s a potential for losses. That’s precisely why not everyone who engages in this activity ends up with significant profits at the end of the day. However, with these tips, you can at least prevent issues that may hinder your success rate.

Note - This is a blog post meant as an overview sourced from portals listed below. It does not constitute financial nor legal advice. Talk to a tax accountant.


[1] "What is KYC and Why is it Important for Crypto Exchanges?", Source:

[2] "Guide for cryptocurrency users and tax professionals", Source:

[3] "What is a crypto wallet?", Source:

[4] "Canada Capital Gains Tax Calculator 2022", Source:

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