Cryptocurrency and Taxes in Canada: How CRA Treats Crypto Trading, Mining, and Staking

Introduction

Cryptocurrency activity has exploded across Canada, and with it, CRA’s enforcement. Whether you trade Bitcoin, mine Ethereum, stake tokens, use DeFi protocols, earn NFTs, or operate on foreign crypto exchanges, CRA considers almost every crypto transaction taxable. Because crypto lives on decentralized platforms, many Canadians mistakenly believe it is anonymous or unregulated. However, CRA now uses blockchain analytics, international reporting agreements, and exchange compliance data to track crypto users. This guide explains exactly how CRA taxes cryptocurrency, how to report trades, how mining and staking are treated, and how to avoid severe penalties.

Why Crypto Creates Tax Complications

Crypto differs from traditional investments because it involves:
high trading volume
micro-transactions
wallet-to-wallet transfers
DeFi lending and staking protocols
airdrops, forks, and rewards
cross-border exchanges
foreign crypto platforms
NFT transactions
The complexity of tracking adjusted cost base, gains, business income, and crypto rewards makes compliance difficult. CRA audits crypto users aggressively because many fail to maintain proper transaction records.

How CRA Classifies Crypto Transactions

Crypto is generally treated as a commodity under the Income Tax Act. This means each transaction can trigger:
capital gains
business income
barter transactions
staking or mining income
NFT income
The classification depends on the taxpayer’s intent, volume, and behavior.

When Crypto Trading Is Capital Gains

Crypto is taxed as a capital gain when the taxpayer is casually investing, meaning:
buying and holding long-term
occasional trading
long-term appreciation
Capital gains tax applies to:
purchases and sales of coins
swaps between tokens (considered a sale)
conversions into fiat
payments for goods/services
Only 50% of the gain is taxable. Losses may be used to offset capital gains.

When Crypto Trading Is Business Income

Crypto is taxed as business income if the taxpayer:
trades frequently or daily
uses leverage or margin
has high transaction volume
uses bots, algorithms, or structured trading systems
advertises trading services
Business income is fully taxable. Business losses may offset other income. CRA reviews trading patterns to decide classification.

Taxation of Crypto Mining

Crypto mining is treated as business income, not capital gains. Miners must report:
value of mined coins at the time earned
electricity costs
hardware depreciation (CCA Class 50)
cooling costs
hosting fees
maintenance and repair
Mining creates two taxable events:
income when the coin is mined
capital gain when the coin is sold later
If mining is done casually, CRA may classify it as hobby income, but this is rare.

Taxation of Staking Rewards and DeFi Yield

Staking rewards, liquidity pool rewards, lending rewards, and DeFi interest are taxed as income when received. CRA views these rewards as similar to interest or trust income. Any increase or decrease in value is taxed again when the tokens are sold.

Taxation of NFTs

NFT activity is taxable when:
minting NFTs
selling NFTs
trading NFTs
earning royalties
NFT profits may be business income (artists/creators) or capital gains (collectors).

Airdrops, Forks, Play-to-Earn, and Rewards

CRA treats:
airdrops as income when received
hard forks as income when coins become available
play-to-earn rewards as income
Each event triggers a taxable inclusion at fair market value.

Foreign Crypto Exchanges and T1135

If the cost of crypto held on foreign exchanges exceeds $100,000 CAD, taxpayers may need to file the T1135 Foreign Income Verification Statement. Many popular exchanges are foreign platforms, including:
Binance
KuCoin
Kraken (U.S.)
Crypto.com
Coinbase (U.S.)
Foreign crypto is one of CRA’s biggest T1135 audit categories.

Common Crypto Audit Triggers

wallet activity inconsistent with declared income
high-volume trading with no records
crypto-to-crypto transactions not reported
use of foreign exchanges
DeFi staking income with no reporting
NFT sales with no tax filings
non-reporting of mining activity
CRA has partnered with blockchain analytics firms that identify Canadian users.

Required Recordkeeping

Taxpayers must maintain:
wallet addresses
exchange transaction logs
timestamps
gas fees
wallet-to-wallet transfers
fair market value at transaction time
proof of mining or staking rewards
CRA requires taxpayers to keep cryptocurrency records for at least six years.

Crypto Losses and Deductions

Capital losses may be used to offset capital gains. Business losses may offset other business income. Losses from rug pulls, hacks, or exchange collapses may be deductible depending on facts. Documentation is essential.

When to Use the Voluntary Disclosures Program (VDP)

Crypto users who have not declared:
foreign crypto
staking rewards
mining income
NFT income
high-volume trading
should consider filing under VDP before CRA contacts them. VDP can remove penalties and reduce interest.

Mackisen Strategy

At Mackisen CPA Montreal, we help crypto investors classify transactions correctly, calculate capital gains, prepare business income statements, reconcile exchange data, complete T1135 filings, and respond to CRA crypto audits. We also assist with mining, staking, and NFT taxation, ensuring full compliance with CRA requirements.

Real Client Experience

A Montreal investor completed overdue crypto filings after realizing crypto-to-crypto swaps were taxable. A miner avoided penalties by correctly reporting electricity and hardware costs. A DeFi investor corrected staking rewards through VDP. An NFT creator reorganized her tax structure after a CRA inquiry.

Common Questions

Are crypto trades taxable? Yes. Is staking income taxable? Yes. Is mining taxable? Yes. Do I report wallet transfers? Not taxable, but must be tracked. Do I file T1135? Only for foreign-held crypto exceeding $100,000. Are crypto audits increasing? Significantly.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal ensures crypto investors stay ahead of CRA enforcement through accurate reporting, strategic planning, and full blockchain documentation support.