Cryptocurrency saw its biggest year ever in 2020 and is slated for even more success in the new year. However, as things become less cryptic, the legality and regulations that are attached to this boom come into question.
Here’s what you need to know and what you can expect with cryptocurrency in 2021.
What is the CRA?
The CRA is the Canada Revenue Agency. They’re responsible for administering and maintaining tax laws. Their jurisdiction includes most provinces and territories in Canada. Luckily, there are groups dedicated to helping unravel the complexity of the CRA cryptocurrency relationship with you.
How Does the CRA View Cryptocurrency?
The Senate reviewed the taxation of cryptocurrency in 2014, agreeing to generally view it as a commodity. Profit on crypto-related transactions is viewed depending on the nature of the transaction itself.
The CRA understands that not everyone is accessing the crypto-market with business intent, so there are a few factors that determine their classifications. When you exchange one currency for another or sell it, the CRA may view it as either business income or capital gain.
The distinction here is intent. Was the crypto transaction you just submitted pre-planned to play the market? Or was it a byproduct of using bitcoin to pay for something online, with profits coming at the whim of the market?
How does this affect me?
Once you’ve determined which category fits your usage best, you’ll be best set to file your taxes appropriately. Make sure you keep a record of all of your cryptocurrency, its valuation, and the history of your transactions. This could help with explaining why you’re filing under a certain category more efficiently.
What Should I Expect in 2021?
Experts predict a record year for cryptocurrency across the board. Larger names like bitcoin seem poised for massive numbers this year, though they aren’t the only productive option. There is the potential of blockchain becoming more mainstream as well, which would lead to significant growth for the crypto-asset market.
You should also stay on the lookout for increased tax measures. This isn’t something that anyone can predict with unfaltering accuracy, but history tells a fairly consistent story. Make sure you’re keeping up to date on news in your jurisdiction.
2021 is certainly shaping up to be the most exciting years yet in the cryptocurrency market. As with all things, being patient is important; the market will be volatile, competitors will appear and disappear with a similar quickness and everyone is going to want a piece of the pie.
Doing research and keeping an ear to the (digital) ground will help you stay on top of the competition. Be smart, and happy mining!