The Canadian Revenue Agency (CRA) can now request Coinsquare cryptocurrency customer data information. Coinsquare is one of Canadian largest cryptocurrency exchanges and captures the most extensive users’ information.
CRA filed a third-party request to access consquare’s customers’ information and then determine whether the users are complying with income tax and excise tax obligations. CRA is getting started in the Canadian cryptocurrency space that has no base on court cases.
CRA has for several years crackdown underground economy focused on tax evasion mainly, residential construction, food industries, accommodation, and retail trade. CRA added cryptocurrencies to their list of obligations, joining the Joint Chiefs of Global Tax Enforcement in 2018.
Since then, CRA has been sending g questionnaires to cryptocurrency investors. In 2020, it filed a petition in Canada’s Federal Court requesting that Coinsquare hand them the customer’s information dating back to January 2013.
The information that CRA requested includes:
A list of all active customer accounts.
A list of all cryptocurrency and fiat currency transfers.
A list of all trading activities.
The request was filed under section 289 of the Excise Tax Act and section 231 of the Income Tax Act.
The Federal Court determined that CRA’s request was legitimate on 19th March and ordered Coinsquare to hand over the active customers’ information and with substantial balance.
The new ruling will affect half of the Coinsquare customers. The new move is a significant victory for Canada’s digital asset industry. Coinsquare released a statement saying it hopes that the order will also be applied to other cryptocurrencies companies, and only what is required by law should be disclosed.
However, requesting customer information prompts concerns over taxpayer rights and privacy which is not well established in the cryptocurrency context. In Canada, there is no statutory or reasonable basis. The truth of the matter is that cryptocurrency users’ data can end up in the hands of CRA to verify compliance without any suspicion of wrongdoing.
Now that CRA has been allowed to fish for information does not mean that it is ideal; possibly, it could lead to taxpayer challenges. Now, the third-party requests add complexities and contradictory to the global cryptocurrency standards.