Canada is set to impose stricter regulations on cryptocurrency service providers following the introduction of new laws in the country’s 2024 federal budget. The budget includes the implementation of the Crypto-Asset Reporting Framework (CARF), which was approved by the OECD in August 2022.

The move is in response to the G20 mandate from 2021, which required the OECD to develop a framework for the automatic exchange of tax information related to crypto assets. Under the CARF, crypto asset service providers, such as exchanges, brokers, dealers, and ATM operators, will need to comply with new reporting requirements and disclose complete transaction details to the government annually.

The reporting criteria will cover transactions between different cryptocurrencies, between cryptocurrencies and fiat currencies, and transfers of cryptocurrencies. Transactions involving central bank digital currencies (CBDCs) are exempt from these requirements. Additionally, service providers will need to report client-specific information, including full names, residential addresses, dates of birth, jurisdictions of residence, and taxpayer identification numbers, for both Canadian residents and non-residents.

To support the implementation of the CARF, the budget allocates CA$51.6 million ($37.3 million) to the Canada Revenue Agency (CRA) over five years, beginning in 2024-25. An annual budget of CA$7.3 million ($5.2 million) has also been set aside to cover ongoing administration and operational costs.

The Canadian government plans to enforce these regulations in 2026, with the initial exchange of information from service providers scheduled for 2027. The budget also includes provisions to combat crypto tax evasion, with penalties for taxpayers who fail to comply with disclosure requirements.

Regulators in Canada have been focusing on the country’s growing crypto economy, with recent proposals for new rules governing public investment funds dealing with crypto assets. Only alternative investment funds and non-redeemable investment funds will be permitted to trade or hold crypto assets directly under the proposed regulations.

Recent reports have also highlighted Canada as one of the primary markets for Bitcoin ETFs, further underscoring the country’s importance in the crypto space.

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