Canadian Tax Agency Asks for Client Details from Major Exchange

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In Brief
  • The Canadian Revenue Agency is requesting a judge to force the handover of information on Coinsquare's customers.

  • Canadian exchange Coinsquare was recently levied with CAD $2.2 million over falsified trading.

  • Coinsquare has not said whether they will fight the request in court.

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The Trust Project is an international consortium of news organizations building standards of transparency.

The Canadian Revenue Agency (CRA) is asking a judge to order Coinsquare, a Toronto-based crypto exchange, to submit information about all of its clients.



Grade Eh Product

Just like the IRS in the United States, the CRA is seeking details about clients from major crypto exchanges. The CRA is asking for the identity of every client on Coinsquare, a major crypto platform. The agency says it is trying to fight tax fraud and an underground economy.

In a September filing to federal court, the CRA requested that a judge make Coinsquare hand over information. These documents regarded clients dating back to the company’s inception in 2013.



The filing is the first of its kind in Canada. In the document, the agency cited tax fraud as a major concern, though there may be more to it. According to the National Post, details are too scarce to determine the CRA’s overall plan. However, the Canadian national paper speculated that the CRA would be comparing past tax returns to information in the Coinsquare documents.

Just the Beginning

Probing Coinsquare may not be the end of investigations, however. According to Canadian tax lawyer David Piccolo quoted in the National Post, the CRA could perform audits. Should a person or organization under investigation not appear on Coinsquare’s documents, it would not signal a dead end:

 “CRA could use this information to essentially try to verify or to match certain transactions with what was reported in Canadians’ tax filings. Then CRA does their internal risk assessment [to determine] whether these are worth pursuing in audit.”

The agency would not say if this probing of Coinsquare’s clients was related to other recent activity. Earlier this year, the Ontario Securities Commission levied CAD $2.2 million in sanctions and costs against the firm. This came after information from a whistleblower that detailed fake trading. Coinsquare fired the whistleblower, then tried to cover up the issue.

According to Piccolo, this is the first time the CRA has actively requested such an extensive amount of information about crypto transactions. It will be a test of the agency’s ability to process massive amounts of information, he says. Coinsquare has around 200,000 accounts.

Crypto has also piqued the Bank of Canada’s interest. On Oct 28, the national bank said it was making progress on a Canadian digital currency.

Better Late Than Never

The CRA may also be setting an example. This kind of tax inquiry, according to Piccolo, could be a warning to other traders who believe they can avoid taxes with virtual currency. It is also a warning to criminals who might try to use crypto in an underground marketplace.

Recently, the agency has been making more noise about crypto transactions in hopes of stopping crimes before they happen.

Beginning in 2018, the CRA created a cryptocurrency investigation unit that focuses on audits. In 2019, the Journal de Motnréal reported that the unit had 54 active criminal investigations.

For the average customer, filing taxes related to crypto can be a headache because of unclear laws and the sheer quantity of taxable transactions many individuals deal with. For their part, Coinsquare is defending the legality of their business. Coinsquare CEO Stacy Hosiak reportedly said the company may or may not fight the information request in court, saying:

 “Coinsquare maintains a robust customer verification process, and we understand our customers comply with all applicable Canadian laws relating to their cryptocurrency trading activities.”

 

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Harry Leeds is a writer, editor, and journalist who spent much time in the former USSR covering food, cryptocurrencies, and healthcare. He also translates poetry and edits the literary magazine mumbermag.me.

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