Canada Revenue Agency’s Crypto Audit Raises Some Hackles

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Canada Revenue Agency's Crypto Audit Raises Some Hackles

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Canada’s tax department appears to be ramping up the pressure on cryptocurrency holders with its latest questionnaire to taxpayers.

Canada Revenue Agency (CRA), the government body responsible for tax collection across the provinces has sent out a detailed questionnaire to those suspected of owning cryptocurrencies. The survey targets those who may not have revealed the total and circumstances of their crypto holdings.

Taxpayers are asked if they use a cryptocurrency mixing service and whether any transactions have passed through a Bitcoin tumbler. A Bitcoin mixer or Bitcoin tumbler is a cryptocurrency anonymization service that breaks the link between a user’s old and new address and makes it impossible to track transactions in the Bitcoin network.

Canada is certainly not alone as it probes into its residents and their activities around cryptocurrency. Both the US and the UK have recently upgraded their taxation legislation to incorporate a more thorough investigation of taxpayers’ cryptocurrency dealings and holdings through the annual tax return.

In one set of questions the CRA questionnaire asks:

Do you use any cryptocurrency mixing services and tumblers? If so, which services do you use? Can you please provide us with the tracing history, along with all the cryptocurrency addresses you ‘mixed’? Why do you use these services?

What is different about the CRA’s approach is the depth of questioning into crypto activity which has certainly raised the bar over other jurisdictions. The whole idea of using a ‘mixer’ is defeated by taxpayers revealing their tracing history and is sure to go down badly within the industry, as once again user privacy is in danger of being infringed by the government.

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