Certain 'high-risk files' have been targeted and asked to accomplish comprehensive questionnaires on their bitcoin activity
As hopes of recovering their investments grow dimmer for customers of the embattled Quadriga cryptocurrency exchange, critics have raised fresh concerns over the lack of regulatory oversight in the nascent space.
But while federal-level protection appears to be a distant dream for Canadian crypto dabblers at this point, it seems they should prepare for another kind of government intervention. Citing multiple anonymous sources, a recent Forbes article reported that “users of bitcoin and other crypto assets in Canada have been targeted by the Canada Revenue Agency (CRA) with audits.”
Those targets of CRA audits, the report added, have also been sent comprehensive questionnaires asking about their bitcoin-related activity going back 10 years.
When asked about the targeting of crypto users, a CRA source shared a statement reaffirming its commitment to ensure that “every taxpayer abides by the same tax laws,” and “keep pace with evolving global services and products, and … address the new ways of doing business in the global economy.”
To abide by these commitments, the statement explained, the CRA set up a dedicated cryptocurrency unit in 2017 to build intelligence and perform audits focused on cryptocurrency-related risks. Stemming from the agency’s broader Underground Economy Strategy, the unit currently has over 60 active audits related to cryptocurrency.
While the statement didn’t divulge specific criteria for selecting which files should be audited, it said the CRA uses “a combination of advanced analytics and business intelligence activities” to find the highest-risk files “while promoting a fair tax system for all Canadians.”
The comprehensive questionnaire sent to those audited, according to Forbes, includes a 13-page section that focuses on cryptocurrencies. The section contains 54 questions, many of which include sub-questions.
It asks the respondents, among other things:
- Whether they use cryptocurrency mixing services and tumblers, which “obfuscate the origins of cryptocurrency funds” for improved user privacy;
- Whether they use ShapeShift or Changelly, platforms that let users exchange crypto assets without tying their transactions to a real-world identity;
- Whether they have purchased crypto assets privately from individuals, as opposed to through exchanges;
- To list their personal crypto asset addresses that aren’t associated with their custodial wallet accounts
- Whether they’ve been a victim of cryptocurrency theft; and
- Whether they’ve participated in initial coin offerings (ICOs) or cryptocurrency mining
The agency has not overlooked bitcoin’s potential use in money laundering — something CRA Project Oversight Director Jared Adams tweeted about earlier this year. It has also dealt with phone-based tax scams where unsuspecting Canadians were falsely told that they have to make tax payments in bitcoin.