Canada Tax Authority Identifies 40% of Crypto Users at Tax Evasion Risk

TLDR

• CRA flagged 40% of crypto users for tax evasion risk in Canada, recovering $100M in taxes.
• The CRA’s crypto audit team has 35 members handling over 230 files to address tax evasion.
• New legislation by the Canadian government to combat crypto tax evasion is expected by Spring 2026.
• FINTRAC fined KuCoin $19.5M for failing to register as a foreign money services business in Canada.

The Canada Revenue Agency (CRA) has revealed that 40% of individuals using cryptoasset platforms in Canada are either evading taxes or are at high risk of non-compliance. Despite the challenge of tracking these users due to limited legal tools and the decentralized nature of crypto transactions, the CRA is taking action to address the growing problem.

Over the past three years, the CRA’s cryptoasset program, which includes 35 auditors, has recovered $100 million in unpaid taxes. However, the CRA faces significant challenges in reliably identifying and assessing taxpayers in the crypto space, making it difficult to enforce compliance on a large scale.

CRA Struggles to Track Crypto Transactions

Tracking tax compliance in the crypto world has proven to be difficult for the CRA. The decentralized nature of cryptocurrencies means that transactions are not always easily traceable, and the CRA has limited access to transaction data on crypto platforms. As a result, it has been challenging to ensure that crypto users are reporting their earnings accurately.

One high-profile case involves Dapper Labs, a Vancouver-based company known for its NFT marketplace. The CRA had sought data on the top 18,000 users of Dapper Labs in its investigation of potential tax evasion. However, negotiations between the CRA and the company led to a reduction in the number of users from 18,000 to just 2,500. While Dapper Labs did not fully comply with the CRA’s request, it did not deny the investigation either.

This case highlights the difficulties that Canadian tax authorities face when trying to obtain information about users engaging in crypto transactions. Without clear regulations, crypto companies can limit the scope of data they share, making it harder for the CRA to enforce tax compliance.

Global Push Against Crypto Tax Evasion

The CRA is not alone in its efforts to clamp down on tax evasion related to cryptocurrency. Tax authorities in the United States, the United Kingdom, and India are also ramping up enforcement in response to the rise of digital currencies. Many of these countries are stepping up efforts to identify individuals and companies that use cryptoassets to evade taxes.

Canada’s enforcement actions come at a time when the global conversation about financial crimes and tax evasion in the crypto space is intensifying. As crypto trading continues to grow in popularity, tax agencies around the world are increasingly concerned about the potential for tax evasion and financial crime.

In response to these concerns, the Canadian Department of Finance announced that new legislation aimed at combating financial crimes—including those related to crypto tax evasion—is expected by Spring 2026. The government’s goal is to enhance its ability to monitor and regulate crypto transactions more effectively.

FINTRAC’s Enforcement Actions and Legal Developments

In addition to the CRA’s efforts, Canada’s financial intelligence unit, FINTRAC, has also stepped up enforcement. FINTRAC recently fined the Seychelles-based crypto exchange KuCoin $19.5 million for failing to register as a foreign money services business in Canada. This fine emphasizes the growing focus on ensuring that foreign crypto exchanges comply with Canadian regulations.

The CRA’s efforts to collect tax revenues from crypto traders have made headlines, but in a recent update from The Block, it was noted that while the Canadian tax authorities are squeezing millions from crypto traders, “no criminal charges” have been filed. The CRA’s approach can be summarized as a calculated move to track transactions and recover unpaid taxes. They appear to be willing to let tax offenders “keep their freedom… for now,” while ensuring that they recover the money owed to the Canadian government.

The CRA’s message is clear: it is monitoring on-chain activity, and while tax offenders might not face criminal charges immediately, they will face financial penalties and owe the taxes they’ve evaded.

Moving Toward New Legislation

As financial crime continues to evolve, the Canadian government plans to introduce new legislation by Spring 2026 to address the challenges of regulating cryptocurrencies. François-Philippe Champagne, Canada’s Minister of Finance, emphasized the need for rapid responses to evolving fraud and financial crime. The upcoming legislation is expected to provide clearer rules for crypto users and enhance the tools available for regulators to track and prosecute tax evasion related to digital currencies.

This new legislation is part of a broader global effort to regulate the growing use of cryptocurrencies and ensure that tax obligations are met, despite the complexities of the crypto market.