Cryptocurrency: Rules and Tax Implications of Seizing Crypto Belongings – Know-how

Introduction – Cryptocurrency: Global Challenges, Regulations

and the tax implications associated with the seizure of crypto

financial assets

In May 2021, the electric car manufacturer Tesla Inc. announced its

Decision to stop accepting Bitcoin as a means of payment. According to CBC,

Tesla's announcement sparked a decline in the cryptocurrency

Prices. In June 2021, China announced its decision to ban them all

Financial institutions and payment companies from the provision

Services related to cryptocurrency transactions. According to CBC,

China's announcement to "take action"

Cryptocurrencies "exacerbated the decline in the cryptocurrency

Prices. In addition, according to the CBC, it is the Bank of Canada

The Federal Reserve indicated that it might launch a challenge

"Declaration that crypto works against the public good".

In addition, according to the CBC, many investors are concerned about

potentially lose their digital investments, others already

"lost more than half of their investment" due to the

continued decline in the crypto market.

According to CBC, the announcement by Tesla & # 39; s Inc

"nearly $ 1 billion clears the market cap in

the crypto sector ". CBC declares, announcement by Tesla Inc.

played a significant role in cryptocurrency falling 54%

"from a record high of $ 64,895 on April 14th," what

the first monthly decline since November 2018. Beyond that

According to the CBC, China's announcement has exacerbated the decline

in Bitcoin, which was originally triggered by Tesla's decision,

Stop accepting Bitcoin as a form of payment. CBC declares by mid-May,

Bitcoin saw a decline of more than 50% and "it hit a

Three and a half month low of $ 30,066, which was at its lowest point

since January 2021. Bitcoin by the end of June, according to CNBC

hit a monthly low of $ 28,908. In addition, CBC explains that Bitcoins

Decline had a negative impact on other crypto assets, including ether (a

Coin restricted to the Ethereum blockchain network) that recently

dropped to its weakest level since the end of January 2021.

According to CBC, Bitcoin, which was already under pressure from

The Tesla and China announcements posted a peak loss of

over 50%. Other cryptocurrencies like Dogecoin even suffered

greater loss "in percent", however, explains CBC,

the loss was greater for investors who "bought"

Margin ". According to CBC, buying for margin is a" process "

when investors borrow from their broker to invest but are required

by lenders to repay some of their debts when the value of theirs

Proportion falls below a certain level. "According to the CBC, some are

Investors who bought with margin "are forced to sell in a

falling market "unless they have excess funds to meet their

Loan amount on repayment request. CBC means the CNBC

Business news service who reported that margin calls were also made

increased "volatility in unregulated global crypto"

Market "where some investors get from their broker" at

100 to 1 ratio. That is, investors borrow $ 100 for each

$ 1 of their own money to buy their investments. While this

Some type of leverage investment can potentially be lucrative, though

Markets are rising, but margin traders risk losing all of their money

Investing in a declining market. According to CBC, though

Canadian brokers do not offer this type of margin, "in a

World market everyone bears the consequences ".

In June 2021, according to CBC, El Salvador using the US

Dollar as currency, declared as the first country

Cryptocurrency as "legal tender". CBC states, El

Salvador’s President Nayib Bukele announced that the

"The government is converting to the exact

Value in dollars at the time of the transaction ".

Context, explains CBC, some Salvadorans who recently negotiated

their salaries in Bitcoin could be due to their decision

recent decline in bitcoin.

In addition, in June 2021 the Bank für Internationale

Settlements (BIZ) publishes its "Central Bank Digital

Currencies: An Opportunity for the Monetary System "(the

"BIZ Report") illuminates the current challenges of

the cryptocurrency market. According to the CBC, the BIS report is

presents that the central banks will start "issuing their own"

digital coins "and they can even take action to get the

Use of cryptocurrencies. CBC referred to that of the BIS report

Conclusion that says "innovations like

Cryptocurrencies, stablecoins and the walled garden ecosystems of

Big techs all tend to work against the elements of the common good, the

underpins the payment system ".

According to The Jerusalem Post, the Knesset is the

Legislative body of Israel, joined the global "creation" trend

NFT – a non-fungible token "for Israel's new president

Isaac Herzog, in honor of his inauguration. Simply put by Forbes

Media, NFTs are digital assets that represent objects (i.e. music,

Art and videos) that can be bought and sold online and often

encoded with the same software as the cryptocurrency. The Jerusalem

Post explains that certain NFTs worldwide are using a

"NFT of the original World Wide Web code recently sold for

$ 5.4 million. "According to The Jerusalem Post, the Knesset,

is the "first parliament in the world to set up an NFT"

However, the continued global success of NFT may move others to embrace the

Trend of "creating NFT". For example, according to The

Jerusalem Post "artist Mike Winkelmann recently sold an NFT

for a record $ 69.3 million. "The Knesset shows how

Government officials are becoming increasingly involved in NFTs and


In May, Bloomberg reported that the Bank of Israel

Testing Ethereum Technology "in a recently launched internal digital

Court hearing. The Central Bank of Israel issued a statement explaining this

its digital payments system could have a potentially positive impact

Impact on the country's economy through "simplification"

Payment processes with simultaneous security for both parties in a

Transaction, "reported Bloomberg. According to Coindesk, some

believe that the digital currencies of the central banks will create

“Efficient and inexpensive infrastructure for cross-border

Payments ". In addition, Coindesk, Sweden reports

The Riksbank and the European Central Bank are among the banks

who "actively research and develop their own"

digital currencies in preparation for expected launches "

within the next five years. In contrast, Coindesk explains the US

Federal Reserve takes a "more cautious approach"

with regard to the introduction of our own digital currencies.

Despite the ongoing challenges of the cryptocurrency market, CBC

highlights some of the benefits associated with digital money

issued by central banks. CBC explains, in contrast to cryptocurrencies,

that could potentially "rise and fall unpredictably",

the value of the digital money issued by central banks "are"

known ". In addition, unlike stablecoins, CBC declares digital

Money issued by central banks can be considered anywhere as

legal tender ". CNBC defines stablecoins as

"Cryptocurrencies Linked to an Underlying Asset".

Furthermore, both the CBC and the BIS report seem to suggest that digital

Coins issued by central banks could potentially be many of the

Advantages of the cryptocurrency "without the disadvantages".

For example, according to CBC, digital money is being spent by

Central banks "eliminate the role of intermediary"

When investors transfer money, they "protect privacy" too

while respecting the integrity of the payment system and the law

Enforcement, "however, CBC declares, longtime crypto owners

will likely not agree with the above benefits

with central banks that issue digital money. According to the CBC as opposed to

Cryptocurrency, transactions and payments with digital money

Central bank issuers could potentially be traced through

Government agencies for a variety of reasons including, but not limited to

limited to law enforcement and taxation.

In connection with this, according to Block Crypto Inc., on July 7th

In 2021, Israel's defense minister signed a seizure order for

Crypto wallets believed to be related to Hamas

Agents. According to Block Crypto Inc., the are crypto wallets

a list of "84 addresses for Bitcoin, Tether, Ether and

Dogecoin, among other things, "Block Crypto Inc. declares that the

National Bureau for Counter Terror Financing "attributes most"

these wallets to seven Palestinian nationals with whom it is associated

Hamas "some of the crypto wallets" remain "

anonymous ". Block Crypto Inc. declares Hamas is a terrorist

Islamic group that controls the Gaza Strip. After block

Crypto Inc., the "European Union, United States, and Israel"

have called all Hamas or its subsidiaries a terrorist

Organizations ". According to Block Crypto Inc., Israel

The Defense Minister issued a statement stating that "every

Person who claims ownership of any or all of the property

(namely the 84 crypto addresses), can assert and submit their claims

in writing to the head of the National Counter Office

Terrorist Finance ". In addition, Block Crypto Inc. explains that

“This is not the first time Hamas has acted as a

Use crypto to raise funds ". For example, Block Crypto

Inc. reports, an Israeli non-profit organization in 2019

Seeks to end Hamas' use of Coinbase, and the US in 2020

Ministry of Defense and Justice uncovered

"Massive Seizure Operation That Hit Cryptocurrency Wallets"

owned by Hamas, Al Qaeda and ISIS ".

In early June 2021, US government officials established the

"Majority of a multi-million dollar ransom payment" in

Colonial pipeline hack, reported CBC. According to the CBC, this is ransom

Recovery was the first seizure by a "specialist"

Ransomware Task Force created by the Biden Administration

Ministry of Justice ". This reflects the increasingly aggressive

Approaches that government agencies are implementing to deal with them

“The growing and increasingly destructive ransomware

Attacks "targeting many industries worldwide,

including but not limited to the crypto market, reports CNN.

In addition, according to the IFC, Kazakhstan has signed a new tax regime

Cryptocurrency Mining Taxation Act with effect from January 1, 2022. IFC

declares while the new law is "said to generate billions".

in local currency ", companies say against it

the taxation of cryptocurrency mining. According to the IFC, there are many

Businesses oppose the new tax law and are concerned

on its impact on the future of mining in Kazakhtan.

Subject to cryptocurrency mining activities

for taxation under the rules of regular Canadian tax law. However,

Determine if your cryptocurrency mining activities

constitute a business or hobby for Canadian income tax purposes;

and the profit reporting method is a complex tax issue. Our

The best Canadian tax attorneys can help you identify your Canadian

Obligations and possibilities of tax planning in relation to

Cryptocurrency mining. Visit our law firm's website to find out more

Taxation of Cryptocurrencies – Impact on Income Tax

of mining.

The IFC reports shed light on the fact that state

Authorities around the world are paying attention

"the regulation of the cryptocurrency market" as in the

Example above where China bans the cryptocurrency market

and has ordered its banks to stop promoting cryptocurrencies

Transactions. In addition, IFC reports while South Korea is accurate

a comprehensive set of rules for exchange within the

Crypto Market Canada published announcements to "multiple exchanges".

(Poloniex and KuCoin) for non-compliance within

Time ". However, since Canada is" stricter "

Regulations out of concern for Bitcoin's energy impact, miners

are preparing to leave the country for other sources

Power, "reports Coindesk. In addition, Bitmex and Binance

among the cryptocurrency exchanges that Canada has for its

new securities regulations. It is important to realize that

potential tax implications could arise if the move

Cryptocurrency exchanges require converting any coin into any one

other coin or in fiat to transfer to another exchange.

For example, the disposition of cryptocurrency triggers a. the end

chargeable event under Canada

Income tax law that could potentially result in a capital gain

or operating income. However, it is uncertain whether more stringent ones

Restrictions and regulation of the cryptocurrency market and

the cryptocurrency mining industry will be effective, explains IFC,

Government agencies always strive

keep control of their currencies.

Cryptocurrency Concerns: Global Challenges,

Regulations and the tax implications related to the seizure of

Crypto assets

There are significant concerns and challenges related to

the cryptocurrency market, including specific cryptocurrency tax concerns. Special,

As mentioned earlier, Tesla has reversed its decision to accept Bitcoin

China announced payments, all financial

Institutes and payment companies related to the provision of services

to cryptocurrency transactions and central banks like The Bank

of Israel, issue their own digital coins while discouraging

the use of cryptocurrencies. While many investors and traders

concerned about the possible loss of their digital investments, others

already have a significant part of their digital

Investments. Some cryptocurrency traders are forced to sell their. for sale

Investing in a declining crypto market due to margin calls.

In addition, as already mentioned, the Bank of Canada has

The Federal Reserve and central banks suggest they may

"Take steps to discourage the use of crypto". Yes, even

when central banks and Canada's Federal Reserve take action to

discourage the use of cryptocurrencies, it is unclear how efficient it is

or will be effective, their actions will be the use of

Cryptocurrency. In addition, despite the volatile nature of the

In the cryptocurrency market, it is uncertain whether the value of the digital

Money spent by central banks would potentially tighten

Volatility in other markets or even its own market. It is important

to recognize that any changes in crypto holdings, including coin to

Coin changes have tax implications, even if they are done in response

to market changes.

Some governments around the world seem theirs

Attention to the regulation of various aspects of cryptocurrency.

Kazakhstan, for example, will tax the mining of cryptocurrencies, Israel

ordered the seizure of a list of crypto wallets, and China is

Prohibition of all practices related to cryptocurrencies. Still it is

unclear whether stricter restrictions and regulations of the

Cryptocurrency Market and the Taxation of Cryptocurrency Mining

will be in control of their government agencies


In addition, as mentioned earlier, the Israeli Minister for

Defense, signed a confiscation order for crypto wallets that

suspects that he is connected to Hamas activists. Likewise USA

Today reported recently that US government officials said the

"Majority of the cryptocurrency ransom payment of $ 4.4 million in

Colonial Pipeline Hack ". These examples shed light on that

domestic powers that government agencies have in connection with

Cryptocurrency Transactions and the Cryptocurrency Market. While

some government agencies are becoming more and more eager

keep control of their currencies, others have the ability and

Desire to seize cryptocurrency where they see fit


Significantly, there are Canadian tax implications

Government agencies that seize cryptocurrencies through the

Our experienced Canadian tax crypto attorneys can advise you.

Government agencies can try to seize cryptocurrency

Wallets and information on cryptocurrency transactions in

to identify tax evaders who are complying with the

Canada's tax system and levy taxes on unreported income. In

In addition, government officials could potentially have confiscated

Cryptocurrencies to track and investigate other crypto wallets and

their holder. It is important to know that there are taxes too

Effects related to the seizure of assets in cryptocurrency.

Confiscated crypto can, for example, give government agencies

Guidance related to the adoption and implementation of more stringent

Regulations on the taxation of cryptocurrencies. As,

the seizure of cryptocurrency can potentially lead to cryptocurrency

Owners and traders to evade their tax obligations by them

certain countries that implement restriction laws. Out

From a Canadian tax perspective, a cryptocurrency asset seizure is considered

considered an injunction and under Canadian Income Tax Act such as

taxable event must be reported via the crypto holder's income

Tax returns that may result in a capital or

Income gain or rather a loss.

Taxation of cryptocurrency in Canada

Under Canadian Income Tax Act, all income is from

Cryptocurrency transactions are known as business income or

as capital gain. Also losses with cryptocurrency

Transactions are treated as a loss of business or a loss of capital.

Taxpayers need to determine if a cryptocurrency transaction

leads to income or capital for income tax purposes. When

Cryptocurrency is used to buy goods and services that are Canada

The Revenue Agency will treat the transaction as a "swap"

Transaction "for income tax purposes. A" swap "

Transaction "occurs when goods or services are exchanged

performed without the use of legal currency. However, the use of

the cryptocurrency used to purchase goods or services is taken into account

be an income tax disposal that leads to a profit

or loss.

Also, when exchanging a taxable property or service

for cryptocurrency, GST / HST that applies to the property or

Services is based on the fair value of the

Cryptocurrency at the time of exchange.

Pro Tax Tips – The Tax Impact of Cryptocurrency

Canada has yet to legislate – taxes or other business

expressly with cryptocurrency or cryptocurrency transactions.

Canadian courts also have yet to rule on a tax issue

in relation to cryptocurrency or cryptocurrency transactions.

For questions about the tax treatment of

Cryptocurrency or cryptocurrency transactions or the potential tax

Effects related to the seizure by state authorities

For cryptocurrency, contact one of our leading Canadian tax attorneys for tax purposes

Orientation aid. Our Certified Specialist in Taxation Canadian Tax Attorney

has extensive experience in dealing with cryptocurrency


When you or your company has unreported earnings or wrongly

reported as capital gains instead of operating income

you may be entitled to relief through cryptocurrency transactions

through the CRA's Voluntary Disclosure Program (VDP). Voluntarily

Disclosures, also known as tax amnesties, are a complex area of ​​law

this requires detailed analysis and advice from an experienced person

Canadian tax attorney. Consider contacting our certified specialist

in tax law Canadian tax attorney for appropriate tax advice

with regard to a possible request for self-disclosure.

The purpose of the Voluntary Disclosure Program is to

Avoidance of "tax evasion and aggressive tax avoidance"

Ensure a responsive and fair tax system for all

Canadian. Promotes Canada's Voluntary Disclosure Program

Compliance with the law and allows taxpayers, including

Companies, the opportunity to voluntarily (1) to correct inaccurate

or incomplete information; and / or (2) disclose to the rating agency

Information that was not previously reported. Canadian taxpayers

those who have unreported income can be entitled to penalty relief and

Partial interest rate relief according to Canada's voluntary information

Program. A valid application for the Voluntary Disclosure Program

got to:

  • Be "Voluntary";
  • Be "complete";
  • Take into account the payment of the estimated tax owed. A taxpayer who

    unable to make such payment at the time of application

    may require consideration for a "payment"

  • Include income tax information at the minimum

    one year overdue;
  • Include information about GST / HST for at least one

    overdue reporting period.

To qualify for the exemption according to the voluntary information

The taxpayer must submit a complete application to the program

Program and meet the above requirements. If you have

unreported income or would like appropriate tax planning to reduce your tax burden please

Contact our tax office for tax advice from one of our top

Canadian tax attorneys.

The content of this article is intended to be general

Instructions on the subject. Expert advice should be sought

about your particular circumstances.

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