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.