Canada’s Tax Agency Wants Coinsquare Crypto Exchange to Fork over User Data
Canada’s tax authority has asked a federal judge in the country to order cryptocurrency exchange, Coinsquare to “hand over information and certain documents about all its clients” starting from the year 2013.
Specifically, the National Post reported on Friday that “the Canada Revenue Agency (CRA) wants to know the identity of every client of a major Canadian cryptocurrency trading platform as part of its effort to fight tax fraud and the underground economy.”
A dedicated crypto unit was originally formed by the CRA in the year 2018 for the specific purpose of conducting crypto-related audits.
“The CRA Presumes that the Chance for Non-compliance is High.”
In September, the CRA filed an original filing stating that the required information was necessary in order to ensure that Coinsquare customers comply with Canadian tax laws.
Charles Drouin, Canada Revenue Agency spokesperson, stated that “given cryptocurrencies’ pseudo-anonymous nature, it is difficult to determine the extent of non-compliance with Canadian taxes obligations.”
“However, the CRA assumes that there is a high chance of non-compliance.”
Journal de Montreal was told by the CRA last year that crypto-related crimes were on the rise. Of 54 criminal investigations, many were conducted using cryptocurrencies to facilitate tax evasion offshore.
CRA’s Coinsquare Approach Echoes IRS’s Coinbase Case
The CRA’s approach to Coinsquare appears to mirror the US approach towards cryptocurrency exchange Coinbase many years ago.
Finance Magnates reported previously that the Internal Revenue Service brought a case against Coinbase in March 2017 over unreported capital gains. This was between 2013 and 2015.
After an eight-month legal battle, the tax agency won. Coinbase was required to provide personal data for all customers with holdings exceeding 20,000 USD. This included taxpayer ID numbers, names, addresses, birth dates, addresses, account statements, invoices, and tax agency information. Later, the IRS sent letters to affected individuals asking them for returns on any gains they might have.
It is not clear if Coinsquare will follow the lead of Coinbase. Stacy Hoisak, CEO of Coinsquare, told Canada’s National Post her company was currently reviewing the request from the CRA and hadn’t yet decided whether it would fight it in court.
Coinsquare is not the first to have dealt with Canadian law enforcement. According to the Ontario Securities Commission (OSC), the Toronto-based cryptocurrency exchange was founded in 2014. It had approximately 235,000 client accounts at December 14, 2019, according the data.
The OSC had previously charged the exchange with market manipulation. They cited an alleged 840,000 wash trading worth around 590,000 bitcoins. The OSC’s July report stated that the trades accounted for approximately 90% of the exchange’s trading volume. The OSC ultimately imposed a $2.2 million fine.