Unsurprisingly, the Canada Revenue Agency (“CRA”) followed the Internal Revenue Service (“IRS”) in seeking a court order for records from cryptocurrency exchanges. The tax authorities prevailed in both cases, increasing the transparency of cryptocurrency trading and investing.
Especially in its earlier days, cryptocurrency had a reputation as an underground currency providing secrecy and facilitating black-market transactions. This notoriety began to recede when in November 2016 the IRS (the US tax authority) filed a generic request, known as a “John Doe” summons, on all U.S. Coinbase customers who had transferred Bitcoin between 2013 and 2015. The IRS initially sought all records, including third party information.
While the US District Court - California Northern District (San Francisco) (Case 3:17-cv-01431-JSC) found that the IRS request was broader than necessary, it nonetheless ordered significant disclosure from accounts having a minimum of $20,000 in any one transaction during the 2013 to 2015 time period. The disclosure included the taxpayer’s identification number, name, birthdate, address, records of account activity, and all periodic statements of account.
In 2020, the CRA followed the IRS’s lead and brought an application to the Federal Court for an order to compel Coinsquare to produce customer records pursuant to subsection 231.2(2) of the Income Tax Act (“ITA”) and section 289(2) of the Excise Tax Act (“ETA”). Subsection 231.2(1) of the ITA allows the Minister of National Revenue (“Minister”), for any purpose related to the administration or enforcement of the ITA, to require that any person provide, within a reasonable time, any information or any document. Subsection 231.2(2) extends this power in respect of unnamed persons, provided that the Minister first obtains the authorization of a judge. Section 289 of the ETA parallels 231.2(1) of the ITA, but also applies in respect of the enforcement of certain listed international agreements, including comprehensive tax information exchange agreements that Canada has entered into with other countries.
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