Canada Faces High Crypto Tax Evasion Despite Limited Enforcement Tools
Canadian authorities are intensifying efforts to tackle tax evasion in the rapidly growing crypto sector, where an estimated 40% of users either fail to file taxes or are deemed high-risk for non-compliance.
Despite recovering over C$100 million ($73 million) in unpaid taxes through audits over the past three years, the Canada Revenue Agency (CRA) continues to face challenges due to the anonymous and decentralised nature of digital asset transactions.
Why Tracking Crypto Taxes Remains Difficult
The CRA struggles to trace crypto earnings accurately, as transactions are often conducted across platforms without clear reporting channels.
The agency employs 35 dedicated crypto auditors working on more than 230 files, yet identifying and assessing taxpayers remains a major obstacle.
Predrag Mizdrak, a CRA project lead, described crypto markets as “deeply embedded in the underground economy” with “significant non-compliance” risks.
A high-profile example involves Vancouver-based NFT firm Dapper Labs.
Initially, the CRA sought information on roughly 18,000 users under an “unnamed persons requirement,” a legal tool that allows authorities to obtain records without accusing the company itself of wrongdoing.
Following negotiations, the request was narrowed to 2,500 users.
This represents only the second time Canadian courts have granted such an order against a domestic crypto company, the first being Coinsquare in 2020.
Dapper Labs did not oppose the investigation but did not provide full compliance either, highlighting the challenges authorities face in compelling crypto firms to disclose user data.
Is Canada Catching Up to Global Enforcement Efforts
Canada’s intensified scrutiny reflects a broader global push to clamp down on crypto-related tax evasion.
Authorities in the United States, United Kingdom, and India are increasing oversight, seeking to identify both individuals and companies using digital assets to sidestep tax obligations.
Despite the scale of enforcement, criminal prosecution remains rare.
Since 2020, only five criminal investigations involving crypto assets have been launched in Canada, with four still ongoing.
Complex cross-border evidence and lengthy investigations contribute to the absence of charges, leaving the CRA to focus on civil recovery of unpaid taxes rather than pursuing criminal penalties.
What FINTRAC’s Recent Actions Reveal About Compliance Risks
Alongside tax enforcement, Canada’s financial intelligence unit FINTRAC has ramped up anti-money laundering measures.
Recently, it fined Seychelles-based crypto exchange Peken Global Ltd., operating as KuCoin, over C$19.5 million for failing to register as a foreign money services business in Canada.
This fine demonstrates authorities’ willingness to hold foreign platforms accountable for regulatory lapses.
New Legislation and Reporting Rules Set for 2026
To strengthen oversight, the Canadian Department of Finance announced in October that new legislation targeting financial crimes, including those linked to crypto tax evasion, is expected by Spring 2026.
Finance Minister François-Philippe Champagne said,
“Fraud and financial crime are evolving rapidly, and so must our response. Whether it’s launching a new Federal Anti-Fraud Strategy, establishing a dedicated Financial Crimes Agency to combat financial crimes, or addressing economic abuse, our government is committed to safeguarding the financial security of every Canadian.”
Canada is also preparing to implement the OECD-backed Crypto-Asset Reporting Framework in 2026.
The framework will require exchanges, brokers, and crypto ATM operators to report transaction and customer data directly to the CRA.
The federal budget allocated over C$50 million across five years to support these efforts, signalling a more systematic approach to monitoring digital asset activity.
How Canadian Crypto Users Are Being Targeted
For casual investors, crypto is taxed similarly to capital gains, with only 50% of profits subject to marginal rates, while frequent traders, miners, and businesses face full taxation on business income.
Most transactions, including sales, swaps, and crypto-based purchases, are treated as taxable dispositions under existing rules.
The CRA’s campaign against Dapper Labs users forms part of a broader crackdown on high-risk taxpayers, reflecting the agency’s growing focus on recovering unpaid taxes while authorities prepare for tighter reporting and regulatory measures.
Is the Gap Between Enforcement and Criminal Prosecution Closing
While the CRA has successfully reclaimed millions in taxes, no criminal charges have been filed in any crypto tax case since 2020.
The approach appears calculated: civil enforcement ensures the government recovers owed funds while navigating the challenges of cross-border crypto transactions and the technical complexities of blockchain data.
As the Canadian government moves to establish a national financial crimes agency by 2026, officials emphasise it will be the country’s first unit dedicated solely to sophisticated financial crime, aiming to tackle online fraud and money laundering alongside tax evasion.
The combination of legislative changes, international reporting standards, and targeted enforcement signals Canada’s commitment to closing the gap in crypto compliance and curbing risks associated with digital assets.
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