Ian Caines presents Understanding the Taxation of Cryptocurrencies at Toronto, as part of its James Hausman Tax Law and Policy Workshop Series hosted by Ben Alarie:

Cryptocurrencies and related electronic assets can be a mysterious area for tax practitioners, raising potentially novel tax issues. However, unlike in other areas that a tax professional might encounter, tax uncertainties arise not so much from the interpretation of any specific tax rules—which are still sparse, given the novelty of these assets—as from the curious details of what cryptocurrencies actually are and how they operate. This article will provide a practical introduction, aimed at the average tax professional, of how cryptocurrencies operate, and discuss some of the tax consequences that flow from those details. The article will conclude with a brief review of the limited cryptocurrency-related tax legislation that has been introduced in Canada so far. As a preliminary matter, we note that this article will mostly talk about Bitcoin specifically.

We will do this for a few reasons: (i) because bitcoins are the dominant asset in the class and will often be encountered by tax practitioners, (ii) because the cryptocurrency space is so varied that it is hard to talk in generalities, and (iii) because it will be convenient to have a concrete example in front of us (and one that is relatively straightforward, as cryptocurrencies go). However, Bitcoin is also a good representative example, and much of what we say about it will be true of other cryptocurrencies as well. The article will not be strictly limited to bitcoins—along the way, this article will also point out some of the variations that are seen in the cryptocurrency landscape, and their potential tax implications.