In a bid to enhance financial transparency and address tax evasion concerns, Canada unveiled its 2024 budget on April 16, unveiling plans to enforce the Crypto-Asset Reporting Framework (CARF). This framework, endorsed by the Organisation for Economic Co-operation and Development (OECD) in August 2022, responds to the G20's directive in 2021, mandating the OECD to devise a framework facilitating the automatic exchange of tax information pertaining to crypto assets.

Under the new regulatory regime, cryptoasset service providers, encompassing exchanges, brokers, dealers, and ATM operators, are mandated to adhere to stringent reporting requirements. These requirements necessitate the disclosure of comprehensive transaction details to the government on an annual basis. Specifically, service providers are obligated to report transactions involving different cryptocurrencies, exchanges between cryptocurrencies and fiat currencies, as well as transfers of cryptocurrencies. Notably, transactions conducted using central bank digital currencies (CBDCs) are exempt from these reporting obligations.

Additionally, cryptocurrency service providers must furnish client-specific information, including full names, residential addresses, dates of birth, jurisdictions of residence, and taxpayer identification numbers. These reporting mandates extend to both Canadian residents and non-residents, marking a significant step towards bolstering regulatory oversight in the crypto sector.

Recognizing the substantial financial resources required for the implementation of CARF, the budget earmarks CA$51.6 million ($37.3 million) to the Canada Revenue Agency (CRA) over a span of five years, commencing from 2024-25. Furthermore, an annual budget allocation of CA$7.3 million ($5.2 million) has been set aside to cover the ongoing administration and operational expenses associated with the regulatory framework.

The Canadian government aims to enforce these mandates by 2026, with the initial exchange of information from service providers scheduled for 2027. Additionally, the budget introduces measures designed to curb crypto tax evasion within the country. These provisions include penalties for taxpayers who fail to fulfill the disclosure requirements outlined in the regulatory framework.

The budget underscores the critical importance of regulating the burgeoning crypto asset market to safeguard the integrity of the tax system and mitigate financial risks for middle-class Canadians. As such, regulatory efforts are aimed at aligning with the evolving landscape of crypto asset transactions and ensuring a fair and transparent tax regime.

In recent months, Canadian regulators have intensified their focus on the burgeoning crypto economy within the nation. In January 2024, securities regulators proposed new regulations governing public investment funds involved in crypto assets. These regulations aim to restrict the trading or custody of crypto assets directly to alternative investment funds and non-redeemable investment funds.

These developments follow a Coingecko report released on November 3, highlighting Canada as one of the primary markets for Bitcoin exchange-traded funds (ETFs), underscoring the growing significance of the crypto asset market within the country's financial landscape.