Cryptocurrencies, such as Bitcoin, Litecoin, Ripple and Ether, have been making headlines lately, but not for the right reasons. They usually make headlines because of spectacular gains in value or, even more headlines with spectacular crashes. They make headlines when criminals use them to extract ransoms without being traced. They also make headlines when hackers steal millions of dollars worth by breaking into wallets and crypto-exchanges.
But what are these digital coins supposed to be used for? More importantly, why would you want to use them for your business?
Cryptocurrencies were designed to cut banks, bureaucracies, and unfortunately for us, lawyers, out of business dealings. They do this by transferring wealth through a decentralized chain of computers that share a single distributed ledger of every crypto-transaction that occurs so that there can never be a dispute as to how much of what was transferred and when. Each transaction has to be verified a number of times (which usually takes less than an hour). This is very different from how things are predominantly done today, where banks, law firms, financial institutions, governments and other players each keep their own ledgers and transaction records, thus making due diligence a necessity and trust a commodity.
By using this technology, you can send and receive wealth within and across borders with the bare minimum of time and expense.
What are the tax implication of using cryptocurrencies?
The tax consequences of using cryptocurrencies depends on what you are using them for. The Canada Revenue Agency (CRA), like everyone else, has been trying to identify with what it already knows and understands in attempting to deal with cryptocurrencies. Here we will address two scenarios:
In later blog we discuss the What Are The Risks Of Accepting Cryptocurrency As Payment?
Generally a few of the risks include volatile values of the different coins while the market is getting used to using them, limited acceptance (for now) and uncertainty with respect to shifting regulations while governments try to figure them out.
For the time being at least the Pros far outweigh the Cons. Please visit our Cryptocurrency and Blockchain Advisory web page to learn more about what cryptocurrencies can be used for and how we can advise your business on best practices and Fintech solutions that will enhance your business and save you money.
Call or email Grinhaus Law Firm for a free consultation to find out how you can integrate Cryptocurrencies into your business model. As a boutique law firm located in midtown Toronto, we have the experience and expertise necessary to help you structure your business.
PLEASE NOTE: THIS IS NOT INTENDED TO BE LEGAL ADVICE AND SHOULD NOT BE RELIED ON AS SUCH. IT IS IMPORTANT THAT YOU CONSULT WITH A LICENSED PROFESSIONAL.