Are profits from selling cryptocurrency taxed as capital gains in Canada?

The Canada Revenue Agency treats cryptocurrency as a commodity, not currency, for income tax purposes. Profits from disposing of cryptocurrency can be taxed as either capital gains or business income, depending on the nature of your trading activity.

If you purchase cryptocurrency as a long-term investment and sell it at a profit, the CRA generally treats this as a capital gain, and the taxable inclusion rate applies. However, if you trade cryptocurrency frequently, commercially, or in a business-like manner, the CRA may characterize all of your profits as fully taxable business income — not capital gains. The same business/capital distinction that applies to real estate speculation applies here.

Every "disposition" of cryptocurrency is a taxable event, including using it to purchase goods or services, exchanging one cryptocurrency for another, and gifting it. You must calculate the fair market value at the time of each transaction and compare it to your ACB. The record-keeping obligations are significant — the CRA expects you to track every transaction. Ontario residents pay both federal and provincial income tax on any amount included in income.