Bitcoins: CRA’s Take

The Canada Revenue Agency (CRA) recently released an article titled “What You Should Know About Digital Currency”.

CRA’s take is clear: this form of currency is still taxable despite the fact that Bitcoins are not controlled by any central authority and can be traded anonymously. They can be traded for traditional currency as well.

So what are they? Bitcoins were introduced in 2009 after the concept was unveiled a year prior by a pseudonymous developer known as "Satoshi Nakamoto". Because of their decentralization, Bitcoins have been an attractive form of currency for online black markets. In 2013, the FBI shut down the Silk Road, which specialized in selling illegal drugs. In this instance, the FBI came into the control of approximately 1.5% of all Bitcoins in circulation.

But Bitcoins have legitimate uses as well, and merchants have an incentive to accept the currency because transaction fees are lower than the 2 to 3% typically imposed by credit card processors. Some big name online vendors including WordPress, OkCupid, Reddit, and the Chinese Baidu have endorsed its use.

Most media treatment of Bitcoins, however, remains critical, and the way nations treat the virtual currency also varies. Citizens in countries suffering from poor national currencies have endorsed the use of Bitcoins. They are used by some Argentineans as an alternative to the official fiat currency. It has also been noted that the popularity of Bitcoins in Iran has risen as a result of international sanctions.

It will be interesting to see how the use of virtual currencies such as the Bitcoin will evolve. The Wikipedia article on Bitcoins recommends, as an odd juxtaposition for a digital currency, that the safest way to store them is with paper print-outs.