How the CRA Classifies Crypto Revenue from Online Sales

With decentralized currencies like Bitcoin and Ethereum entering mainstream commerce, the Canada Revenue Agency (CRA) has taken a clear stance: digital currencies are not exempt from tax scrutiny. For Canadian entrepreneurs accepting cryptocurrency in exchange for products or services, understanding the tax treatment of that revenue is critical, especially when distinguishing between passive holdings and active crypto trading in a business context.

The CRA considers cryptocurrency a “commodity,” not legal tender, which means crypto transactions fall under the barter transaction rules. For tax purposes, how crypto is used (rather than simply owned) plays a significant role in how it’s classified. And when crypto meets CRA, businesses must be prepared to justify whether their activities constitute passive investment or active commercial operations.

Passive Crypto Holdings: Treated Like Capital Property

Passive crypto holdings refer to digital assets acquired for long-term appreciation. A business may hold Bitcoin in reserve or accept it as payment and retain it without engaging in frequent trading. If those assets are sold later at a profit, the CRA may consider it a capital gain, provided there’s no pattern of regular buying and selling. Only 50% of capital gains are taxable in Canada, which makes this classification significantly more tax-efficient.

However, for a business to successfully argue a capital treatment, it must demonstrate that the primary purpose of acquiring and holding the crypto was investment, not resale. The CRA evaluates several indicators, including:

• Frequency of transactions
• Period of ownership before sale
• Knowledge and experience in crypto markets
• Business practices and promotional material

Even one-off transactions may be treated as business income if they reflect a commercial motive, making it imperative to get legal advice from a Canadian tax lawyer specializing in crypto taxation before accepting crypto payments.

Active Crypto Trading: Business Income Rules Apply

By contrast, active crypto trading, especially when it’s part of how a business generates revenue, falls under business income. This includes using crypto trading bots, conducting frequent buy/sell orders, or promoting crypto-related services on a business website.

For e-commerce businesses, even simply accepting cryptocurrency as payment and then converting it into Canadian dollars regularly can trigger business income treatment. This is because the CRA looks at the intent and pattern of use. If crypto is considered integral to business operations, the revenue generated from it is taxed as 100% business income, not a partial capital gain.

This classification also applies if a business mines cryptocurrency or receives staking rewards. Such activities are considered services rendered or production efforts and are therefore taxed as business income, subject to the usual deductions and reporting obligations.

Recordkeeping and Valuation Challenges

Regardless of how crypto is classified, Canadian businesses are expected to keep detailed records of every transaction. This includes:

• The date of the transaction
• The market value of the crypto in Canadian dollars at the time
• The purpose of the transaction (payment, investment, etc.)
• The wallets or exchanges involved
• Receipts or invoices

The CRA requires businesses to use the fair market value (FMV) of crypto at the time of each transaction to calculate gains or income. FMV can be determined from reputable exchange rates, but businesses must be consistent in their valuation methodology.

Planning for Compliance

As crypto adoption increases, so does the CRA’s interest in digital asset transactions. Businesses must not only maintain thorough records but also establish a defensible tax position, whether treating holdings as capital property or business inventory.

Consulting a crypto-specialist tax lawyer can help assess your crypto activity profile and ensure proper classification. Misreporting crypto revenue, whether intentional or accidental, can lead to reassessments, penalties, and interest.

For Canadian online sellers, clarity in how crypto is used can make all the difference in how it’s taxed. A proactive approach to compliance reduces risk and supports better financial outcomes in an environment where the tax rules are only getting more sophisticated.