Canada DeFi Tax: How Does The CRA Tax DeFi?
Learn how DeFi is taxed in Canada in 2025. Our DeFi Tax guide covers the tax implications of DeFi transactions, from liquidity pool tokens to staking protocols and more.
There is no guidance from the CRA on DeFi tax, but that doesn't mean your DeFi transactions aren't taxable.
Investors must interpret the existing guidance as it applies to their transactions, ideally with the help of a crypto accountant.
Generally speaking, investors will pay Income Tax on the entirety of any income and on half of any gain.
Whether you have income or a capital gain depends on the specific transaction and how you're classed as an investor.
Investors should use a crypto tax calculator to help simplify DeFi taxes.
How does the CRA tax DeFi?
The CRA hasn’t issued specific rules for DeFi taxes, but your transactions are still taxable under existing Canadian crypto tax laws. Until clear guidance exists, you must apply current rules, or consult a crypto tax accountant in Canada.
You can read our Canada crypto tax guide for the full story. But in brief, profits from crypto can be taxed as capital gains or business income:
Capital gains: Selling, trading, spending, or gifting crypto. Individuals pay tax on 50% of the gain.
Business income: If you’re trading like a business (e.g., day trading), 100% of profits are taxed as income.
Other crypto income: Such as mining, staking, bonuses, or selling created NFTs, is taxed as income when received.
The CRA decides classification case‑by‑case, often using these business income indicators:
Activity is commercial in nature.
You promote products or services.
You intend to make a profit.
Transactions are frequent or repetitive.
Frequent DeFi transactions may be treated as business income. Always review each transaction’s nature and seek professional advice for accurate reporting.
With all this in mind, to figure out Canada DeFi taxes, we need to look at the specific transaction and how the CRA is likely to view it.
Tax on buying, selling, and trading on dexes
There is clear guidance from the CRA on these transactions. Provided you're an individual investor with capital gains, you'll pay Income Tax on half of any capital gain from selling or trading crypto using a dex.
Meanwhile, buying crypto with fiat currency like CAD is tax free. But buying crypto with another cryptocurrency, even stablecoins, would be viewed as a trade and taxable transaction.
Liquidity pools and liquidity mining tax
Most liquidity pools work in a similar way, no matter the protocol. When you add liquidity, you receive a liquidity pool (LP) token representing your share. When you want your capital back, you trade the LP token in. For example, if you added BUSD and BNB to a PancakeSwap pool, you’d receive a BUSD‑BNB LP token.
Even though you’re not technically selling your assets, the CRA may view this as a crypto‑to‑crypto trade, which is a taxable disposal. You’d pay tax on any capital gain from the transaction.
But how your rewards are taxed depends on how they’re paid. It's easier to understand with examples.
Value‑based rewards: For example, on PancakeSwap, your LP tokens simply increase in value as trades happen. You don’t receive new tokens, so you only realize a gain when you remove your liquidity. In this case, you’d pay tax on any capital gain at that point.
Token‑based rewards: For example, on Aave, if you deposit ETH, you receive aTokens at a 1:1 ratio. Your rewards are also paid in new tokens. The initial swap to aTokens may be a taxable disposal, but your new rewards are more likely to be taxed as income, based on their fair market value when received.
Read next: What is liquidity mining?
DeFi lending tax
DeFi lending might seem simple, but it can get messy from a tax perspective. Even though loaning or borrowing crypto doesn’t feel like a taxable event, it often involves token swaps that the CRA could treat as taxable crypto‑to‑crypto disposals.
Take Compound, for example:
Lending: Deposit crypto into a lending pool and receive cTokens representing your capital. When you redeem your cTokens, it may be viewed as a trade, meaning any capital gain is subject to tax.
Borrowing: To borrow, you add collateral and receive cTokens. Redeeming them later could also trigger a taxable event.
Interest and rewards
How interest is taxed depends on how it’s paid. For example:
If your cTokens simply increase in value over time, you don’t realize a gain until you redeem them, at which point any capital gain would be subject to tax.
However, in this same example, you may also earn COMP tokens as rewards. Because these are new tokens, they’re more likely to be treated as income, taxed at their fair market value when received.
Paying interest
Paying interest in crypto counts as a disposition and may be a taxable disposal. However, if you’re borrowing crypto to generate income (for example, investing it in another yield‑earning protocol), your interest payments may be tax‑deductible against that income.
In short:
New tokens: Income Tax on receipt.
Token value increases: Taxable gains at the point of disposal.
Interest paid: Taxable gains at the point of disposal, but sometimes deductible if tied to income‑generating activity.
Yield farming tax
Yield farming covers a wide range of activities, and how it’s taxed depends on how your rewards are paid.
Take SushiSwap as an example:
Step 1: You provide liquidity and receive SushiSwap LP (SLP) tokens. This is a disposal, where any gain is taxable.
Step 2: You stake your SLP tokens. By staking SLP, you earn SUSHI tokens, which you can harvest at any time. Because these are new tokens, they’re likely to be taxed as income at their fair market value when received.
Step 3: You can stake SUSHI to earn XSUSHI. You don’t receive more XSUSHI tokens; instead, their value increases over time. You only realize a gain when you unstake, at which point you have a taxable disposal.
Overall, the tax implications will come down to how your specific protocol works and the transactions made.
Learn more about yield farming and how to earn passive income from crypto.
Staking Tax
In DeFi, “staking” can mean two different things — and the tax treatment depends on which one you’re doing.
Protocol staking
Investors often use “staking” to describe locking tokens into a protocol — for example, staking SLP tokens to earn SUSHI.
If you earn new tokens, it’s likely Income Tax applies, based on their fair market value when received.
If your tokens simply increase in value without receiving new assets, you’ll likely pay tax on any capital gain when you dispose of them.
Proof of Stake (PoS) staking
Many DeFi projects use PoS blockchains such as ADA or AVAX. You can stake coins directly from non‑custodial wallets like Yoroi or Daedalus to earn rewards. Because you’re receiving new coins, these rewards are typically taxed as income at the point of receipt.
Read next: What are the best staking platforms?
Margin trading and derivatives tax
There’s no specific CRA guidance for crypto margin trading, derivatives, or CFDs on centralized or decentralized exchanges. How you’re taxed depends on whether you’re seen as an individual investor or a day trader.
If you’re trading as an individual investor, any capital gain is usually subject to tax when you close a position. Margin fees can be deducted if they relate to your trading, and liquidation counts as a disposition, so any profit is taxable.
If you’re considered a day trader, profits are treated as business income and taxed under Income Tax rules when you close a position.
Play to earn tax
The CRA hasn’t issued any guidance on play to earn games tax yet, but it’s all going to come down to how you earn and how your earnings are viewed.
If you’re earning minimal amounts (like hobby mining), it’s likely you’d only pay tax on any capital gains at the point of disposal.
But if you’re earning larger amounts, regularly, like an income, you’re likely to pay Income Tax on your crypto, based on the fair market value at the point you receive it.
Of course, many DeFi games are using NFTs, so we’ll cover NFT taxes below.
NFT tax
Despite being non-fungible, these tokens are treated the same as any other cryptocurrency from a tax perspective. In short:
Buying NFTs: Tax on any capital gain if you're buying with crypto (like a trade). Tax free if you buy with fiat currency.
Selling NFTs: Tax on any capital gain if you’re selling an NFT you bought. Income Tax if you’re selling an NFT you created.
Trading NFTs: Tax on any capital gain as a result of the trade.
Gas fees tax
We’ve got a whole article on gas fees and taxes, but in brief, transaction fees can be added to your cost basis and are therefore tax deductible, while transfer fees likely cannot be added to your cost basis and should be treated as a disposition.
Wrapped tokens tax
Wrapped tokens allow for interoperability between various blockchains, for example, WETH or WBTC.
When you ‘wrap’ a token, you’re exchanging one token for another. This could be a disposal, like a crypto-to-crypto trade, so any capital gain as a result is taxable. However, as the two tokens are of equivalent value, you’ll often have no realized gain or loss.
Token rebases tax
Some tokens aim to maintain a fixed value with an underlying asset. For example, Lido’s stETH is tied to ETH’s value and uses a “rebasing” function to adjust supply based on price changes.
If the price rises above the target, more tokens are issued; if it falls below, supply is reduced. This means your token balance can increase or decrease, sometimes daily.
The CRA hasn’t issued guidance on token rebases, but they can be compared to a stock split, which is not considered a disposition and is therefore non‑taxable. It’s reasonable to assume rebases may be treated similarly.
What's the best crypto tax software for DeFi?
Koinly is a crypto tax calculator that handles everything for you, including DeFi taxes. Simply sync your wallets, exchanges, or blockchains via API, or upload a CSV of your transactions.
Koinly will automatically identify and categorize your transactions, but you can manually tag them if needed, for example, as loan interest, pool rewards, or deposit/withdrawal costs. You can also adjust settings to control how gains on liquidity transactions, other gains, and transfer fees are treated.
Once your data is in, Koinly calculates your taxes and generates an easy‑to‑read summary. You can then download CRA‑ready reports or export them for tax software like TurboTax.
