Are you looking to expand your accountancy firm? Over 1/10 Canadians hold cryptocurrencies, as a result, there's a market of four million people who need help paying taxes on their capital gains. Demand for crypto-accountants is on the rise providing the perfect avenue for you to grow your income stream.
Suppose you’re looking to get ahead of the competition in the crypto-accounting field. In that case, this guide will give you an in-depth insight into the Canadian crypto market and present you with six tips to help you get ahead of the competition.
How big is the Canadian crypto market?
The Canadian crypto market has been somewhat of a sleeping giant; as a highly advanced market economy, Canada's population has plenty of expendable income to invest in crypto. While the adoption rate remained low in 2020, more recently, it's been on the rise. According to Finder.com, in 2021, over 10% of Canadians owned crypto, meaning Canada has the 13th highest cryptocurrency adoption rate worldwide.
Crypto Ownership In Canada
Finder's report suggests that around four million Canadians hold crypto. And 5.3% of the population hold Bitcoin, which is approximately two million people.
A large portion of Canadians have diversified their portfolios by adding alt-coins; Ethereum (ETH) is held by 5.3%, while Dogecoin (DOGE), Binance Coin (BNB), and Cardano (ADA) are held by roughly 2% of the population, respectively. This tells us that Canadian crypto clients may have somewhat complicated portfolios to track and report at tax time.
There's also a considerable gender gap in the Canadian crypto market, with Finder’s report revealing that while 12.7% of the male population holds at least one cryptocurrency, the same is true for only 7.3% of females.
What is the future of crypto in Canada?
If you’re thinking of spending time and resources moving your accountancy firm toward the cryptocurrency market, then naturally, you want to be assured that crypto ownership will continue to grow.
According to a report from the Bank of Canada, crypto adoption has been accelerating rapidly among Canadians, with the number of people holding Bitcoin nearly tripling from 2021 to 2022.
The report went on to add that the majority of investors are adding crypto to their portfolios, not just as a means of payment.
Investing in crypto leads to people incurring some form of taxation, especially during bull markets - and sentiment appears to be turning positive as we speak.
Crypto is here to stay, and as more Canadians start profiting from their investments, they’ll need help from tax firms. The following section will give you six tips for maximizing the number of crypto clients knocking on your firm’s door for tax advice.
Get to grips with Canadian Crypto Laws.
Understanding crypto laws and regulations can seem daunting, however, it isn't nearly as complicated as you might think.
The Canadian Tax Authority (CRA) makes it clear on its website that under the Income Tax Act, cryptocurrencies are taxed the same way as commodities. Furthermore, the CRA adds that income generated through cryptocurrency transactions should be treated either as business income or as capital gains - depending on a few factors.
The CRA has issued clear guidelines on what constitutes business income when dealing with cryptocurrencies. The activities that are commonly categorized as ‘carrying on a business’ are as follows:
- You carry out commercial activities in a commercially viable manner.
- You undertake activities in a businesslike manner, which might include preparing a business plan and acquiring capital assets or inventory. You promote a product or service.
- You show that you intend to make a profit, even if you are unlikely to do so in the short term.
The CRA adds that companies involved with mining, trading, or providing cryptocurrency exchange services also fall under the Business Income umbrella.
Personal Income and Capital Gains
If a taxpayer trades cryptocurrencies as an individual as opposed to a business, then they will be required to pay tax if they make a profit as this constitutes a capital gain. For example, if you make a profit of $5,000 on a BTC trade, then you will be required to pay the 50% capital gain tax amounting to $2,800.
There are also many crypto transactions that could be considered income by the CRA - including disposing of your crypto if you're regularly trading and at scale. One of the simplest ways to think about it is anytime you're seen to be 'earning' crypto - this could be seen as income and subject to Income Tax instead. Examples of crypto transactions that could be considered income include: getting paid in crypto, mining crypto, staking rewards, referral bonuses, and selling an NFT you've created.
Read our Canadian Crypto Tax Guide for Accountants for your complete how-to on CRA crypto tax.
Learn by doing
Even though it isn’t essential to get involved in trading crypto, it can help you get a feel for the industry and how it works. Your best bet is to buy and sell on one of Canada’s most popular exchanges, such as Wealthsimple, Newton, Shakepay, CoinSmart or Bitbuy.
It’s worth noting that the crypto market has come a long way in the last couple of years, and trading tokens is no longer the only process you should be familiar with. Your clients will probably expect you to have some knowledge of Decentralized Finance (DeFi), yield farming, and staking, as these fields now play a central role in the ever-expanding crypto ecosystem.
You certainly don’t need to start throwing around your life savings but using a few dollars to interact with the significant blockchains and DeFi services will help you get your head around the space.
Furthermore, the rise of DeFi to a multi-billion dollar industry means that there are bound to be customers in this space looking for help with their taxes. If you can show that you understand DeFi from first-hand experience, they’ll be more likely to trust you with their cash.
Stand out from the crowd
If you’ve read up on CRA’s guidelines and got to grips with crypto tax rules, then it’s time for you to start attracting your share of the growing number of crypto investors in Canada.
The best way to get started is to set up a website for self-promotion. Creating a website using WordPress or an alternative creator software has made the process straightforward so you won’t need to invest a huge amount of money or time.
"Crypto accountant near me" is a popular search term - meaning investors are hunting on Google for someone to help. So be the accountant they pick by ensuring a page of your website is dedicated to your crypto accounting services.
You can even take your website content one step further by offering sections that answer popular queries, like:
- How is crypto taxed in Canada?
- How do you report crypto taxes to the CRA?
- How to calculate capital gains.
- How to calculate crypto income.
Finally, don’t forget to add the keywords ‘Crypto Tax’ to your Google Business listing - or create a Google Business listing if you don't have one already!
Join industry bodies
If you're not already involved in the crypto community professionally, it pays to belong, especially when the talent pool is still in its infancy and rapidly expanding. Your accounting firm could join a stack of industry groups today, spreading the word that your practice is ready to do crypto taxes. Here are two of them:
Canadian Blockchain Consortium (CBC): The CBC is an inclusive ecosystem that seeks to bring together the best and brightest members of Canada’s crypto community; its members include developers, investors, and blockchain-based businesses. The CBC is planning on holding its first annual summit this October 2022, where some of the biggest names in Canadian crypto are slated to make an appearance.
The Canadian Blockchain Supply Chain Association (CBSCA): The CBSCA aims to bring together professionals working in the cryptocurrency space and leverage their skills to increase the use of blockchain technology across the global supply chain. The body focuses on building bridges between different fields within the crypto community, which makes it ideal for firms that have recently moved their services into the space. In addition, the CBSCA focuses heavily on providing members with educational services to aid them in keeping up to date with developments in the industry.
Get listed on Koinly
If you'd like to attract even more clients - whether you're an experienced crypto accountant or a relative newcomer - you can also get listed on Koinly's accountant directory. We have a dedicated Canadian crypto accountants directory to help Canadian crypto investors find reputable and trustworthy crypto accountants. It's easy - and free - to get listed - apply today.
While the foundations of crypto tax are pretty straight-forward, due to the sheer amount of assets a client may hold and the volume of transactions they may have made in a single financial year, the real challenge for crypto accountants is the resources needed to process and calculate client's crypto tax liability.
This is why almost all crypto accountants opt to use the right tools for the job, such as a cryptocurrency tax calculator - like Koinly.
Koinly's crypto tax software does all the calculations on your - and your client's - behalf). It imports transactions from all the exchanges, wallets, or blockchains that any given investor uses, identifies the cost basis of those transactions (or the fair market value on the day of the transaction), and converts it into CAD - saving hours of spreadsheets and manual calculations.
In even better news, Koinly generates a variety of CRA-compliant crypto tax reports, ready to help your client file or file on their behalf?
Koinly offers licenses for crypto accountants managing every step on behalf of their clients, or your client can simply give you access to their existing Koinly account via their settings. Find out more about Koinly's crypto tax solutions for accountants, here.