VANCOUVER - The Canada Revenue Agency (CRA) has been actively auditing cryptocurrency users, uncovering over $100 million in unpaid taxes in the past three years. The agency is currently investigating more than 200 cases, highlighting concerns that up to 40% of taxpayers using crypto platforms may not be compliant with tax regulations.

Despite these findings, the CRA has not filed any criminal charges related to cryptocurrency tax evasion since 2020. A recent court filing involving a Vancouver-based crypto company indicates that the federal government's efforts to combat tax evasion and illicit financing in the crypto space are hindered by limited enforcement resources. The CRA's application to the Federal Court in September expressed concerns about taxpayers using the anonymous underground economy, particularly through cryptocurrencies and non-fungible tokens (NFTs).

Predrag Mizdrak, a project leader in the CRA's digital compliance division, stated in an affidavit that the agency struggles to identify taxpayers operating in the crypto space. "There is no way to reliably identify taxpayers operating in the crypto space and assess compliance," he noted. The CRA sought a court order to reveal the identities of clients from Dapper Labs Inc., a prominent NFT company. Initially, the CRA aimed to access information on 18,000 users but negotiated down to 2,500.

This court order marks only the second instance of the CRA using an "unnamed persons requirement" to investigate potential tax evaders in Canada. Mizdrak's affidavit revealed that the cryptoasset industry is prevalent in the underground economy, with about 15% of Canadian taxpayers using crypto platforms failing to file their taxes on time or at all. Additionally, 30% of those who do file are considered high-risk for non-compliance.

The CRA has 35 auditors dedicated to its cryptoasset program, which has yielded significant tax revenue. The agency reported five criminal investigations involving digital assets since 2020, with four still ongoing as of March. However, no charges have been filed, as investigations can be complex and lengthy, depending on various factors such as evidence availability and cooperation from witnesses.

In a related development, Canada's anti-money laundering agency, FINTRAC, has imposed substantial penalties on crypto firms this year for non-compliance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. In October, FINTRAC announced a record penalty of nearly $177 million against Xeltox Enterprises Ltd., which operates from a Vancouver mailbox rental business. The agency also fined Seychelles-based crypto exchange Peken Global Ltd. over $19.5 million for failing to register as a foreign money services business.

Jessica Davis, president of Insight Threat Intelligence and an expert in illicit financing, commented on the CRA's findings. She described the $100 million collected from crypto audits as a "pretty significant haul" but expressed surprise that no criminal charges have been filed yet. "I think people still don't fully understand that profits made on crypto are actually taxable," she said. Davis noted that while Canada is making progress in regulatory measures, enforcement remains a challenge.

The federal budget includes plans to establish a Canadian financial crimes agency by spring 2026, although details about its structure and mandate are still unclear. Finance Minister Francois-Philippe Champagne announced that this new agency will focus on investigating complex financial crimes, including money laundering and online scams. The CRA continues to address taxpayer non-compliance identified through its investigations, but it has not provided estimates on the number or value of resulting tax reassessments.