In an August 8, 2019 Technical Interpretation (2018-0776661I7, Ross, Matthew), CRA discussed the timing and valuation of income to be included for persons mining bitcoin (a type of cryptocurrency). Mining involves the use of specialized computers to solve complicated mathematical problems which confirm bitcoin transactions and group them into blocks. By mining, a miner is monitoring and validating transactions occurring on the network.

the limited activity required to be in business

A miner typically receives two types of payments: payment from newly created cryptocurrency, and fees from the transactions included in the newly validated block. Payments are made in the cryptocurrency that miners are validating, bitcoin in this case.

The validation of transactions is considered a service rendered by the miner. If in the business of bitcoin mining, the bitcoin received must be included in income at the time it is earned.

Since providing services for payment in bitcoin is a barter transaction, the taxpayer must bring into income the value of the services provided or the value of bitcoin received, whichever is more readily valued. It is expected that the bitcoin value will be used in most cases.

See VTN 453(7) for a discussion on recent CRA cryptocurrency activity and projects.

this potential policy change

Editors’ comment
This Technical Interpretation seems to indicate that CRA has modified their previous position (discussed in VTN 451(4)) that a taxpayer mining cryptocurrency in a commercial manner generates business income when the cryptocurrency is sold, not when it is created.