The Canada Revenue Agency (CRA) has confirmed with Forbes that it is actively auditing over 60 cryptocurrency users/traders considered “highest risk files.”
The media outlet also claims that “multiple sources” have confirmed they are the subject of the audits, which involve having to fill out 13-page forms detailing crypto trading activities, including the use of “mixing” services.
According to a YouTube video posted by BestMixer.io, crypto mixing service allow users to:
“Protect your anonymity and the anonymity of your cryptocurrency assets…”
The company claims their service, “makes it impossible to track your transactions within cryptocurrency network (sic).”
For example:
“When you send your coins to BestMixer.io, you deposit them in the general pool. In their place you receive (sic) absolutely new set of coins.”
Most likely, there are fees involved.
Using cryptocurrencies is a largely unregulated affair across the globe, and there is typically little recourse if a user makes a mistake or is ripped off during the course of a transactions.
Arguably, a willingness to assume this level of risk in a financial transaction suggests the user is either unconcerned (ie. bought cryptocoins early when they were cheap and/or is willing to experiment) or very motivated (ie. particularly privacy-conscious or trying to obscure monies).
If the mixing service works as claimed and intended, the digital “paper trail” connecting a user to a particular crypto transaction is obscured, perhaps permanently, especially if the mixing service has not kept records.
The CRA questionnaire also asks if the parties targeted for audits have ever used Shapeshift or Changelly, two apps that have allowed people to do crypto-to-crypto trades without having to prove their identities.
Shapeshift recently relented on its anonymity policy and began “to KYC” users (require proper ID in order to comply with anti-money laundering/counterterrorist finance laws).
Changelly reportedly still only requires users to provide an email address to flip cryptos into other cryptos.
In a correspondence with Forbes, The Canada Revenue Agency says the audits of crypto users are part of its, “commit(ment) to ensuring that without exception, every taxpayer abides by the same tax laws.”
The agency also says that audits have been issued as a result of the work of its, “dedicated cryptocurrency unit…established in 2017 to build intelligence, and conduct audits focused on risks related to cryptocurrencies.”
As well:
“The CRA’s enhanced efforts in this space stem directly from its broader Underground Economy Strategy, which includes a commitment to monitor emerging platforms and new business models, with a special focus on the sharing economy and digital currencies.”
Persons of interest in the audits, says the CRA, were selected, “us(ing) a combination of advanced analytics and business intelligence activities to ensure that we pick the highest risk files to audit while promoting a fair tax system for all Canadians.”
There are indications that the CRA has been aware of potential misuse of cryptocurrencies for some time.
A fake CRA tax scam has been afoot in Canada for at least two years.
The scam involves fraudsters leaving telephone messages claiming taxes are owed. If victims call back, they are urged to pay bitcoins to the scammers.
The IRS also also reportedly subpoenaed the American crypto exchange Coinbase for user data, though Forbes claims Coinbase was able to reduce the amount of user data it turned over.
