The federal Department of Finance released explanatory notes in August 2025 to accompany draft legislation integrating the crypto-asset reporting framework (CARF) into the Income Tax Act in line with commitments announced in the 2024 federal budget.
Related amendments to the common reporting standard (CRS) were also made to address overlapping reporting obligations.
These measures signal a significant shift in Canada’s regulatory approach to digital assets, with implications for financial institutions, crypto-asset service providers and tax practitioners advising clients in the digital economy.
Policy objectives
CARF, as put forth by the Organisation for Economic Co-operation and Development (OECD), aims to enhance and facilitate information-sharing across jurisdictions.
From a Canadian perspective, the growing adoption of crypto-assets enabled by blockchain technology introduces both innovation and complexity to Canada’s financial landscape.
Despite promoting efficiency and decentralization, the crypto-asset industry also poses challenges in tax compliance and transparency—particularly in relation to offshore transactions and unregulated intermediaries.
To address these risks, last year’s federal budget proposed implementing CARF and expanding the CRS to improve reporting coverage, reduce duplicative compliance and align Canada’s tax reporting standards with evolving international frameworks developed by the OECD.
Incorporating CARF into federal legislation
Implementation and scope
The explanatory notes confirm that Canada will implement CARF through amendments to the Income Tax Act, effective January 1, 2026, with the first reporting due in 2027 for the 2026 calendar year.
CARF will apply to:
- Canadian-resident crypto-asset service providers, which can include individuals as well as corporations.
- Certain non-resident entities that carry on business in Canada.
For these purposes, reporting crypto-asset service providers includes businesses that provide exchanging services on behalf of customers as well as those acting as a counterparty or intermediary in respect of those transactions.
These entities will be required to report transactions involving a relevant crypto-asset. In addition to cryptocurrencies, relevant crypto-assets also include stablecoins, non-fungible tokens (NFTs) and other blockchain-based instruments that can be used for payment or investment.
Reporting requirements
Crypto-asset service providers must report annually to the Canada Revenue Agency (CRA) to disclose:
- User information, including full name, address, date of birth, jurisdiction(s) of residence, taxpayer identification number (TIN) and controlling persons for entities.
- Transaction data, including:
- Exchanges between crypto-assets and fiat currency.
- Exchanges between different crypto-assets.
- Transfers exceeding US $50,000, including retail payment transactions and wallet transfers.
Reporting relief may be available if a particular crypto-asset service provider already complies with equivalent reporting and due diligence requirements in a partner jurisdiction if the provider resides in that jurisdiction.
Due diligence and enforcement
Crypto-asset service providers will be required to conduct due diligence procedures to adequately determine the scope of reportable users before 2027. This includes obtaining self-certifications of user residency and being required to implement reasonableness procedures to evaluate the information as well as obtaining relevant anti-money laundering (AML) and know your customer (KYC) documentation.
The legislation also introduces anti-avoidance provisions aimed at arrangements designed to circumvent CARF requirements.
The CRA will be authorized to administer and enforce CARF compliance, including information collection, audit authority and participation in international exchanges of information.
CRS amendments
The draft legislation also proposed technical amendments to the CRS, effective 2026, to align with CARF and address potential reporting gaps and redundancies.
Key changes include:
- Expansion of scope of reportable assets to:
- Relevant crypto-assets.
- Specified electronic money products.
- Central bank digital currencies.
- Revised definitions of financial accounts, depository institutions, excluded accounts and investment entities to reflect the digital asset landscape.
- Introducing transitional relief provisions, with certain reporting elements deferred until 2028.
- Introducing harmonization measures to ensure consistent treatment between CRS and CARF while avoiding duplicate reporting.
- Amendments to anti-avoidance provisions which target arrangements designed to circumvent CRS requirements via intermediaries.
Labour-sponsored venture capital corporations will notably be removed from the list of non-reporting financial institutions, with non-registered accounts classified as excluded accounts if contributions remain under US $50,000 annually.
These amendments will apply to 2026 and subsequent calendar years.
What this means going forward
The integration of CARF and amendments to the CRS represent a material expansion of Canada's information reporting regime, with a clear focus on enhancing transparency in the digital economy.
While implementation is staged for 2026, early preparation and consultation with key advisors will be critical for stakeholders operating in or adjacent to the crypto-asset sector.
The August 2025 explanatory notes provide important clarity on definitions, administrative authority and enforcement mechanisms, marking a pivotal moment in the regulation of digital finance in Canada.
