Toronto-based crypto startup Coinsquare announced on Tuesday it has entered into an agreement with the Canada Revenue Agency (CRA) to hand over information pertaining to its clients’ account history and trading data.
According to Coinsquare, it finalized an agreement with the CRA to provide “limited” client information for certain users dating back to 2014.
The agreement comes after it was revealed in the fall that Coinsquare was being asked by the CRA, as part of federal proceedings, to share information and certain documents about all its clients since the beginning of 2013. Coinsquare states it was able to negotiate to protect its client’s privacy, with a more limited amount of information being disclosed.
“Coinsquare negotiated to protect our client’s privacy, and limit any disclosure to only what was absolutely required by the CRA under Canadian tax law,” the company said in a public statement. “Instead of providing the CRA with all client data dating back to 2013 as was initially requested, Coinsquare and the CRA have agreed that information relating to 90-95% of our clients will not be disclosed.”
The affected clients reportedly include ones that have had accounts valued at $20,000 CAD or more as of December 31 in the years 2014 through 2020, and 16,500 “of the largest client accounts by trading volume during those periods.” Coinsquare is required to provide the data by April 6.
The CRA’s filings were the first of its kind involving a Canadian cryptocurrency exchange. The CRA stated the decision as needing to ensure that Coinsquare’s customers have “complied with their duties and obligations” under Canadian tax laws. Coinsquare acknowledged in its statement that under the Income Tax Act, the CRA has the authority to review and verify that all Canadians have met their ongoing tax obligations.
With cryptocurrency becoming increasingly popular, regulators have been working to keep up with these new exchanges and how to track these transactions. Uncertainty in the market, like that brought about by Quadriga, has resulted in increasing interest from regulators of late to implement crypto-specific policies. Most recently, the Canadian Securities Administrators (CSA) published guidance aiming to improve the quality of disclosures around crypto assets.
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Coinsquare called its agreement with the CRA “a partial but significant victory for Coinsquare and the digital asset industry in Canada.”
“We hope that our victory will set a precedent for other companies in the cryptocurrency industry to defend their clients’ privacy and to limit any disclosure to only what is absolutely required under Canada’s tax law,” the company stated.
The CRA’s court filing regarding Coinsquare followed the startup’s settlement with the Ontario Securities Commission during the summer of last year over allegations of wash trading.
Since then Coinsquare overhauled its leadership team and streamlined its business plan and technology. In February, Coinsquare launched its crypto platform Quick Trade, which allows Canadians to buy, sell, and trade digital assets through an app. Coinsquare also sold a 20 percent stake to Vancouver-based FinTech startup Mogo for an initial investment of $56.4 million CAD.
Coinsquare has also re-applied to the OSC and the Investment Industry Regulatory Organization of Canada (IIROC) for registration as an investment dealer and marketplace operator. As part of its application to the OSC and IIROC, Coinsquare claimed it had submitted an application to operate as “Canada’s first regulated marketplace for digital assets.” However, in Canada, a number of FinTech companies are launching new cryptocurrency offerings, creating increased pressure in the crypto market for Coinsquare.
Wealthsimple Digital Assets’ crypto platform was first announced over the summer, allowing users to buy and sell crypto assets through its Trade app. Wealthsimple received an exemption from the OSC and CSA to operate and test its platform for a period of two years. Coinsquare also faces increased pressure from other Canadian companies on the regulation front, including online cryptocurrency brokerage Netcoins. Netcoins, a Vancouver startup, applied for registration from the British Columbia Securities Commission (BCSC) and the CSA’s regulatory sandbox program, which Wealthsimple Crypto is a part of. Netcoins claimed that, if approved, it would operate the first regulated open-loop crypto asset trading platform in Canada.