Why the CRA focuses on crypto traders

Cryptocurrency activity attracts attention for several reasons: rapid value changes, cross-border flows, and historically patchy record-keeping among retail traders. The CRA has a dedicated crypto guidance page and expects taxpayers to keep detailed books and records to support each transaction. Records must show dates, amounts, counterparties (or wallet addresses), and the Canadian-dollar value at the time of each transaction. The CRA explicitly reminds taxpayers to export and retain exchange records because platforms can cease operations or restrict access. citeturn1search0turn3search5

Common audit triggers for crypto traders

• Large, unexplained transfers from or to exchanges (especially >C$10,000) or frequent structured transfers.
• Third-party reporting, data sharing or FINTRAC reports that don’t match your tax returns.
• Failure to disclose foreign holdings or file Form T1135 when required (aggregate foreign specified property >C$100,000 CAD).
• Unreconciled trade volumes, or inconsistent ACB (adjusted cost base) calculations across wallets and exchanges.
• Repeated or large claims for losses or business deductions without supporting documentation.

Regulators and service providers are more connected than before: FINTRAC enforces registration and reporting requirements for crypto businesses, and exchanges operating or directing services at Canadians must register and keep detailed records. Enforcement actions against large providers demonstrate that regulators have sources of exchange-level transaction data. citeturn2search6turn0news12

Record-keeping: The core of audit readiness

Under the Income Tax Act you must keep sufficient books and records; the CRA’s guidance for crypto users lists the minimum information you should record and explicitly states you must keep records for at least six years from the end of the tax year to which they relate. That period can effectively extend longer when purchases pre-date dispositions, so keep trading history exports, wallet addresses, receipts, and proof of transfer. Failure to maintain proper records can result in penalties and make an audit far more painful. citeturn1search0turn0search1

Checklist: transaction-level records to retain

• Date and time of each trade, deposit, withdrawal or transfer.
• Number and type of tokens transacted and wallet addresses involved.
• Canadian-dollar value at the moment of each transaction (timestamped FX source or exchange rate snapshot).
• Receipts for purchases, sales, withdrawals, staking rewards, airdrops and mining proceeds.
• Exported exchange statements, CSV trade ledgers and transfer logs — keep a separate backup copy offline.
• Records of fees, borrowing costs, and other expenses used to calculate business income or capital gains.

How to reconcile ACB (Adjusted Cost Base) and why it matters

The CRA expects consistent, supportable ACB calculations. For many retail traders ACB is measured using the average-cost method; for businesses it’s different. If ACB is miscalculated you will understate or overstate gains/losses, which invites questions. Use exportable trade ledgers from exchanges or a reputable crypto tax tool that supports Canadian rules and average-cost calculations to prepare reconciled schedules for each token and year. Wealthsimple and other Canadian platforms provide realized gain/loss reports and CSV exports to help your reconciliation. citeturn3search2turn3search0

Dealing with missing or incomplete exchange data

Exchanges sometimes shut down, or accounts can be locked. If you can’t obtain historical records from an exchange, document your attempts to retrieve them and assemble corroborating evidence: bank statements showing fiat deposits/withdrawals, blockchain transaction hashes, wallet histories, screenshots, and emails with the exchange support. The CRA accepts reasonable reconstructions if adequately supported, but the burden of proof remains on the taxpayer.

Practical steps when data is missing

1. Export whatever you can immediately and keep multiple copies (CSV, PDF, raw JSON if available).
2. Gather bank/credit card statements that match fiat flows to/from the exchange.
3. Use on-chain explorers to trace transactions and capture transaction IDs and timestamps.
4. Prepare a reconciliation memo explaining assumptions and methodologies used to rebuild missing records.

Cross-border holdings and Form T1135

If you hold specified foreign property (which can include crypto held on foreign exchanges or wallets) with a total cost base exceeding C$100,000 you must file Form T1135. The CRA’s position treats many crypto assets as foreign property for T1135 purposes where they are held outside Canada. Not filing T1135 when required is a common audit red flag and can lead to penalties. Keep documentation about where each token is held at year‑end and how you calculated the threshold. citeturn0search5

What to do if the CRA contacts you: step-by-step

If you receive a notice or audit letter from the CRA, respond promptly and professionally. Delays or non-response can escalate enforcement. Here’s a measured sequence:

1. Carefully read the notice to understand scope and requested documents.
2. Immediately preserve and export relevant exchange and wallet records for the requested years.
3. Prepare a concise reconciliation package: ACB schedules, trade ledger exports, bank statements and a transaction summary narrative.
4. Engage a tax professional experienced with crypto (CPA or tax lawyer) to manage communications and negotiate timing and specificity of requests.
5. If you discover unreported amounts, consider the Voluntary Disclosures Program (VDP) — acting before CRA contact can reduce or eliminate penalties and in many cases interest. Recent VDP changes and tiers make early voluntary disclosure a realistic way to limit downside. citeturn4search1turn4search7

Voluntary Disclosures Program (VDP): When and how to use it

If you find unreported taxable crypto income or capital gains, the VDP allows taxpayers to correct past returns with potential relief from penalties and — depending on eligibility — interest relief. To maximise benefits, disclosures should be voluntary and made before CRA begins an audit or receives third-party data pointing to your activity. The CRA updated the program and offers tiers of relief; speak to a tax advisor to confirm eligibility and how to prepare an application. citeturn4search1turn4search4

Practical day-to-day habits to stay audit-ready

• Weekly or monthly exports: automatically export trade history and deposit/withdrawal reports from each exchange.
• Keep a master ledger: consolidate exchange exports, wallet transactions and bank flows in one place.
• Store immutable backups: use secure offline storage for annual archives (encrypted external drive or reputable cloud with strong encryption).
• Tag transfers clearly: label internal transfers between your wallets and exchanges so they are not treated as disposals when reconciling ACB.
• Document methodology: maintain a brief written policy describing how you calculate ACB and how you value crypto in CAD (data source and timestamp policy).

Exchange reporting and third-party data — what traders should know

Canadian platforms commonly offer tax reports and CSV exports to customers; Wealthsimple, Bitbuy and other regulated Canadian providers provide realized gain/loss summaries and transaction CSVs to help with reporting. Exchanges and reporting entities must also comply with FINTRAC and anti-money-laundering rules, and some providers are required to report large virtual currency transactions and maintain KYC records. Expect that exchange data can be shared with regulators — this is why meticulous personal records are essential. citeturn3search0turn0search0turn2search7

If audited: what the CRA typically requests and how to present it

CRA audit teams commonly request: (1) trade ledgers per exchange, (2) wallet transaction histories with hashes, (3) bank statements showing fiat flows, (4) documentation supporting staking/mining income, and (5) a reconciled ACB schedule by token and tax year. Deliver documents in an organised packet with a short summary memo that explains any reconstructions, assumptions or gaps. Transparent and structured documentation reduces follow‑up questions and audit time.

Conclusion — Practical priorities

Active crypto traders should treat audit readiness as part of their trading infrastructure. Prioritise consistent record keeping, export data regularly, reconcile ACB using an accepted method, file T1135 where required, and consult a tax professional early if you discover gaps. If you need to correct past errors, consider voluntary disclosure before the CRA initiates contact. Regulators and exchanges now generate data trails that can be matched to your returns — being organised saves time, money and stress during an audit.