8 March 2018 CBA Commodity Taxes Roundtable, Q.7

1. Does the position in 2013-0514701I7, that “Virtual currencies, such as Bitcoins, are not considered to be a currency … [so that] using Bitcoins to purchase goods or services would be treated as a form of barter transaction” still hold, or (given that the definition of “money” is not restricted to the listed items and includes “money”) does CRA consider the purchase and sale of crypto-currencies to be an exempt supply of a financial service (specifically, of money)?
2. What is CRA’s analysis of “money”?
3. How will a supply by a GST/HST registrant of a taxable service in Ontario worth $1,000 to another GST/HST registrant (also engaged 100% in commercial activities) for a payment of $1,000 in Bitcoins be treated?

(a) CRA responded:

The CRA is presently considering its position regarding the GST/HST treatment of Bitcoin and similar crypto-currencies given the increasing use of crypto-currencies.

(b) After quoting the s. 123(1) definition of “money,” CRA stated:

[T]he CRA has previously taken the position that, to qualify as “currency”, a medium of exchange must be issued by a country as legal tender. Furthermore, to qualify as a “cheque, promissory note, letter of credit, draft, traveller's cheque, bill of exchange, postal note, money order, postal remittance and other similar instrument”, an instrument must be issued to pay a debt or to transfer funds upon the credit of the issuer. Based on these positions, bitcoins are not a currency, and they are not a cheque, promissory note, letter of credit, draft, traveller's cheque, bill of exchange, postal note, money order, postal remittance or other similar instrument for the purpose of the definition of “money”.

(c) CRA stated:

If bitcoins are not characterized as “money” for GST/HST purposes, then they would likely be characterized as IPP. In such circumstances, a supply of a bitcoin in exchange for a supply of property or a service would be regarded as a barter transaction. If both parties to the transaction are GST/HST registrants, and if both supplies are made in the course of a commercial activity, both parties would be required to charge and collect the GST/HST on their respective supplies. The value of the consideration for the supplies would be equal to the fair market value of the supplies at the time the supplies are made, in accordance with paragraph 153(1)(b) of the ETA.

CRA indicated that it “is presently considering its position regarding the GST/HST treatment of Bitcoin and similar crypto-currencies.” It also noted that it had previously taken the position that Bitcoins do not come within the items specifically listed in the ETA definition of “money,” namely currencies and credit instruments or devices such as cheques, promissory notes, letters of credit and bills of exchange or “other similar instrument,” but implicitly acknowledged that the definition of "money" was an "includes" definition.