Whether crypto is intangible property situate outside Canada may be indeterminate

Specified foreign property” for s. 233.3 reporting purposes includes intangible property situated, deposited, or held outside Canada that is not used or held exclusively in the course of carrying on an active business.

What is stored in a digital wallet is not the actual cryptocurrency but rather one or both of the owner’s public keys (akin to a bank account number) and private keys (akin to the PIN for that account). The situs of a private key is arguably what is most relevant to determining the cryptocurrency’s situs.

The situs of a cold wallet (i.e., a physical storage drive) is generally its physical location. For a hot wallet (i.e., a digital wallet connected to the internet), the primary server location used by the wallet provider “should be strongly determinative of situs.”

Reporting requirements are unclear if the taxpayer stores a private key in multiple locations at once, for example, where a document containing a private key is saved on a computer in Canada, and also in cloud storage in circumstance where it is difficult to ascertain the host server’s geographic location(s), e.g., for large providers whose server locations are often numerous or highly confidential. Similar uncertainty may exist where the owner uses multiple wallets, e.g., with one wallet stored in Canada, and another abroad.

Neal Armstrong. Summary of William Musani and Ashvin Singh, “Foreign Property Reporting: Where Is Your Crypto?” Tax for the Owner-Manager, Vol. 21, No. 4, October 2021, p. 6 under s. 233.3(1) – specified foreign property – (a).