In the past decade, cryptocurrency has transformed from a niche asset into a globally utilized investment vehicle, transaction method, and harbour of wealth. Approximately 1.4 million Canadians, over 3% of the population, own cryptocurrency. This presents emerging questions about how cryptocurrency should be valued in estates and how it can be inherited by beneficiaries. 

Background 

Cryptocurrency is a digital currency, functioning as a medium of exchange, unconnected to a central bank or government institution. The ‘decentralization’ of cryptocurrency is core to its identity, as it is purposefully distinct from any authorizing agency. To maintain security and legitimacy, cryptocurrency relies on a digital ledger, where transactions are secured through cryptographical codes. This security system is often referred to as the “blockchain”. 

Legal Status of Cryptocurrency in Canada 

The Canadian government primarily views cryptocurrency as a commodity, and it has been taxed in Canada since 2013. In 2014, Canada became the first country to establish laws regarding cryptocurrency, amending the Proceeds of Crime and Terrorist Financing Act to encompass all entities dealing in cryptocurrency. For tax purposes, income generated from cryptocurrency is classified as business income, or as a capital gain, and must be reported. In terms of regulating cryptocurrency, Canada has employed an inconsistent approach across jurisdictions. However, cryptocurrency is widely treated in a similar capacity to securities, with comparable tracking and reporting processes. 

Cryptocurrency and Estate Planning 

As it has evolved into a widely utilized asset, cryptocurrency has become relevant in the realm of estate planning. Thus, estates lawyers must become well-versed in how best to track, manage, and transfer these valuable assets. The Government of Canada generally recognizes cryptocurrency as an “asset” and a “medium of exchange”. Due to these classifications, Ontario law allows for cryptocurrency to be included in a will, much the same way as other personal property. If an individual dies intestate, provincial intestacy laws apply to cryptocurrency the same way they would to any other asset, which is provided in Part II: Intestate Succession, of the Succession Law Reform Act (sections 43.1-49).  

Thanks for reading and have a great day, 

Ian Hull & Spencer Atin