Policy & Advocacy
Learn more about how we're working to build a dynamic and secure Canadian regulatory landscape →
Learn more about how we're working to build a dynamic and secure Canadian regulatory landscape →
What we care about:
New Tax Rules for Crypto Asset Mining in Canada
On February 2, 2022, the Department of Finance (Finance) proposed an amendment to the Excise Tax Act – GST/HST (and QST in Quebec) legislation -- that declares that digital (crypto) asset mining is not a “commercial activity” in Canada.
Under the proposal, companies engaged in digital asset mining activities, including Canadian data centres that supply high performance computing services to those engaged in digital asset mining, may not be eligible to receive Input Tax Credits (ITCs) for the value added taxes (GST, HST, QST) paid on business inputs (i.e. computer and IT technology, energy costs, professional, consulting fees, etc.).
Canadian Digital Asset Mining today
In the early days, mining activities were informal, undertaken mostly by enthusiast working on unspecialized consumer hardware and excited by the potential of this innovative technology. In recent years, the shape and size of the global digital asset mining industry has been transformed.
Today, the backbone of this industry in Canada has evolved and is now dominated by independent high-performance computing data centres, known in the industry as digital asset mining facilities, owned by publicly listed companies such as Argo Blockchain PLC; Bitfarms Ltd.; DMG Blockchain Solutions Inc.; HIVE Blockchain Technologies Ltd.; Hut 8 Mining Corp. and Iris Energy Ltd.
These companies supply high performance computing services to other companies in the blockchain ecosystem known in the industry as digital asset mining pools. Digital asset mining pools conduct the transaction verification (or ‘mining’) activities on the blockchains that generate crypto assets such as Bitcoin.
On the Bitcoin blockchain for example, mining pool operators buy computing ‘hashrate’ from Canadian data centres for agreed fees based on the amount of hashrate supplied. The more hashrate the greater the fees for the hashrate computing services.
In fundamental respects, Canadian high performance computing data centres that supply hashrate to digital asset mining pools are supplying computing services that are no different than computing services that support other sectors of the economy. The only distinguishing feature is that they are selling their services and expertise to support the blockchain ecosystem.
Canadian high performance computing data centre companies participating in blockchain represent more than $2 billion market capitalization and growing. These companies have invested more than $1 billion in Canada in the past three years and are set to invest another $1 billion in Canada by 2025 on new jobs, state-of-the-art technology, and the purchase of clean Canadian energy. These companies pay millions of dollars each year in corporate and payroll taxes and invest directly to support the communities in which they operate.
What’s the better solution?
Restricting access to ITCs makes the business of supplying high-performance computing services to support blockchain technologies in Canada simply uncompetitive. Many other jurisdictions, including in the United States, are instead offering incentives to blockchain data centres and are now experiencing a booming industry and rapid tech job creation as a result.
The Federal Government should continue to treat independent, high-performance computing data centres that enable blockchain technologies, for tax purposes, just like other non-exempt commercial activities (such as conventional data centres and other high-performance computing services) that rely on significant capital investments in infrastructure, equipment, technology, innovation, skilled workers and access to clean energy, while the federal government takes additional time and devotes the necessary resources to more fully understand and assess the positive potential of this new industry for all Canadians.
The DigitalABC is coordinating with key industry stakeholders, and officials in the Department of Finance and the Canada Revenue Agency to engage in constructive and positive dialogue to resolve these concerns in the best interest of both our industry and all Canadians.
The public discourse related to blockchain, and climate tends to begin and end with the adverse environmental impacts of an energy intensive industry. In Canada, this discourse contributes to a public and political unease about the growth of digital asset mining that relies more on misunderstanding than fact. This has led to challenges for crypto asset mining companies to access clean electricity in several provinces across Canada. Most recently a Canadian court upheld a moratorium in BC on new crypto asset mining projects in the province.
The developments risk driving digital asset mining out of Canada, but it will not have any impact on the speed of technology innovation or adoption globally, or in Canada. Many other jurisdictions, including in the United States, are offering significant incentives to blockchain companies to locate their operations in other jurisdictions. Digital asset mining companies prefer Canada because our country offers a cold and dry climate that is ideally suited for their work, an abundance of clean, low carbon energy, a skilled workforce, highly educated population, world class universities and a stable regulatory environment with robust technology and security oversight.
Digital assets mined is Canada are “Green”, having been produced, in most cases, with electricity from extremely clean electricity grids fed by hydro, solar wind and zero-emission nuclear power. Digital assets mined in Alberta often use electricity produced from natural gas at the wellhead that would otherwise be “flared” directly into the atmosphere often resulting in a net reduction of emissions.
The DigitalABC is working with industry players, energy experts, Canadian utility operators and governments to change the conversation on digital asset mining and climate change, to highlight how Bitcoin mining and other blockchain innovations may be able to contribute to the decarbonization of the grid and help accelerate and scale the deployment of renewable energy.
Canadians deserve access to and the benefits that can flow from blockchain technologies and the emerging digital asset marketplace.
Digital ABC is advocating to Canadian governments for the development of laws, regulations and policies that promote Canadian economic development through participation in the global digital asset ecosystem and encourage responsible growth and good governance in the digital asset marketplace.
Going forward, this space will be used to set out specific policy initiatives and options that DigitalABC will be championing on behalf of Canada’s growing digital asset ecosystem.
Digital ABC is focused on educating government decision-makers, policymakers and the public about Canada’s role in the growing global digital asset ecosystem.
Going forward, this space will be used to share insight and awareness-raising materials to help the public and politicians alike better understand the realities and opportunities to be gained by Canada’s growing digital asset ecosystem.