Court filings involving a Vancouver-based crypto company suggest the federal government’s efforts to curb crypto-based tax evasion and illicit financing are hampered by limited resources for enforcement in an area characterised by limitless anonymity.
A CRA filing in federal court in September said Canada’s finance minister was concerned that taxpayers were using the anonymous shadow economy to avoid taxes, powered by cryptocurrencies and non-fungible tokens, that are digital representations of an asset. However, the agency’s top crypto auditor says in related documents that the CRA believes “there is no way to reliably identify taxpayers operating in the crypto space and assess compliance” with income tax reporting requirements.
The tax agency is targeting high-risk crypto users
The CRA had turned to federal court looking for an order to unmask hundreds of consumers of Dapper Labs Inc., a “leading company” in non-fungible tokens that also operates its own blockchain and its own line of crypto wallets for storing digital assets. The company didn’t oppose the investigation, however the documents show that the CRA initially sought information on Dapper’s 18,000 largest users, but negotiations with company officials and its lawyers ultimately resulted in that number being reduced to 2,500 users. It is barely the second time a court has ordered a Canadian crypto company’s customers to be unmasked as a part of an investigation to ferret out possible tax evaders, often called the “unnamed person requirement” within the Income Tax Act.
An affidavit from Predrag Mizdrak, a project manager within the agency’s digital compliance and audit support department, said the crypto asset industry is widespread within the shadow economy.
The best crypto platforms and apps
We have rated the very best crypto exchanges in Canada.
Mizdrak’s affidavit states that the authority’s compliance efforts for crypto platforms up to now “indicate significant non-compliance in this area.” Previous data shows that about 15% of Canadian taxpayers using cryptoasset platforms “did not file their taxes on time or at all.” The agency says 30% of users who file tax returns “have been identified as high-risk businesses for non-compliance.”
“The use of cryptoassets has increased significantly during the COVID-19 pandemic,” Mizdrak’s affidavit states. “This has created additional compliance challenges for the CRA due to anonymity within the crypto space, transaction volumes and ease of account setup on many crypto asset platforms across borders.”
CRA audits are increasing alongside the high FINTRAC fines
In an emailed statement, the agency said it has 35 auditors in its cryptoasset program, working on over 230 files and collecting “significant tax revenue through audits,” including $100 million within the last three years. It said five criminal investigations with a “digital asset component” had been launched between 2020 and the primary quarter of 2025, 4 of which were ongoing as of March, but no charges had been filed.
“The CRA’s criminal investigations are complex and often take years,” the agency said. “The duration of the investigation will depend on the complexity, the number of people involved, the availability of evidence, international requests for assistance and the level of cooperation from witnesses to determine whether criminal charges are warranted.”
The article continues below promoting
X
Neither Dapper Labs nor its lawyers responded to requests for comment.
The corporations covered by the unnamed disclosure requirements are usually not accused of wrongdoing and can only be approved by the court in the event that they are an “identifiable” group and are utilized by the CRA for tax compliance purposes.
Canada’s anti-money laundering agency FINTRAC, meanwhile, has imposed massive fines on crypto firms this 12 months for violating the country’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
FINTRAC announced in October that it had imposed a record superb of nearly $177 million against Xeltox Enterprises Ltd. which is registered as a mailbox rental company in Vancouver. In addition, the Seychelles-based crypto exchange Peken Global Ltd. – trading as KuCoin – was fined greater than $19.5 million for failing to register as a foreign exchange services company in September. Neither Xeltox nor Kucoin have Canadian offices or employees, but each have hired Canadian lawyers to fight the penalties in federal court.
Canada regulates well but has difficulty enforcing
Jessica Davis, president of Insight Threat Intelligence, is a bootleg finance expert who once worked for FINTRAC and the Canadian Security Intelligence Service. She said the $100 million raised through crypto-related audits was a “pretty significant haul.” Davis said she was surprised there have not been criminal charges yet since crypto assets have been around for years, nevertheless it took a while for awareness to succeed in the “mainstream.”
“I think people still don’t fully understand that profits made in crypto are actually taxable, which is kind of funny,” she said. “I think people have thought for a long time that they don’t fall under that scheme, which obviously isn’t true.” She said Canada is doing “really well” on the regulatory side and while the space is borderless, it shouldn’t be “lawless.”
“We have more problems with enforcement. So actually maintaining financial crime investigations, actually bringing these charges and demonstrating the effectiveness of our regime.” She said the RCMP’s federal and contract policing model means resources dedicated to financial crime investigations “can be cannibalized to support other investigations.”
“I would perhaps argue that, rightly or wrongly, Canadians care much less about financial crime than they do about other things. And I would also say that politically there is not a requirement for the RCMP and other law enforcement agencies in Canada to actually produce findings on financial crime,” she said.
