According to Elections Canada, the agency that runs federal elections in Canada, there has been “a growing interest” in cryptocurrency donations. This trend has prompted some political parties to ask for a ruling on how best to manage bitcoin and other cryptocurrency political donations and how to navigate the various reporting systems required by both Elections Canada and the parties so that they comply with the Canada Elections Act.

Election season is just beginning in Canada. There are three federal by-elections called for February 25, 2019; these will fill vacant seats, including a seat for one of the party leaders. A full federal election will be called before October 21, 2019.

On the legality of accepting cryptocurrency donations, an Elections Canada (EC) official told Bitcoin Magazine that “the Canada Elections Act does not prohibit political entities from accepting cryptocurrency contributions. Political entities are therefore currently able to accept such contributions.”

Elections Canada is taking the initial position that bitcoin and other cryptocurrencies are non-monetary, in-kind contributions, i.e. property or a commodity, but not a currency, a similar position taken by the U.S. Federal Elections Commission (FEC) and the Canada Revenue Agency.

However, Elections Canada has left the question of whether to classify cryptocurrencies as monetary or non-monetary open for the parties to consider in the current consultation process.

Is Bitcoin Legal in Canada?

Chetan Phull, a Toronto lawyer, founder and principal of Smartblock Law Professional Corporation, has written about the seemingly murky area of the legality of using cryptocurrencies as money in Canada.

Phull told Bitcoin Magazine that the use of bitcoin and other cryptocurrencies as money (legal tender) is, strictly speaking, illegal under Canada’s Currency Act.

However, he acknowledges that “Canada may be opening up to treating crypto as a type of non-fiat money, despite the current statutory definition of money.”

He points out that, to date, “there has been no actual enforcement action against the use of crypto as ‘money’ in Canada — not even against the Calgary Digital Dollar, where enforcement would be supported by long-standing precedent of the Supreme Court of Canada. Nor has there been any significant government pursuit of taxes not charged on trades of crypto as a good.”

Although Elections Canada has agreed that cryptocurrencies are not money, its inquiry into crypto contributions further suggests that Canada’s general climate is warming toward the use of crypto as a type of non-fiat money.

“We’re not quite there yet given the present law on the books,” Phull stated, “but these are all signals that Canada is opening up to crypto becoming a medium exchange in commerce. The appropriate crypto-friendly legislation will follow, starting with virtual currency regulations which are presently in draft.”

Phull also noted that the trend in the U.S. to bring cryptocurrencies into the mainstream, recently with a bipartisan bill before Congress for the Token Taxonomy Act, could carry some weight in Canada.

At the state level, Ohio now accepts payment of business taxes in crypto via ohiocrypto.com, three crypto-centric bills are presently in committee in New York, and a recent bill from Wyoming is attempting to clarify cryptocurrencies as money within the state.

“As more U.S. states permit the treatment of cryptocurrency as a medium of exchange, cryptocurrency in Canada will continue to move into the mainstream,” says Phull.

“Cryptocurrency will ultimately be legalized as a form of payment in Canada, one way or another. It’s just a matter of time.”

Carter Cameron-Huff, a Toronto CPA who also works as a volunteer chief financial officer for political riding associations, told Bitcoin Magazine that accepting another form of donation will require streamlined rules to meet the reporting requirements of both EC and the political party.

“The big challenge is that campaigns and riding associations need to be audited by a CPA; finding a CPA who is confident auditing things of a digital currency nature can be a challenge as they are typically risk averse.”

Political parties are responsible for ensuring that no single donor exceeds the annual limit and that complete identification is received with each donation.

Managing Cryptocurrencies as Political Donations

An official with Elections Canada told Bitcoin Magazine that their top priority is to ensure full transparency in any political donations over $20 CAD, as outlined in the Canada Elections Act.

This means that, to have a donation accepted, the political party must establish that the donor is a Canadian citizen and must confirm the identity of anyone who donates more than $20 worth of cryptocurrencies to a campaign.

Contributions of $20 CAD or less can be anonymous but EC cautions parties to “watch for unusual amounts or patterns in anonymous contributions they receive.”

In addition, each party would be required to keep a running tally of crypto donations (in equivalent fiat) to ensure that no single donor goes over the current annual donation limit of $2,700 CAD.

EC is recommending that the contribution amount is the commercial value of the cryptocurrency at the time that it was received, based on the rate on a major exchange platform.

Bitcoin Donations Not Treated Equally

Unlike a fiat contribution, donations in bitcoin and cryptocurrencies would not be eligible for a tax credit.

This is a problem for Cameron-Huff who sees this as a basic unfairness in the new EC proposal. He is planning to contribute his views as part of the Elections Canada consultations.

In the U.S., a 2014 FEC ruling that said political campaigns and organizations could accept bitcoin donations led BitPay to partner with CoinVox and a number of fundraising agencies to help process the donations.

Jared Polis, current Governor of Colorado, and Mick Mulvaney, current White House Chief of Staff, were among the first U.S. legislators to accept bitcoin campaign donations.

NOTE: Bitcoin Magazine reached out to the four federal political parties for comments on the Elections Canada decision. At press time, only the Green Party responded, saying that they do not accept cryptocurrency donations at present.