Earlier this month the Wall Street Journal reported that, according to a Canadian official from the Department of Finance, bitcoin is not considered to be legal tender in Canada. This is not particularly surprising considering that the term ‘legal tender’ is described in the Currency Act (R.S.C., 1985, c. C-52) as:

8. (1) Subject to this section, a tender of payment of money is a legal tender if it is made

(b) in notes issued by the Bank of Canada pursuant to the Bank of Canada Act intended for circulation in Canada.

Along with section 7 of the Act, which describes the Royal Canadian Mint as the current authority to issue coins in Canada, it is clear that legal tender is a state-centric term. More specifically, the two authorities described in the Act that are allowed to issue ‘legal tender’ currency are the Mint and the central bank. Therefore, it can be argued that this is an issue of semantics in that ‘legal tender’ is a descriptor of state-backed currency which is, at the end of the day, fiat money.

With this in mind as the qualifier of ‘legal tender,’ it seems that bitcoin would not necessarily be considered as automatically ‘illegal.’ In fact, the Canada Revenue Agency (CRA), Canada’s taxation authority, has a fact sheet on its website addressing digital currencies. The fact sheet clearly acknowledges that digital currencies can be used as legitimate forms of payment. More specifically, they state that:

Digital currency is virtual money that can be used to buy and sell goods or services on the Internet. Bitcoins are an example of digital currency. Bitcoins are not controlled by central banks or any country, and can be traded anonymously. Bitcoins can be bought and sold in return for traditional currency, and can also be transferred from one person to another.

Therefore, it can be seen that, regardless of whether bitcoin is ‘legal tender’ in Canada, it is considered to be a legitimate form of money by agencies such as the CRA. In fact, Canada has embraced digital currencies more than some of its Western counterparts, with the country now host to a growing number of bitcoin exchanges and ATMs. Given that digital currency is being utilized by an increasing number of Canadians, it is important to consider its regulatory implications. While the relative volume of alternative currencies such as bitcoin is quite low in comparison to traditional currency, there is still a degree of risk that it might pose to the financial system. As such, authorities, such as the Bank of Canada, have a careful watch on the realm of digital currencies and seem well-positioned to lead the charge on monitoring and regulating them to ensure that safety and stability are maintained.