Sure, cryptocurrencies might seem like they are a type of magical digital tokens, but there is a long process to create them. This process is called mining, and as long as cryptos are legal to trade in your country, it should also be legal to mine them.

The best part about mining cryptocurrencies? Anyone can do it with the right equipment!

Thus far, Canadians have been able to enjoy adding cryptocurrencies to their investment portfolios without any fear of recourse from the government. Investing in cryptos has become a much easier task over the years but what about mining them?

It is completely legal to mine crypto in Canada. However, it is important to realize that while mining crypto can be a tremendously rewarding endeavour, it can also come at a great expense. 

So before you head out and start buying crypto mining equipment, there are definitely some things you will want to learn.

Yes! In addition to buying and trading cryptos as investments, it is also completely legal for any Canadian to mine them as well. The government of Canada has remained fairly silent on the matter, and have not moved to make any regulations on the digital currencies industry.

This is a stark contrast to countries like China, India, Iran, and even the US, which either have or are in the process of looking to add regulations.

This might make Canada an opportune country for new miners to flock to, especially if there are some new regulations implemented in the US. We have already seen one major migration of Bitcoin miners move from China to the US, after the Chinese government once again banned everything to do with cryptocurrencies within the country. 

How To Mine Cryptocurrency in Canada

Of course, legally being able to mine crypto and knowing how to mine crypto in Canada are two completely different things. So how can you mine cryptocurrency in Canada?

Well, believe it or not, mining these valuable digital tokens is all up to a simple math equation. The actual process behind mining blocks and creating hashes is fairly complicated. To simplify things, a crypto miner is a computer that is connected to the network and is essentially trying to solve a mathematical equation called the SHA-256 which is an algorithm to determine the next block in the blockchain. 

So before your mining rig can even begin to start trying to solve these puzzles, you’ll need to purchase one. These rigs can cost anywhere from $100 to $50,000, so you can take a guess as to which rig is more effective.

On top of that, you’ll need to keep your rig cool as they can get quite hot when crunching numbers 24 hours per day. All of this leads to needing a tremendous amount of energy to run this mining rig all day long.

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This is actually the reason why countries like Iran have banned crypto mining, as the country was experiencing several power outages per day due to a sharp increase in crypto mining activities. 

Is Crypto Mining Safe?

Crypto mining in Canada is completely safe in terms of legalities and government regulations. There are specific Provinces, like Quebec, that have had power companies that are notoriously difficult for Bitcoin mining companies to get along with. Specifically, Hydro-Quebec placed a temporary ban on crypto mining back in 2018 after a certain amount of power had been used for the month.

Not surprisingly, companies like Hive Blockchain Technologies, have moved a bulk of its crypto mining to other locations around the world where energy consumption is more lenient. On the flipside, Hut 8 operates out of Alberta, where the company has said the Province has accommodated crypto mining more than other regions of the country. 

In practice, crypto mining is a safe investment or hobby to undertake from the comfort of your own home. Newcomers shouldn’t expect to bring in thousands of dollars per day though. Prospective miners always need to keep in mind how much energy is being consumed to operate the mining rigs. You might not get in trouble from the government, but you will definitely be monitored by your local power company, and likely be handed a massive bill each month.

But if you can manage to earn more than the energy costs each month, then you’ll likely make out pretty well.

Do You Have to Pay Taxes on Crypto Mining in Canada?

An excellent question and one that people looking into crypto mining need to know the answer to.

To be clear, there are no taxes to be paid by Canadians on investing in or mining cryptocurrencies. The only time you pay any income taxes are when you sell your crypto at a profit. The amount of profit you make is taxed as capital gains, just as if you were to buy and sell a stock or an ETF.

But just as with any other investment asset in Canada, you are not taxed until you sell for a gain. And if you were wondering if you can add mined cryptocurrencies to your TFSA, the answer is no. 

Related Financial Geek Article: Is Wealthsimple Crypto a TFSA? [Quick Explanation]

The crypto mined in Canada may be subject to income tax laws, especially if you are a registered business. Of course, any income should always be reported, but the laws around cryptocurrencies have not been as strict thus far.

Perhaps with the popularity of crypto investing rising, we could see some stricter regulations in Canada in the not so distant future. This really would not shock me.

It would seem silly if Canada allowed investors to buy and trade cryptos, but not have the opportunity to legally mine it.

With that being said, mining cryptocurrencies is not as easy as it sounds. A good mining rig set up can cost you upwards of tens of thousands of dollars, not to mention the gaudy energy bill you receive each month.

So while Canadians are free to mine any crypto they wish, they should first understand what they’re getting themselves into before they get started. 

For me personally, I don’t think it’ll be something I get involved with, but hey that’s just me.

And that’s that! Thanks for reading Geekers.

I hope you learned a thing or two from this article, if you had another questions on mining crypto in Canada, don’t hesitate to reach out!

Geek, out.

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