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Holding of Cryptocurrencies, NFTs, or Blockchain Assets in RRSP: How Does it Work?: A Canadian Tax Lawyer Guide

Person putting bitcoins into a mouse piggy bank
By: Crypto Tax Lawyer

Published: December 29, 2022

Last updated: October 10, 2023

Introduction: Is Holding Cryptocurrency in your RRSP an Expectant Tax Disaster? 

A registered retirement savings plan (RRSP), which was first offered in 1957, enables people to postpone paying taxes on the money they set aside for their retirement. You can deduct your RRSP payments from your taxes, and the income you earn within the plan is tax-free. When you withdraw funds out of your RRSP, tax is due. However, if you've done your crypto tax planning, you won't have to start withdrawing money until you've reached retirement age and are at a lower tax rate. In other words, by using money that would have otherwise gone to the government as taxes, an RRSP essentially enables you to increase your retirement savings on a tax-free basis. When the time comes to pay those taxes, it will be after several decades, when your income and therefore your tax rate may be lower and you will have already reaped the rewards of your investments made with pre-tax income. 

Canadians preparing for retirement may regard cryptocurrency as a means to see higher returns in their nest egg because cryptocurrencies like Bitcoin, Ethereum, Tether, and BNB are battling for acceptance in the mainstream financial scene. Smart contracts, cryptocurrency liquidity mining and yield farming, and non-fungible tokens (NFT), to mention a few, are only a handful of the opportunities, arrangements, and assets that have been made possible by advancements in blockchain technology. And Canadians may be interested in combining these possibilities with the tax benefits of an RRSP.

Questions may be raised such as: can you add cryptocurrencies and other blockchain-based assets to your registered retirement savings plan? or is this a potential tax catastrophe?

This article examines whether cryptocurrency or other blockchain assets can qualify as RRSP investments by first discussing the fundamental crypto tax rules in Canada governing registered retirement savings plans, namely the requirement that an RRSP must contain "qualified investments." In order to help Canadian taxpayers who want to hold qualifying cryptocurrency investments in their registered retirement savings accounts, this article then the offers pro tax advice.

Talking about Registered Retirement Savings Plans, "Qualified Investments," and the RRSP Penalty Tax

Any person who is a Canadian tax resident may establish a registered retirement savings plan. In other words, a natural person must be the RRSP holder (or RRSP annuitant) (as opposed to a corporation or other entity). Additionally, you cannot open or contribute to an RRSP if you are not a Canadian tax resident. It may be necessary to carefully examine both Canadian domestic tax law and the tax rules under a tax treaty between Canada and another county in order to determine a person's status as a Canadian tax resident, which is dependent on multiple intricate, interconnected tax rules. Residence for citizenship or landed immigrant status is entirely distinct from residence for Canadian tax purposes. You can get guidance from our knowledgeable Canadian cryptocurrency tax lawyers regarding your status as a tax resident in Canada and the ensuing Canadian tax obligations.

The RRSP holder may deduct RRSP contributions from net income when calculating net income for a tax year, which is the first tax benefit of an RRSP. You don't pay tax on income or capital gains that accumulate inside of an RRSP, which is the second tax benefit of having one.  

You must fund your registered retirement savings plan before the RRSP deadline in order to be eligible for the RRSP deduction. Only if you make your RRSP contribution during that year or during the first 60 days of the next year (which typically falls on March 1st, but is February 29th in a leap year), will it be eligible for the RRSP deduction for that year. 

Additionally, the amount that you can contribute to your RRSP each year is capped under the Income Tax Act of Canada. If you make a lifetime contribution that exceeds your RRSP contribution room by $2,000 or more, you are subject to an RRSP penalty tax on the excess amount at a rate of 1% per month. Your RRSP contribution limit for the year is the lesser of two amounts: (1) 18% of your earned income from the prior year; and (2) the prescribed maximum for the tax year (for example, the prescribed maximum for the 2021 tax year is $27,830). A special tax return (Form T1-OVP, "Individual Tax Return for RRSP, PRPP, and SPP Excess Contributions") is also required to be filed in order to disclose the RRSP penalty tax, and failure to do so could result in further penalties. Interest is also charged on the penalty tax at the prescribed rate.

If the RRSP acquires a non-qualified investment, a penalty tax is also due. An RRSP penalty tax equal to 50% of the fair market value of the non-qualified investment is incurred by the RRSP holder if the registered retirement savings plan purchases a non-qualified investment or if an existing RRSP investment is converted to a non-qualified investment. Furthermore, the RRSP holder is responsible for paying taxes on any income derived from the non-qualified investment as well as any capital gains from selling the non-qualified investment.

In other words, the tax-preferred treatment of an RRSP only applies to its "qualified investments." The term "qualified investments" is defined in the Income Tax Act to include all of the following:

  • money, GICs, and various deposits;
  • the vast majority of the securities listed on a designated stock exchange, including shares of corporations, warrants, options, units of exchange-traded funds, and real estate investment trusts;
  • segregated and mutual funds;
  • provincial savings bonds as well as Canada Savings Bonds;
  • a corporation's debt obligations that are listed on a designated stock market;
  • debt obligations with a rating of investment-grade; and
  • insured hypothecs or mortgages.

Determining whether cryptocurrencies, non-fungible tokens, or other blockchain-based assets qualify as "qualifying investments" is the key tax question for Canadian taxpayers who want to hold them in their registered retirement savings accounts. 

Do the Tax Rules for a Registered Retirement Savings Plan Consider Cryptocurrency, Non-Fungible Tokens, or Other Blockchain Assets to Be "Qualified Investments"?

As stated above, the Income Tax Act's definition of "qualified investments'' essentially relates to two items: (i) money and (ii) securities that are listed on a designated stock exchange. As such, cryptocurrencies and non-fungible tokens themselves are not "qualified investments." "Digital currencies, such as [B]itcoins, are not considered to be money issued by a government of a country and are not qualified investments," according to the CRA, which is legally correct (see paragraph 1.12 of Canada Revenue Agency, Income Tax Folio S3-F10-C1, "Qualified Investments - RRSPs, RESPs, RRIFs, RDSPs and TFSAs," October 1, 2018). A non-fungible token or cryptocurrency cannot be traded as a security on a stock exchange that has been designated to do so by Canada's Minister of Finance. Therefore, since they don't fall under the Income Tax Act's definition of "qualified investments," cryptocurrencies and non-fungible tokens cannot be held in an RRSP.

However, the number of cryptocurrency-based exchange-traded funds (ETFs) has recently increased, with many of them being traded on designated stock exchanges. The result is that even if cryptocurrencies themselves aren't "qualified investments," many of the publicly listed cryptocurrency ETFs are. Therefore, these cryptocurrency ETFs might be acceptable as RRSP investments. The cryptocurrency-based ETF specifically qualifies as a "qualified investment" if it trades on one of the stock exchanges the Canadian Finance Minister has designated for the purposes of the Income Tax Act of Canada, such as the Toronto Stock Exchange (TSX), the New York Stock Exchange (NYSE), or any other Canadian or international stock exchange.

In conclusion, because cryptocurrencies and non-fungible tokens are not "qualified investments" in and of themselves, your RRSP cannot directly contain them. However, RRSP can contain cryptocurrency-based ETFs or other cryptocurrency-based funds—but only for instances where the fund can be found on a designated stock exchange listing, such as the New York Stock Exchange and Toronto Stock Exchange.

Tax Pro Tips - Relief from RRSP Penalty Tax Due to Non-Qualified Cryptocurrency Investments: An Expert Canadian Tax Advice from a Canadian Tax Lawyer

Cryptocurrencies and non-fungible tokens cannot be held in your RRSP because, as was previously stated, they do not fall within the Income Tax Act's definition of "qualified investments." Because of this, you will pay an RRSP penalty tax equal to 50% of each non-qualified investment's fair market value if your registered retirement savings plan contains cryptocurrencies, non-fungible tokens, or any other type of non-qualified investment.

The Canada Revenue Agency has the option to waive all or part of the RRSP penalty tax associated with holding non-qualified investments—such as cryptocurrencies or non-fungible tokens—in your registered retirement savings plan, according to subsection 207.06(2). If the Canada Revenue Agency (CRA) "considers it just and equitable to do so having regard to all the circumstances, including (a) whether the [RRSP penalty tax] arose as a consequence of a reasonable error; (b) the extent to which the transaction or series of transactions that gave rise to the [RRSP penalty tax] also gave rise to another tax under [the Income Tax Act]; and (c) the extent to which payments have been made from [the registered retirement savings plan]."

Numerous Canadian taxpayers have requested the cancellation of RRSP penalty taxes under subsection 207.06(2) with the help of our expert Canadian tax lawyers.  Your paragraph 207.06(2) application can be meticulously planned and quickly completed. A properly constructed penalty-tax-cancellation application not only improves your chances of the CRA accepting your application, but it also paves the way for a judicial review application to the Federal Court should the CRA unjustly reject your application and refuse to cancel your RRSP penalty taxes.   

Frequently asked questions

I purchased bitcoin in my RRSP. Is this a problem?

Your RRSP is very constricted in terms of the types of eligible investments it can acquire. Crypto currency, including bitcoins or NFT’s are not eligible investments for an RRSP. You face a 50% penalty tax. The penalty waiver from CRA through an expert Canadian crypto tax lawyer.

I would like to have crypto currency in my RRSP but I understand that crypto currency is not an eligible investment. What can I do?

While crypto such as bitcoin or ETF does not qualify as an eligible investment in an RRSP, exchange traded ETF’s that invest in crypto currency can be held by an RRSP.


"This article just provides broad information. It is only up to date as of the posting date. It has not been updated and may be out of date. It does not give legal advice and should not be relied on. Every tax scenario is unique to its circumstances and will differ from the instances described in the articles. If you have specific legal questions, you should seek the advice of a lawyer."

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