If you exchange one cryptocurrency – say Bitcoin, for example, – for another cryptocurrency – say Litecoin – do you have to pay tax on that transaction? The answer depends on whether your Bitcoin increased in value between the date of purchase and the date you exchanged it for the other currency. If it did, then the increase in value of your Bitcoin is taxable, either as a capital gain or as income.
CRA treats the transaction as a disposition of the Bitcoin at its fair market value at the time, and a purchase of the Litecoin. You will have to report the gain on the disposition of the Bitcoin in the tax year that the transaction occurred.
Going forward, you should keep a record of the adjusted cost base (ACB) of the Litecoin. Generally speaking, the adjusted cost base is the cost of a property, in this case the Litecoin, plus any expenses to acquire it, such as commissions and legal fees.