88 terms

DeFi and crypto tax glossary

Short, plain definitions, with links to the calculator or guide where each term matters.

Mitey: Jargon is a fee you pay in confusion. Here's the refund.

A

Adjusted cost base (ACB): The total cost of acquiring a property for tax purposes, usually the purchase price plus costs such as fees. For identical properties, such as units of the same crypto asset, the ACB per unit is the average cost of all units held, recalculated after each purchase.See: ACB tracker · Superficial loss
Airdrop: Tokens sent to wallet addresses, often to promote a new project or reward early users. Unexpected airdrops can also be used in scams that ask you to approve a contract or visit a site to claim value.See: Wallet security: a practical checklist for self-custody
Allowance (token approval): A permission you grant a smart contract to move a specific token from your wallet, up to a set amount or without limit. It stays active until you revoke it, so old unlimited approvals can expose funds if that contract is later compromised.See: Wallet security: a practical checklist for self-custody · Smart contract risk: what can break when code holds your funds
Amplification coefficient: A setting in StableSwap-style pools, often written A, that controls how closely the pool keeps two assets trading near 1:1. A higher value means lower slippage near the peg but larger impermanent loss if one asset depegs.See: Impermanent loss · Stablecoin depeg risk: what holds a peg and what breaks it
APR (annual percentage rate): A yearly rate of return or borrowing cost that does not include the effect of compounding. Two products with the same APR can produce different results if one compounds more often.See: APR to APY
APY (annual percentage yield): A yearly rate that includes compounding, so it shows what you would earn if returns were reinvested at the stated frequency. APY is always equal to or higher than the matching APR.See: APR to APY · Compounding vs gas
Arbitrage: Buying an asset where it is cheaper and selling it where it is dearer to profit from the price difference. In DeFi, arbitrage traders keep pool prices in line with wider markets, and fees, gas and transfer time decide whether a gap is worth closing.See: Cross-chain spread · Flash-loan arithmetic
Audit: A review of smart contract code by an outside security firm, looking for bugs and design flaws. An audit covers one version of the code within a stated scope and does not guarantee a contract is safe.See: Smart contract risk: what can break when code holds your funds
Automated market maker (AMM): A smart contract that lets people trade against a pool of tokens at a price set by a formula, instead of matching buyers with sellers. Liquidity providers supply the tokens and earn trading fees.See: Impermanent loss · Slippage & MEV exposure
Average cost method: The way Canadian tax rules calculate cost for identical properties: total cost of all units divided by the number held. Selling units does not change the average cost per unit; buying more does.See: ACB tracker

B

Block explorer: A website that displays public blockchain data, such as transactions, balances, contract code and token approvals for an address. It is useful for checking what a transaction did and for keeping records.
Bridge: A system that moves tokens or messages between blockchains, usually by locking or destroying tokens on one chain and creating matching tokens on another. Bridges concentrate large amounts of value and depend on how transfers are verified.See: Bridge risk: wrapped tokens, validators and the cost of crossing · Bridge costs
Business income: Profit from carrying on a business, which is fully included in income for tax purposes. CRA lists factors that can point to business income from crypto, including frequent transactions, short holding periods, market knowledge, time spent and buying with borrowed money.See: Capital vs business

C

Canadian Investor Protection Fund (CIPF): A fund that protects eligible client property held by a member investment dealer if the dealer becomes insolvent. Its coverage excludes crypto assets, including value-referenced crypto assets.See: Custody risk: platforms, contracts and your own keys compared · CSA, CIRO and stablecoin rules
Capital gain: The amount by which proceeds from disposing of capital property exceed its adjusted cost base and selling costs. As of October 2026, one-half of a capital gain is included in taxable income.See: ACB tracker · Capital vs business
Capital loss: The amount by which the adjusted cost base and selling costs of capital property exceed the proceeds. The allowable portion can only offset taxable capital gains, and unused net capital losses can generally be carried back three years or forward indefinitely.See: Superficial loss · ACB tracker
CARF (Crypto-Asset Reporting Framework): An international standard under which crypto-asset service providers report user information to tax authorities. Canada's Budget 2025 deferred its application date to January 1, 2027; as of October 2026, the implementing bill had not received Royal Assent.See: CSA, CIRO and stablecoin rules
CDIC (Canada Deposit Insurance Corporation): The federal agency that insures eligible deposits, such as savings accounts and GICs, up to $100,000 per insured category at each member institution. CDIC lists cryptocurrencies, including stablecoins, as not covered.See: Stablecoin vs GIC · Custody risk: platforms, contracts and your own keys compared
CIRO (Canadian Investment Regulatory Organization): The national self-regulatory organization that oversees investment dealers and mutual fund dealers in Canada. Crypto trading platforms are expected to register as investment dealers and become CIRO members, and CIRO issued a digital asset custody framework for them on February 3, 2026.See: CSA, CIRO and stablecoin rules · Custody risk: platforms, contracts and your own keys compared
Cliff: A period at the start of a vesting schedule during which no tokens unlock. When the cliff ends, a block of tokens may unlock at once, followed by regular releases.See: Token vesting
Close factor: The maximum share of a borrower's debt that a liquidator can repay in a single liquidation. A 50% close factor means at most half the debt can be repaid, and half the matching collateral plus bonus seized, at one time.See: Liquidation price · Liquidation risk: how a collateralized loan gets closed for you
Cold wallet: A wallet whose private keys are kept offline, such as on a hardware device that is not continuously connected. It reduces exposure to online attacks but still requires careful handling of the recovery phrase.See: Wallet security: a practical checklist for self-custody
Collateral: Assets pledged to secure a loan. In DeFi lending, collateral is held by a smart contract and can be sold through liquidation if its value falls too far relative to the debt.See: Liquidation price · Liquidation risk: how a collateralized loan gets closed for you
Commission (validator): The share of staking rewards a validator keeps before passing the rest to the people who delegated to it. A higher commission lowers the delegator's net reward rate.See: Staking rewards
Composability: The ability of DeFi protocols to plug into one another, such as a vault depositing into a lending market that accepts a bridged token. It enables complex products but means one failure can spread through every layer above it.See: Smart contract risk: what can break when code holds your funds
Compounding: Earning returns on previous returns by adding them to the principal. In DeFi, each compound may cost gas, so compounding more often is not always better for small balances.See: Compounding vs gas · APR to APY
Constant-product formula: The pricing rule x × y = k used by many automated market makers, where x and y are the pool's token balances. Large trades relative to the pool move the price more, and liquidity providers face impermanent loss when prices diverge.See: Impermanent loss · Slippage & MEV exposure
Crypto asset trading platform (CTP): A business that lets clients buy, sell or hold crypto assets. Platforms serving Canadians, including those based outside Canada, must register with Canadian securities regulators or operate under a pre-registration undertaking.See: CSA, CIRO and stablecoin rules · Custody risk: platforms, contracts and your own keys compared
CSA (Canadian Securities Administrators): The umbrella organization of Canada's provincial and territorial securities regulators. It publishes the list of crypto platforms authorized to do business with Canadians and investor education on crypto assets.See: CSA, CIRO and stablecoin rules
Custody: Control over the keys that can move an asset. Crypto can be held in platform custody, in a smart contract, or in self-custody, and each option carries different risks.See: Custody risk: platforms, contracts and your own keys compared

D

DCA (dollar-cost averaging): Investing a fixed amount at regular intervals regardless of price. It spreads purchases over time, so the average cost per unit reflects many prices rather than one.See: Dollar-cost averaging · ACB tracker
Decentralized exchange (DEX): A trading venue run by smart contracts, where users swap tokens directly from their own wallets. Many decentralized exchanges use automated market makers instead of order books.See: Slippage & MEV exposure · Gas & fee breakeven
Decentralized finance (DeFi): Financial services such as lending, trading and staking built on public blockchains and run by smart contracts rather than by a central institution. CRA's crypto guidance does not address DeFi activities specifically.See: Methodology · CSA, CIRO and stablecoin rules
Depeg: When an asset designed to track a reference value, such as a stablecoin aiming for $1, trades meaningfully away from that value. Depegs can affect liquidity pools, lending markets and anyone holding the asset.See: Stablecoin depeg risk: what holds a peg and what breaks it · Impermanent loss
Disposition: Any event that ends your ownership of a property for tax purposes. CRA lists selling crypto, trading one crypto asset for another, using it to buy goods or services, and giving it away as dispositions.See: ACB tracker · Capital vs business

F

Fair market value: The price an asset would fetch between a willing buyer and seller acting at arm's length. Crypto received as income or in a trade is generally valued at its fair market value in Canadian dollars at that time.See: Staking income · ACB tracker
Flash loan: An uncollateralized loan that must be borrowed and repaid within one blockchain transaction, or the whole transaction is reversed. It is used for arbitrage and refinancing, and also in attacks that manipulate prices.See: Flash-loan arithmetic · Oracle risk: how a bad price feed turns into real losses
Front-running: Placing a transaction ahead of a known pending transaction to profit from the price move it will cause. On public blockchains, pending transactions are often visible before they are confirmed.See: Slippage & MEV exposure

G

Gas: The fee paid to process a transaction on a blockchain, usually paid in the network's native token. Gas costs vary with network demand and can make small transactions uneconomical.See: Gas & fee breakeven · Compounding vs gas
GIC (guaranteed investment certificate): A deposit that pays a set rate for a fixed term at a Canadian financial institution. GICs at CDIC member institutions are eligible for deposit insurance up to the coverage limits.See: Stablecoin vs GIC
Governance token: A token that gives holders voting power over a protocol's settings, upgrades or treasury. Concentrated holdings can let a small group, or an attacker who acquires enough tokens, pass proposals.See: Token vesting · Smart contract risk: what can break when code holds your funds

H

Hardware wallet: A physical device that stores private keys and signs transactions without exposing the keys to your computer. The Canadian Anti-Fraud Centre advises buying hardware wallets directly from the manufacturer.See: Wallet security: a practical checklist for self-custody
Health factor: A measure of a DeFi loan's safety: collateral value times the liquidation threshold, divided by debt. Above 1 the loan cannot be liquidated; at 1 or below, it can.See: Liquidation price · Liquidation risk: how a collateralized loan gets closed for you
HISA (high-interest savings account): A savings account that pays a higher rate than a standard account. HISA deposits at a CDIC member institution may be eligible for deposit insurance, but HISA ETFs and HISA mutual funds are not protected by CDIC.See: Stablecoin vs GIC
Hot wallet: A wallet whose keys are on an internet-connected device, such as a browser extension or phone app. It is convenient for frequent DeFi use but more exposed to malware and phishing.See: Wallet security: a practical checklist for self-custody

I

Impermanent loss: The shortfall between the value of a liquidity pool position and the value of simply holding the same tokens, caused by prices moving apart. It becomes permanent if you withdraw while prices are still apart.See: Impermanent loss · Yield farming
Inclusion rate: The share of a capital gain that is included in taxable income. As of October 2026 it is one-half; a proposed increase to two-thirds was cancelled in March 2025.See: Capital vs business · ACB tracker

L

Leverage loop: Repeatedly borrowing against collateral, buying more of the same asset and depositing it again to increase exposure. Each loop raises potential gains and losses and moves the liquidation price closer.See: Leverage loops · Liquidation risk: how a collateralized loan gets closed for you
Liquid staking token: A token received in exchange for staking an asset through a protocol, representing the staked amount plus rewards. It can be traded or used in DeFi but may trade below the value of the underlying stake.See: Staking rewards · Smart contract risk: what can break when code holds your funds
Liquidation: The forced repayment of part of a loan using the borrower's collateral once the loan becomes unsafe. In DeFi, any participant can usually perform it and receive collateral at a discount.See: Liquidation risk: how a collateralized loan gets closed for you · Liquidation price
Liquidation bonus: The extra collateral, expressed as a percentage, that a liquidator receives for repaying a borrower's debt. It is a direct cost to the borrower on top of selling collateral at a low price.See: Liquidation price · Liquidation risk: how a collateralized loan gets closed for you
Liquidation price: The collateral price at which a loan's health factor reaches 1. For a single-asset loan, it equals debt divided by the number of collateral units times the liquidation threshold.See: Liquidation price · Liquidation risk: how a collateralized loan gets closed for you
Liquidation threshold: The loan-to-value level at which a position becomes eligible for liquidation. It is set higher than the maximum loan-to-value allowed when borrowing, creating a buffer.See: Liquidation price · Liquidation risk: how a collateralized loan gets closed for you
Liquidity pool: A pool of two or more tokens held in a smart contract that traders swap against. Prices are set by a formula, and liquidity providers earn a share of trading fees.See: Impermanent loss · Yield farming
Liquidity provider (LP): Someone who deposits tokens into a liquidity pool so others can trade. Providers earn fees but take on impermanent loss and the risks of the pool's contracts.See: Impermanent loss · Yield farming
Loan-to-value (LTV): Debt divided by collateral value, as a percentage. Lending protocols set a maximum loan-to-value for new borrowing and a higher liquidation threshold.See: Liquidation price · Leverage loops
LP token: A token that represents your share of a liquidity pool and is used to withdraw your portion later. It can sometimes be deposited elsewhere to earn extra rewards, which adds another layer of contract risk.See: Yield farming

M

MEV (maximal extractable value): Profit that can be captured by choosing which transactions are included in a block and in what order. Sandwich attacks and front-running on swaps are common forms that cost ordinary traders.See: Slippage & MEV exposure
Multisig: A wallet or contract that needs approval from several keys, such as three of five, to act. Protocols often use multisigs for admin and upgrade rights to avoid a single point of failure.See: Smart contract risk: what can break when code holds your funds · Bridge risk: wrapped tokens, validators and the cost of crossing

O

Oracle: A service that supplies outside data, usually prices, to smart contracts. Lending and liquidation depend on oracle prices, so a wrong or manipulated price can cause real losses.See: Oracle risk: how a bad price feed turns into real losses
Over-collateralization: Requiring collateral worth more than the loan, such as $150 of collateral for $100 of debt. It is how DeFi lending works without credit checks, and the extra value is the cushion against price falls.See: Liquidation price

P

Phishing: An attempt to trick someone into revealing secrets or approving a harmful action, often through fake websites, messages or support agents. In crypto, phishing commonly targets seed phrases and wallet signatures.See: Wallet security: a practical checklist for self-custody
Pre-registration undertaking (PRU): A commitment a crypto trading platform signs with Canadian securities regulators so it can keep operating while its registration application is reviewed. The CSA publishes a list of these undertakings.See: CSA, CIRO and stablecoin rules
Price impact: How much your own trade moves the price in a pool, so you receive less than the pre-trade price suggests. It grows with trade size relative to pool depth.See: Slippage & MEV exposure · Gas & fee breakeven
Private key: The secret number that authorizes transactions from a blockchain address. Anyone with the private key controls the funds, and if it is lost the funds become inaccessible.See: Wallet security: a practical checklist for self-custody · Custody risk: platforms, contracts and your own keys compared
Proof of stake: A way of securing a blockchain in which validators lock up tokens as a stake and earn rewards for proposing and confirming blocks. Misbehaving validators can lose part of their stake.See: Staking rewards · Staking income

R

Rug pull: A scheme in which a project's creators withdraw pooled funds or sell off their tokens and abandon the project. Admin keys, unlocked liquidity and anonymous teams are common enabling factors.See: Smart contract risk: what can break when code holds your funds · Token vesting

S

Sandwich attack: A trader places one transaction just before and one just after a victim's swap, buying first and selling after to profit from the price move. Wide slippage tolerance makes a swap easier to sandwich.See: Slippage & MEV exposure
Seed phrase: A list of words, also called a recovery phrase, that can regenerate every private key in a wallet. Anyone who has it controls the wallet, and legitimate services never ask for it.See: Wallet security: a practical checklist for self-custody
Self-custody: Holding your own private keys instead of relying on a platform. It removes platform failure risk but makes you responsible for securing keys and checking what you sign.See: Custody risk: platforms, contracts and your own keys compared · Wallet security: a practical checklist for self-custody
Slashing: A penalty that removes part of a validator's stake for breaking network rules, such as signing conflicting blocks. Delegators to that validator can lose part of their stake too.See: Staking rewards
Slippage: The difference between the price you expect when submitting a trade and the price you actually get. It comes from price impact and from other trades executing first.See: Slippage & MEV exposure · Bridge costs
Slippage tolerance: The maximum worse price you allow before a swap is cancelled. A wide tolerance helps trades go through in volatile markets but leaves more room for sandwich attacks.See: Slippage & MEV exposure
Smart contract: A program stored on a blockchain that runs automatically when called and can hold and move tokens. Its rules apply to everyone equally, including any bugs.See: Smart contract risk: what can break when code holds your funds
Stablecoin: A crypto asset designed to track a reference value, usually a currency such as the US or Canadian dollar. It can lose its peg, and CDIC does not cover stablecoins.See: Stablecoin depeg risk: what holds a peg and what breaks it · Stablecoin vs GIC
StableSwap: A pool pricing curve for assets that should trade near the same value, blending a constant-sum and constant-product formula. It offers low slippage near the peg, controlled by the amplification coefficient.See: Impermanent loss · Stablecoin depeg risk: what holds a peg and what breaks it
Staking: Locking tokens to help secure a proof-of-stake network, directly or through a validator, in return for rewards. CRA states that staking rewards from a centralized platform are generally income when credited; it has not addressed on-chain staking specifically.See: Staking rewards · Staking income
Superficial loss: A capital loss you cannot deduct because you, or an affiliated person, acquired the same or identical property within 30 days before or after the sale and still held it 30 days after. The denied loss is usually added to the cost of the substituted property.See: Superficial loss · ACB tracker

T

Time lock: A delay built into a contract so that approved changes, such as upgrades, only take effect after a set period. It gives users time to review a change and withdraw before it applies.See: Smart contract risk: what can break when code holds your funds
Token generation event (TGE): The moment a project's token is first created and distributed. Vesting schedules often release a share of allocations at the TGE and the rest over time.See: Token vesting
Total value locked (TVL): The combined value of assets deposited in a protocol's contracts. It measures size and popularity, not safety.See: Smart contract risk: what can break when code holds your funds
TWAP (time-weighted average price): An average of a price over a time window, such as 30 minutes. Oracles use TWAPs to resist short-lived manipulation, at the cost of reacting slowly to real moves.See: Oracle risk: how a bad price feed turns into real losses

U

Unbonding period: The waiting time between asking to unstake tokens and being able to move them. During this period the tokens usually earn no rewards and cannot be sold, while their price can still change.See: Staking rewards

V

Validator: A participant that stakes tokens and runs software to propose and confirm blocks on a proof-of-stake network. Token holders can often delegate to a validator, which keeps a commission.See: Staking rewards
Value-referenced crypto asset (VRCA): The term Canadian securities regulators use for crypto assets designed to maintain a stable value by referencing an asset, such as a fiat currency. Regulators have said they may be securities or derivatives, and registered platforms may only offer them on set terms.See: Stablecoin depeg risk: what holds a peg and what breaks it · CSA, CIRO and stablecoin rules
Vesting: A schedule that releases tokens gradually rather than all at once, often after a cliff. Large unlocks can add supply to the market on known dates.See: Token vesting

W

Wrapped token: A token on one blockchain that represents an asset held on another, typically through a bridge. Its value depends on that backing remaining in place and redeemable.See: Bridge risk: wrapped tokens, validators and the cost of crossing · Bridge costs

Y

Yield farming: Moving deposits between DeFi protocols to earn trading fees and reward tokens. Headline rates can shrink once impermanent loss, falling reward-token prices and gas are counted.See: Yield farming · Impermanent loss