Canadian Tax Implications of Vitalik Buterin’s Short-lived Love Story with Shiba Inu (SHIB)


  1. Create a Uniswap pool for SHIB (the “Uniswap Pool”) and use 49.5% of SHIB supply and 10 ETH as initial liquidity (the “Pool Inception”). According to Etherscan, the Pool Inception happened during the evening of July 31, 2020. On that day, ETH price closed at USD $345.55. Hence, although the author ignores SHIB initial price on Uniswap upon the Pool Inception, it can be reasonably estimated that the total liquidity of the Uniswap Pool at that moment was worth about USD $6,910, i.e. USD $3,455, the value of the 10 ETH, times two (as one of the fundamental principle to providing liquidity in an “automated market making” pool is to pool the same USD value of both assets).
  2. Following the Pool Inception, the totality of the LP tokens received by SHIB’s founder were transferred to Vitalik’s Ethereum wallet [7] (the “LP Tokens Burn”). The impact of that transaction effectively gave Vitalik control over 100 % of the Uniswap Pool’s liquidity.
  3. In a series of three transactions, the remaining 50.5% of SHIB’s supply was “burned” by SHIB’s founder by sending the tokens to, again, Vitalik’s Ethereum wallet [8] (the “SHIB Burn”).


Consequences of the LP Tokens Burn and the SHIB Burn

Consequences of the Donation Transactions


  2. 2. [consulted on May 13, 2021]
  3. 3.
  4. 4. See under the heading “Ecosystem” [consulted on May 13, 2021]
  5. 5.
  6. 6. [consulted on May 13, 2021]
  7. 7.
  8. 8. See, and
  9. 9.
  10. 10.
  11. 11. 13,291 ETH x USD $3,785.85, which is the closing price of ETH on May 12, 2021 on
  12. 12.
  13. 13. Canada Revenue Agency, Income Tax Folio S3-F9-C1 – Lottery Winnings, Miscellaneous Receipts, and Income (and Losses) from Crime, par. 1.3, [consulted on May 13, 2021]
  14. 14. CRA Views, Tech Interp (external), 2003–0050735 – Fair market value, December 19, 2003
  15. 15. It is important to note that Vitalik was gifted over time, and in a manner similar to the LP Tokens Burn and the SHIB Burn, an important percentage of the supply of different crypto assets. For sake of simplicity, the author will limit the example of the determination of the cost basis to SHIB only. The element to keep in mind is that considering the way those operations were conducted, the cost basis for Vitalik is virtually nil in comparison to the fair market value of the assets gifted by Vitalik in the course of the Donation Transactions.
  16. 16. 14,842 ETH x USD $3,785.85, which is the closing price of ETH on May 12, 2021 on
  17. 17.



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