US Vs. Canada: Analyzing the Laws On Bitcoin

Icy Canada Team
Icy Canada TeamMarch 21, 2022
Updated 2023/09/08 at 9:41 AM
3d rendering of a metallic Bitcoin over a Canadian flag. Source: Depositphotos

In 2021, Canada became the first country in the world to allow Bitcoin into its stock exchange.  Canadian authorities have so far permitted as many as three Bitcoin fund ETFs in its stock exchange. Due to its relative silence on the subject, this move came as a surprise for investors.

The U.S. though still has a far more cautious approach to crypto – and taxes Bitcoin as a property.

So, which country makes it easier to trade Bitcoin and other cryptocurrencies? What are their regulations and legal status? That’s today’s topic.

A look into Bitcoin regulation in the US

First, let’s go through cryptocurrency regulation in the US since they’ve spurred more controversy. Today, anyone can buy and sell cryptocurrencies between individuals, crypto exchanges, and ATMs. Some banks have allowed it as well.

One US Dollar Banknote with gold Bitcoin coin surrounded by coins and USD currency. Cryptocurrency and Fiat Money. Digital Cash concept. Source: Depositphotos

The main confusion seems to come from how various agencies and states approach crypto regulation.

The BSA (Bank Secrecy Act)

First, cryptocurrency businesses in the US need to comply with the US’s BSA. That means they need to submit separate reports, including transactions, suspicious activity, and foreign bank accounts.

The goal is to avoid money laundering. That’s understandable since money laundering is one of the most significant concerns surrounding cryptocurrencies.  Failing to report accordingly results in prominent penalties and fines.

Tax regulations for cryptocurrencies

Regulation for Bitcoin and its counterparts depends on how people use them. For instance, holding them for investment counts as capital gains/loss. Cryptocurrency counts as property in this scenario, and short- and long-term capital gains apply for under and over one year, respectively.

However, mining cryptocurrency and using it for payments change the story. In these cases, they’re taxed as income by the IRS. The records must contain the USD value of the crypto coin at the time of the transaction.

Licensing requirements

Banks are allowed to provide multiple crypto services: asset custody, crypto-fiat conversion, tax auditing, and more. They’re also able to hold blockchain nodes. Similarly, any crypto business (like exchanges) counts as a Money Service Business by FinCEN.

Entities not registering as an MSB violate the Bank Secrecy Act. Similarly, any fund manager for crypto assets needs a license from the Commodity Futures Trading Commission. Finally, ICOs must register with the SEC if their offerings could be considered securities.


What about Canada?

The Library of Congress opens its breakdown stating that Canada permits digital currencies, like crypto coins. However, they’re not a form of legal tender, despite the country’s tax laws applying to their transactions.

For Canada’s Revenue Agency, cryptocurrencies are commodities. Their use as payment for goods and services counts as bartering.

It also mentions that the amendments to the Proceeds of Crime and Terrorist Financing Act in 2014 refer to virtual currencies as MSBs. That’s important when assessing money laundering possibilities.

However, should companies deal in virtual currency, they must register with the Financial Transactions and Reports Analysis Centre of Canada (Fintrac) and follow compliance obligations.


People can use crypto coins for purchases on the internet and traditional retail stores as long as they accept them. Trading digital currencies in open exchanges are legal as well. Still, Canada only considers the Canadian dollar as legal tender.

Many Canadian banks, including BMO and RBC, have also banned the purchase of cryptocurrencies from their credit and debit cards.


Taxation depends on how the cryptocurrency is used, just like in the US. The government says that the income you generate can be either business income or capital gains, depending on what kind of income it is.

  • For payments, cryptocurrencies respond to the ITA (Income Tax Law). Sellers must register these transactions as income, but the transaction itself sticks to bartering rules.
  • Trading digital currencies mean accounting for trading gains and losses from trading operations. When not trading, cryptocurrencies account for capital. When trading, they account for income.
  • Carrying out a crypto business – including trading for profits regularly or undertaking business operations to make money, means you need to treat your income as business income.
  • Finally, mining cryptocurrencies can be considered as profit or a personal hobby. If the taxpayer makes a business from mining, Bitcoin counts as income. However, mining as a hobby isn’t taxable.
  • Should you trade one cryptocurrency for another, you need to report the value in Canadian dollars.

Other regulations

Other Canadian regulations are somewhat similar to the US:

  • Any company dealing in crypto needs to register accordingly and comply with government laws.
  • ICOs, ITOs, exchanges, and investment funds may be held accountable for securities law.

So, what’s the difference?

Overall, both countries are mostly similar in their stance on Bitcoin and cryptocurrencies. Many regulations and considerations mirror each other in both cases. However, the U.S. seems to be still having a cautious approach – while Canada offers more clarity right now.


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