When Bitcoin first appeared more than a decade ago, it was difficult to purchase. Nowadays you have so many options that it can be difficult to know which is the best way to buy crypto in Canada. Some things to consider are the fees you will pay, the safety and security of the platform you are buying from, and of course, how convenient and easy the process is. We’ve examined some of the most popular methods to bring you the ultimate guide on how to purchase cryptocurrency in Canada in 2021.
1. Cryptocurrency Exchanges
Cryptocurrency exchanges account for 95% of the crypto trading volume. When you sign up to a cryptocurrency exchange you will need to verify your identity by going through a standard Know Your Customer (KYC) and anti-money laundering procedure. Once you’ve done that, you can then deposit Canadian dollars (CAD) into your account via Interac e-Transfer.
Currently, Canadian banks seem to be against allowing their customers to purchase cryptocurrency. Some credit and debit card transactions will go through, but more often not, Canadian banks block cryptocurrency transactions due to regulatory concerns. It is best to find an exchange that accepts Interac e-Transfer to deposit CAD to your account on an exchange.
- Most exchanges are beginner-friendly making it easy to buy crypto.
- You can withdraw your crypto off the exchange to a wallet for safekeeping.
- Exchanges often have a wide variety of coins and trading pairs available.
- Cryptocurrency exchanges are reliable. They are built for the sole purpose of trading crypto.
- An exchange will usually charge deposit and withdrawal fees to and from your bank account. They will also charge a trading fee to cover mining and validation costs, plus a commission on each trade.
- They are centralized, unlike a decentralized exchange (DEX). A centralized exchange acts as a third party to facilitate a crypto trade. Ultimately, they control your ability to trade and can lock you out of your account, or lose your funds.
- Hackers target exchanges and your crypto is at risk of theft if left on an exchange.
- Not anonymous. You must verify your identity in order to trade.
- An exchange takes custody of your coins. You must withdraw your coins off the exchanges to an external wallet such as a hardware wallet in order to have complete control of your crypto.
2. Trading platforms
Covered in our best Canadian cryptocurrency exchanges article, Wealthsimple is great for beginners who want to purchase Bitcoin or Ethereum as simply as possible with one of the most reputable platforms in Canada.
Similar to Wealthsimple, payments giant Paypal started allowing its US customers to purchase cryptocurrency in 2020 and plans to expand this internationally in 2021.
- An easy and beginner-friendly way to purchase crypto.
- Convenient for existing customers.
- You do not hold custody of your assets and cannot move them off the platforms.
- You are issued an IOU – you are not taking ownership of the coin itself.
- Wealthsimple only offers Bitcoin and Ethereum.
3. Decentralized Exchanges (DEX)
A decentralized exchange (DEX) is similar to a regular centralized exchange (CEX) e.g. Coinbase, Binance, in that you can buy and sell crypto, but it is decentralized, meaning it is not controlled by a company or organization. With a CEX, they take custody of your private keys, and therefore your crypto. A DEX is instead a peer-to-peer trading platform. It means you trade directly with another person, globally, without a middleman. Users connect their external wallets containing crypto to the DEX to make trades with another user. Trades are executed via smart contracts.
- Limitless trading pairs. If you would like to purchase Chainlink (LINK) with DigiByte there is sure to be someone out there willing to trade. You don’t have to rely on the limited amount of trading pairs offered by a centralized exchange.
- Anonymity. You can trade anonymously since KYC and anti-money laundering compliance is not required with a decentralized platform.
- Trustless transactions. When making a purchase on an exchange, that transaction is overseen by the exchange. With a DEX, transactions are executed via smart contracts making them “trustless”. A trustless transaction means that you do not have to rely on a third party (E.g. a centralized exchange) to handle the transaction. Instead, is is executed using the blockchain protocol itself.
- Custody of assets. The big benefit of a DEX is that you are retaining custody of your private keys and therefore your crypto. A centralized exchange takes custody of your private keys and therefore your funds could be lost due to a hack or if they block your account. By maintaining custody of the keys to your wallet, you have complete control of your crypto.
- Lower fees. A DEX will charge a fee to cover the gas prices of executing the smart contract, but there are no commissions taken like there are with a Centralized exchange.
- You can only trade crypto to crypto. There is no way to deposit fiat to a DEX and withdraw fiat to your bank account.
- Not beginner-friendly. It’s much easier to buy crypto through an Interac e-Transfer or credit card through a centralized exchange than it is to learn the process of trading peer to peer on a DEX.
In April 2021, Canada launched North America’s first Bitcoin Exchange Traded Fund (ETF) – Purpose Bitcoin ETF (BTCC).
An ETF is a fund containing stocks of several companies often grouped together by industry. A Bitcoin ETF is a managed fund that gives investors the opportunity to invest in Bitcoin without the hassle of signing up to a cryptocurrency exchange and managing a wallet. A fund is managed for you making it incredibly easy to invest.
Here are some Bitcoin ETFs that trade on the Toronto Stock Exchange. You can buy shares in these ETFs using popular Canadian brokers such as Questrade and Wealthsimple.
- CI Galaxy Bitcoin ETF (BTCX)
- 3iQ CoinShares bitcoin ETF (BTCQ)
- Evolve Bitcoin ETF (EBIT)
- Purpose Bitcoin ETF (BTCC)
- Gives exposure to crypto without having to worry about storing your private keys safely.
- A convenient way to invest in crypto in Canada for beginners.
- Convenient for people who already invest in ETFs.
- Much like gold and silver ETFs, Bitcoin ETFs are backed by actual Bitcoins, not derivatives.
- You can hold Bitcoin in your TFSA and RRSP.
- You are relying on the brokerage to act as an intermediary. You must be able to trust your brokerage not to lock you out of your account or go out of business.
- Bitcoin ETFs incur management fees of approximately 1%.
- You do not hold the private keys to your Bitcoin holdings.
5. Crypto ATMs
The world’s first Bitcoin ATM was launched in Vancouver, Canada in 2013. There are now more than 19,000 crypto ATMs across 72 countries and 1,435 crypto ATMs in Canada. You can find a map of ATMs across the world here.
Generally, to use one of these ATMs, you choose select which coin you wish to purchase, scan the QR code of your wallet address where you want the coins sent to, then insert cash and click send. Bear in mind that there are many types of crypto ATM with variations on the procedure.
While convenient, the downside to ATMs is the high fees. The majority of ATM operators in Canada charge a fee of around 12-15%. Compare this with a typical 1.5% fee at a crypto exchange and you can see that using an ATM, even just once, is costly.
- An easy and convenient way to purchase Bitcoin, Ethereum, and Litecoin with cash and send it directly to a wallet.
- They are usually in convenient locations such as malls or coffee shops in cities.
- Crypto ATMs charge high fees.
- You must use an ATM in person.
- They are not as common as regular bank ATMs.
6. Over-The-Counter (OTC)
An Over-The-Counter (OTC) trade is made off the main exchange. Usually reserved for extremely wealthy customers who wish to purchase large amounts of Bitcoin, Ethereum, and other cryptocurrencies. These people are often known as “whales”. They negotiate a price with the exchange and it is conducted off-exchange at an agreed-upon date and time. It’s like having a personal shopper for your crypto.
- Acts like a custom service just for you.
- You won’t have to do anything yourself. Your account manager will execute your trades.
- You can agree upon a price, date, and time of a trade in advance.
- Only suitable for large volume trades.
7. Ledger Live
Ledger is a European company that makes secure hardware wallets to store your digital currency. What makes Ledger so secure is that these wallets store your cryptocurrency offline making they are safe from hackers. When leaving your crypto on an exchange, your coins are at risk of theft or being lost. With a hardware wallet, you have ownership of your private keys and as long as you store them safely (offline) your crypto will remain safe.
You can purchase cryptocurrency with Ledger’s partner, Coinify, directly through Ledger Live for which you must have an account. Your purchased cryptocurrency will be sent directly to your Ledger account. You can buy Bitcoin, Ethereum, and many other digital currencies through Ledger Live.
- Ledger hardware wallets are the most secure way to store your crypto.
- You have full custody of your digital currency.
- You can stake several digital currencies in your Ledger Live account to receive crypto rewards.
- You can easily swap one crypto for another.
- If you lose your hardware wallet, it’s not the end of the world as whoever finds it would need the wallet password as well as access to your Ledger Live account in order to move your crypto.
- You are solely responsible for keeping your private keys and Ledger password safe.
- Ledger Live and its hardware wallets can be confusing for beginners.
- Ledger hardware wallets have a relatively expensive upfront cost.
In the end, you must choose the most suitable solution for yourself. The best way to buy crypto in Canada is the one that you are most comfortable with.
Centralized exchanges such as Coinbase or Binance are the most popular way to buy cryptocurrency, but with the rise of decentralized finance (DeFi), decentralized exchanges are becoming popular too. If you are looking for a short-term investment or you don’t want to deal with the hassle of private keys, then a trading platform such as Wealthsimple, or a Bitcoin ETF, is a good choice. If you’d like to have full custody of your digital currencies, then buying them through Ledger Live, or an exchange, and transferring them to a wallet is the best way to go.
Crypto is becoming more mainstream by the day and there will no doubt be many other ways to purchase it in the near future.