By now, most of us have heard plenty of good things about cryptocurrencies such as Bitcoin. Digital currencies are becoming increasingly popular and the good news is that it is now easier than ever to purchase Bitcoin and invest in cryptocurrency for yourself. Typically, Bitcoin and other cryptocurrencies are purchased through exchanges.
A crypto exchange is a platform that users sign up for before being able to deposit fiat currency or other cryptocurrencies to purchase Bitcoin.
If you’re interested in jumping on the Bitcoin bandwagon and want to get started, here’s how.
Choosing a Bitcoin Exchange
There are various Canadian and worldwide cryptocurrency exchanges that you can use to buy Bitcoin.
Spend some time researching your options to ensure that you are signing up to an exchange that is the ideal choice for you.
You will need to consider several factors:
- including your level of experience
- the type of currency that you would like to use to purchase Bitcoin
- and the security and reputation of the exchange itself
If you have never purchased cryptocurrency before, it is a good idea to use a fiat-to-crypto exchange that is designed to be easy to use for beginners.
Check out Wealthsimple’s advice on how to buy Bitcoin in Canada to help you get started. Wealthsimple offers advice for investors at all levels.
How to Buy Bitcoin
Compared to buying, trading, and selling Bitcoin just a few years ago, traders today have a lot of advantages.
Buying Bitcoin is as simple as making an online transaction and there are various payment options available.
You can easily use an exchange to purchase Bitcoin using your debit or credit card, a bank transfer, PayPal, or exchange Bitcoin for a different cryptocurrency using a crypto-to-crypto exchange.
More about cryptocurrency can be learned by watching this video.
Can You Purchase Bitcoin Anonymously?
As security threats and hacking attempts have plagued the cryptocurrency industry since its conception, it’s no surprise that any reputable exchange takes security very seriously.
In addition, in Canada, all cryptocurrency exchanges must adhere to anti-money laundering and counter-terrorism financing regulations, which involves verifying the identification of every user when they sign up.
In Canada, cryptocurrency exchanges are advised to perform ‘Know Your Customer’ checks on all users and it is very likely that you will be required to send a copy of your ID to the exchange before you can start enjoying all the features.
However, if for any reason you would rather not disclose your identity when purchasing Bitcoin, there are some alternative options to consider that will allow you to remain anonymous when purchasing the cryptocurrency. These include:
- Decentralised peer-to-peer crypto exchanges where you can make purchases directly from other users in cash
- Bitcoin ATMs that do not take your photograph for identity verification and support cash transactions
However, bear in mind that remaining anonymous can come at a high price, with both Bitcoin ATMs and peer-to-peer exchanges charging higher fees compared to the typical exchange.
If you have no real reason to keep your identity hidden, it’s definitely worth considering giving up your anonymity.
Buying Bitcoin on a Peer-to-Peer Exchange
Although peer-to-peer exchanges are not always recommended for beginners compared to regular crypto exchanges, they can have some advantages.
One of these is that it’s easier to stay under the radar and use cash to make your purchase.
Another is that since users are free to set their own prices for Bitcoin, you may be able to purchase Bitcoin for less or negotiate with the seller to bring the price down.
Can You Purchase Bitcoin Over the Counter?
Cryptocurrency exchanges will regularly add new features and updates to meet the trading needs and requirements of their users.
However, the majority of crypto exchanges are tailored for retail traders or moderate investors, rather than institutional investors with a desire to purchase a large amount of Bitcoin at once.
If you want to invest in a large amount of Bitcoin such as more than $100,000 worth of BTC, using a Bitcoin over the counter (OTC) desk is advisable compared to a crypto exchange.
These platforms offer more advantages for traders making large purchases, such as high liquidity and more privacy since they are decentralised and non-custodial.
By purchasing Bitcoin over the counter, you can avoid slippage or an average price that is much higher than the one you agreed on. There are several over the counter desks for Bitcoin to choose from in Canada.
How to Exchange Other Cryptocurrencies for Bitcoin
If you have previously purchased other cryptocurrencies and want to trade them for Bitcoin, you will need to use a crypto-to-crypto exchange.
An exchange that supports a wide range of cryptocurrencies is your best option, especially if you have purchased altcoins or digital currencies that are less popular.
To trade another digital currency for cryptocurrency, all you need to do is deposit the crypto that you want to trade after signing up for the exchange.
Specify the amount of Bitcoin that you would like to use to purchase, and complete the transaction.
Should you buy your bitcoin now?
Where is Bitcoin Stored?
Unlike fiat currencies which can be stored as cash in the bank or notes in your wallet, Bitcoin needs to be stored digitally.
It’s important to make sure that you have somewhere ready to store your cryptocurrencies before you start making purchases.
Bitcoin wallets are a virtual online address that is accessed with a private key. Most commonly, they come in the form of software that can be downloaded and installed on your device. You can also use online or cloud-based Bitcoin wallets that you can access from any device that has internet access.
For those who need a lot of storage space or a more long-term storage solution, there are hardware Bitcoin wallet options to consider.
Most cryptocurrency exchanges will provide you with a wallet in the exchange to store your Bitcoin. However, it is not a good idea to use the exchange’s storage options long-term.
This is because you are relying on the exchange alone to keep your Bitcoin safe and are at higher risk of cyberattacks and other security issues.
How to Cash Bitcoin Out?
You can cash out your Bitcoins to Canadian dollars using either a fiat-to-crypto exchange or a peer-to-peer exchange.
A fiat-to-crypto exchange will allow you to trade your Bitcoin to Canadian dollars based on the current value, while peer-to-peer exchanges give you more flexibility and customization options for setting your price and preferred payment method.
Do You Have to Pay Tax on Bitcoin?
In Canada, Bitcoin is treated as a commodity rather than a legal tender currency.
As a result, it is taxable according to guidelines issued by the Canada Revenue Agency. When you purchase Bitcoin, it may be subject to either capital gains tax or income tax.
Capital gains are only 50% taxable, compared to business income, which is 100% taxable. If you’re unsure which one you are liable for, a financial advisor can help.
Is Bitcoin Legal in Canada?
Bitcoin is not considered legal tender in Canada since it cannot compete against the Canadian dollar. However, it is not against the law to purchase and trade Bitcoin online against other currencies.
You can legally mine Bitcoin as a hobby or to make a profit, and cryptocurrency transactions are not regulated by Canadian governmental financial institutions.
As Bitcoin has gained more popularity, Canada is taking steps to regulate the cryptocurrency industry further.
Does Canada Have Bitcoin ATMs?
There are over eight hundred Bitcoin ATMs available throughout the country, according to CoinATM Radar. The highest number of Bitcoin ATMs can be found in Toronto, and they are also available in Calgary, Vancouver, Ottawa, and Montreal.
You will usually find them in grocery stores, supermarkets, restaurants, retail stores and airports.
The majority only support card payments; however, a handful of ATMs that accept cash payments do exist.
Which Canadian Debit Cards Can Be Used to Purchase Bitcoin?
There are several major Canadian banks that are currently in the process of adopting new policies regarding cryptocurrencies. The Royal Bank of Canada has now started allowing customers to use their debit and credit cards held with the bank for Bitcoin transactions.
Other banks are expected to follow suit, including the Bank of Nova Scotia and the National Bank of Canada.
Where Can I Spend Bitcoin in Canada?
There are various businesses in the country that will accept Bitcoin payments. In Toronto, you can pay in Bitcoin at Grossman’s Tavern, or buy your lunch with BTC in Montreal at Burrito Shop.
Steamrollers in Vancouver also allows customers to make purchases using this cryptocurrency, along with many other travel agencies, retail stores, and other businesses where you can pay directly with BTC.
With the value of Bitcoin at an all-time high and cryptocurrencies seriously taking off around the world, it’s no surprise that more and more people are becoming interested in investing in cryptocurrency.
Today, there has never been a better time to add digital currencies such as Bitcoin to your investment portfolio with a range of crypto exchanges and other purchase options to choose from.
Photos: Shutterstock
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