As the hype of owning crypto assets is increasing in Canada, the practice of buying Ether, Bitcoin, and Dogecoin is also growing eventually. It has been stated by the Ontario Securities and Commission that by the year 2023, more than 30% of the residents of Canada will be willing to buy crypto assets.
Here is a detailed guide article that will provide the details to the readers about the methods that they can adopt for buying cryptocurrencies directly through a crypto exchange or a broker in Canada.
Is Buying Cryptocurrency in Canada Legal?
Although buying cryptocurrency is not considered legal tender in the country; still, cryptocurrency trading has been declared legal in Canada. Taxes are applicable on all the virtual currencies present in the market, as made clear by the Canada Revenue Agency (CRA). It can be normalized in case local coffee shops, restaurants, e-commerce websites, and traders accept using the currency in their daily life activities.
Any cryptocurrency is treated as a commodity by the Canada Revenue Agency. This means that there are equal chances of loss and gain while using it. The tax is applied over the transaction whenever anyone sends, receives, or trades any cryptocurrency. The proper regulatory rules and guidelines regarding the use of cryptocurrency in Canada are provided on the website of Canada Securities Administrators.
Is Cryptocurrency Allowed by the Canadian Banks?
As cryptocurrencies are becoming more and more popular daily, therefore as subject to state and federal regulations, cryptocurrency trading is allowed and recognized by Canadian banks. In regard to this, a large number of Bitcoin ATMs are being installed by Canadian banks in the country. The highest number has been recorded in Toronto, with a total of about 897 ATMs, with a total of more than 2600 all across the country.
Physician money can be converted into digital currencies by using these ATMs that can then be further utilized by people for their daily life activities. Moreover, buying and selling cryptocurrency in return for cash can also be performed. After the United States of America, Canada has the second-highest number of Bitcoin ATMs.
Several reputable banks are existing in Canada that allow people to support trading through cryptocurrency in one way or other. These banks may include Coast Capital, ATB, Scotiabank, Royal Bank of Canada, Canadian Imperial Bank of Commerce, and National Bank of Canada. In addition to that, a large number of banks are also planning to join them as the hype of crypto trading is rising in the country.
Crypto can be purchased from banks by using multiple methods that may include bank wire transfers, Interrace e-transfer, or debit cards. In order to buy cryptocurrencies, the customers have to link their bank accounts with any crypto exchange. This can be done by using the local Canadian dollar or any other well-known fiat currency.
Moreover, crypto can also be purchased by using credit cards. But it should be kept in mind that huge interest rates or some additional advance fee in the form of cash may be charged by some of the banks. Therefore, purchasing crypto through credit cards may prove quite expensive for users.
What are the Ways to Buy Cryptocurrency in Canada?
Cryptocurrency can be bought in Canada using two common ways. It can be purchased either directly through an exchange or by using a broker. It should be kept in mind before choosing the way to buy crypto that the user may have more hold over his accounts and funds if he opts for cryptocurrency exchange.
On the other hand, if a broker such as Mogo and Wealthsimple is chosen to buy crypto, as per the brokerage policy, the user may have to face certain restrictions while using his holdings or carrying out transactions, transfers, or storage-related issues. There can be seen several similarities between the crypto brokers in Canada and the finance trading platforms operating traditionally in the country.
Using their platform and expert team in the crypto space, these brokers have the aim to decrease the complexities in the crypto trading process, making it convenient for the traders. However, these brokers then charge a specific fee for their services. This makes them a little more costly than buying crypto through simple exchanges.
How to Buy Cryptocurrency in Canada Using a Crypto Broker?
If one wants to buy cryptocurrency through a broker to carry out trade conveniently, he has to follow specific simple steps that are mentioned below.
- Setting Up an Account on a Crypto Trading Platform
The very first step is to set up an account. For this purpose, choose a crypto trading platform according to your convenience. Download the application of the platform or visit its website and fill in the required credentials to sign up. Enter your exact phone number and email to complete the creation of an account. In the end, for the verification of the account, also add in the personal information that is required.
- Adding Funds to Your Account
The next step is to add funds to your account. There are a number of methods that are provided by most crypto trading platforms to make payments conveniently. These methods may include gift cards, wire transfers, PayPal, credit cards, or debit cards. The fee that is charged for carrying out the transfer of funds may vary with the method adopted.
As the funds transfer through credit cards is a relatively quick process that may require only a few minutes; therefore, the fee charged for using credit cards may also be higher. On the other hand, it may take a few days to transfer funds through a wire transfer; therefore, it charges a lower fee.
- Buying Cryptocurrency of Your Own Choice
The last step is buying the cryptocurrency. The user has to purchase it by selecting the crypto of his choice and placing an order for it. After viewing the buy order, the correct match is then found by the trading platform.
However, it is to be kept in mind that unlike trading through crypto exchanges, trading through a broker does not provide the user with a wide range of cryptocurrencies to choose from. The user is made to select the required currency from the limited choices available.
In addition to that, for the sell orders and volume, the users may also face certain restrictions. Therefore, it is always advised to think carefully before making an investment in crypto trading.
How to Buy Cryptocurrency in Canada Using a Crypto Exchange?
Although there are certain differences that can be spotted in all the crypto exchanges, however, here are some common steps that can be followed by the user to buy crypto through a crypto exchange.
- Picking Up Your Exchange
First of all, the user has to choose an exchange in order to buy the cryptocurrency. The marketplace that is available digitally and allows the sellers and buyers in the market to interact and carry out trade of different cryptocurrencies is referred to as the crypto exchange.
The users can exchange Canadian dollars with crypto and also convert one type of cryptocurrency into other using these exchange platforms. Several exchanges in Canada permit users to carry out crypto trading. These exchanges may include Coinberry, BitBuy, KuKoin, Kraken, Crypto.com, Binance, and CoinBase.
- Creating an Account
Creation of an account is the next step after choosing a proper exchange platform. The user has to enter his valid phone number and email in order to sign up for an account. The user has to undergo some verification procedure that may require him to upload some documents, including his passport and driving license.
Moreover, for the face match with the documents that are provided to the platform, the user may also be asked by the exchange platform to upload a selfie for the completion of the identification process of the user.
- Depositing Cash and Buying Cryptocurrency
After the completion of the above procedure, the user has to now link his account with a bank account. This is mandatory for transferring funds into the new account opened by the user. The user has to then look at the cryptocurrencies that are available on the exchange platform and place an order to buy one of his choices after the transfer of funds.
Buying Bitcoin is a usual practice in Canada; however, the demand for altcoins such as Solana and Binance Coins is also increasing in the market with time. These exchange platforms can also be used otherwise. The users can sell their crypto holdings on these platforms and get the funds transferred into their linked bank accounts after converting them into fiat currency.
The users can also choose the option of Bitcoin ATMs for conversion of their crypto into cash. But it should be kept in mind that it may cost them high charges, and this facility is not provided by all ATMs too.
How can Cryptocurrency Be Stored in Canada?
No insurance protection such as Canada Deposit Insurance Corp guards the cryptocurrency similar to fiat currency. Therefore, it becomes essential for users to secure and safeguard their crypto holdings. Cryptocurrencies are more prone to cyber-attacks, thefts, scams, hacks, and crimes. There are a number of methods that can be used to secure and protect cryptocurrencies. Some of them are mentioned below.
- Using the Exchange
Crypto can be left on the exchange platforms, and the owners can earn income passively through farming and staking it. When crypto holdings are locked with an exchange and income is earned through the interest over it, it is referred to as staking. Similarly, while using the already existing crypto holdings, when more crypto is earned, it is known as farming.
To provide an additional layer of security, from the security settings in the account, the user can turn the two-factor authentication (2FA) mode on. Moreover, the crypto assets may be distributed among different exchanges to lessen the risk factor.
But it should also be kept in mind that keeping the assets on different exchanges may also cause the user to lose all his assets and holdings in case the exchange gets hacked, closed, or frozen. This phenomenon is similar to centralized exchanges, where they may change their policies and regulations with time.
- Through Crypto Wallets
Using crypto wallets helps one in securing his crypto assets by using passwords or private keys. Therefore, crypto is not actually stored in the crypto wallets. But it provides access to the users to their digital holdings present over the blockchain by using the keys.
Crypto wallets are able to store several different coins at the same time, such as DOGE, ETH, BTC, and many other altcoins that are permitted by the wallet.
It should be kept in mind that it is very important for the users to protect their recovery or seed phrase as it may help the user to get back his private key that may get lost during any activity. However, if one loses or forgets the seed phrase, it means he has lost his crypto holdings permanently as they cannot be recovered in any case.
There are two kinds of wallets that are usually used by the residents of Canada.
- Hot Wallets
These are the types of wallets that are connected to the internet usually. This makes these wallets more prone and vulnerable to cyber-attacks and crimes as being connected to the internet the data can be easily hacked. However, these kinds of wallets are easier and more convenient to use for beginners and regular traders in the market. Hot wallets can be used for making quick payments.
All web-based wallets, mobile-based wallets, and desktop wallets are included in hot wallets. Some of the commonly used crypto hot wallets in Canada are CoinSmart, Coinbase Wallet, Binance Trust Wallet, and MetaMask.
- Cold Wallets
These are the types of wallets that are kept offline and are not connected to the internet. This makes them less vulnerable to cyber threats reducing the danger of online attacks and hacking. However, these wallets are usually more costly and difficult to use for new traders in the market. Cold wallets are usually recommended to traders who carry out long-term trades storing huge crypto amounts in wallets.
All paper wallets and hardware wallets are included in cold wallets. Some of the commonly used crypto cold wallets in Canada are Trezor and Ledger.
It is often recommended to store the crypto assets by distributing them among both hot and cold wallets as storing large crypto amounts in one wallet can prove risky in the future.
How and Where Can Cryptocurrency Be Spent in Canada?
In Canada, people can purchase goods using Bitcoin or other cryptocurrencies. But it can be only done by traders who allow payments via cryptocurrencies or by using prepaid cards or credit cards. According to a survey held in 2022, it was claimed that in the next five years, about 62% of traders would be interested in carrying out trade processes using cryptocurrency.
A wide range of cryptocurrencies is accepted by CoinGate where users can easily buy gift cards for Airbnb, BestBuy, PlayStation, Amazon, eBay, and a lot of others. In addition to that, there are many more other retailers that accept payments in crypto in Canada. These retailers may include Overstock, which carries out home furnishing; Travala, for making travel bookings; and Newegg, for buying gaming products.
Moreover, gift cards for many top-notch brands such as Air Canada, Amazon, BestBuy, and many others can also be bought using the web shop known as Coincards. The users can conveniently shop over their website using prepaid cards, Bitcoin, or other cryptocurrencies. Moreover, as per the requirements of the user, the prepaid card can be loaded again and again using crypto.
Risks Involved in Crypto Trading
However, before ultimately shifting the bandwagon to crypto trading, it is essential for the traders to make themselves aware of certain risks that are integrated with crypto trading and cannot be ignored. Some of them are mentioned below.
- High Volatility
The sudden market fluctuations and unpredictable nature of the crypto space is the most significant risk integrated with crypto trading. The experts are of the view that crypto is highly sensitive to changes in the market.
- Security Threats
Though the exchanges and firms are constantly striving to make the crypto regulatory process better, however, the risk of scams attached to crypto is still a significant problem today.
No one in the market can predict which currency has the potential to sustain and which one will eventually be eliminated from the market.
Not being able to sell the investment at the correct time is still an issue with many cryptocurrencies out there.
Canada has set a benchmark for other countries in the world to adopt a crypto-friendly environment by providing clear and valid regulations and providing a proactive approach. Moreover, the country is also aiming the acceleration in the adoption of cryptocurrency throughout the region.
However, before investing funds in any kind of trading process, it is recommended that traders should carefully think and carry out detailed research regarding all the pros and cons of the crypto market.