Here's how Canadians can buy and sell bitcoin

Canadians have been trying to figure out how to get in on the digital gold rush ever since Bitcoin climbed to nearly US$20,000 last December.

While the world’s most notorious cryptocurrency has since slunk back down to US$9,357 (as of press time), the hype surrounding digital currencies lingers, and new solutions, as well as entrants from the U.S. market, are pushing in to help Canadians satiate their appetite for buying and selling cryptocurrency.

But the field is dense; there are a lot of options for breaking into the market and a lot of cryptocurrencies to choose from – roughly 1,600 with a combined market cap of US$434.6 billion, according to CoinMarketCap.

Some have taken a novel approach.

CBlocks, which recently located to Canada on account of “cheaper regulatory expenses” has taken a crypto mystery box route, offering to invest on behalf of customers in five random currencies in exchange for a US$50 service fee and the amount the customer chooses to invest.

But investors looking to handle their own buying and selling directly, might want to consider a cryptocurrency trading platform, says Fred Schebesta, CEO, and co-founder of personal finance comparison site Finder Canada and a co-founder of cryptocurrency broker HiveEx.com.

“For smaller trades, it’s worth comparing traditional cryptocurrency exchanges,” he says. “These work similarly to a stock exchange, with buyers and sellers trading based on the current market price of the cryptocurrency (and) the exchange acts as the middle-man.”

Larger trades around $50,000 may want to involve a cryptocurrency broker (otherwise known as an OTC trading platform). “With this method, your funds are traded via a broker who will offer a fixed price and initiate the trade between you and a liquidity provider,” says Schebesta.

Here’s what you’re in for, if you’re looking to set up a cryptocurrency wallet and buy and sell the top digital currencies in Canada using a trading platform.

Find the right platform

In a lot of ways, the cryptocurrency sphere is still the wild west. In addition to some of the more well-known digital currencies like bitcoin, Ethereum, Litecoin and Bitcoin Cash, there are hundreds of lesser-known outliers. There are also security tokens – a process where entrepreneurs or businesses crowdfund through an Initial Coin Offering (ICO), issuing a new crypto token as a sort of share in the company which investors can buy to support it.

But both cryptocurrencies and tokens are open to scams.

“Especially around private sales since it’s an unregulated thing,” explains Jordan Anderson, VP of sales and marketing for Monitex, the parent of bitbuy.ca a platform for buying and selling cryptocurrency. “If you send it to somebody’s address and they don’t pay you the money they say they’re going to pay you or you pay and they say they sent it but don’t, there’s no getting it back – it’s not like sending money where there’s a paper trail.”

Homegrown platforms like bitbuy.ca, Coinsquare, QuadrigaCX, and international options like Binance, Kraken, and Coinbase, have stepped in to facilitate easier, safer trading. “Look online for reviews, make sure that whoever you’re dealing with – whether it’s a private sale or through a platform like ours – is just really legitimate, that they’ve been in the industry for a long time,” adds Anderson.

Getting verified

Once you’ve identified the platform that works best for you, you’ll need to verify your account and go through Know Your Client (KYC) measures set out by FINTRAC. Some platforms, like bitbuy.ca, will need you to share personal details including your full name, address, phone number.

“You’re required to upload a government-issued photo ID and a picture of you holding that government-issued photo so we can match you to the actual ID,” says Anderson. You’ll also need a piece of mail or a bank statement linking you to that ID and proving you really live in Canada.

Through a partnership with Equifax, Coinsquare uses an automated verification process to validate clients and ensure they’re not involved in “in terrorist financing or other illegal activities.”

“About 10 per cent are not successful at getting through that automated verification process (but) for the most part so long as you’ve got enough information about yourself that matches what Equifax knows about you, you’re going to pass,” says Cole Diamond, CEO of Coinsquare. “Assuming you pass our KYC protocols you’re free to fund your account.”

Funding your account and buying/selling

Most platforms will allow Interac e-transfers, bank drafts, InteracOnline, or credit cards to fund your account but fees will vary ranging from one per cent up to 10 per cent. The well-known platforms all have their fee structures listed on their websites.

“Most exchanges charge on deposits, to get the money in you have to pay a per cent and then there’s also another fee that’s to trade from currency to crypto, deposits and withdrawal fees then transaction fees,” explains Anderson adding that bitbuy.ca charges 0.75 per cent to buy on the transaction and a 0.5 per cent fee to sell.

A lot of the major players tend to focus on what Diamond calls the “first bucket of cryptocurrencies” which includes bitcoin, Bitcoin Cash, Ethereum, Litecoin, Dash, and Dogecoin. You can track the market price before buying and when it comes to selling you can convert at the current market price or put in a sell order which will let you pull out your funds when they reach a certain threshold.

“You’ll receive credit in your account for Canadian dollars,” he says. “If you decided at that point you want to take your Canadian dollars off the platform back into a Canadian financial institution you input your banking information and we’ll send you an electronic funds transfer in 48 hours.”

While Diamond says he’s not in a position to tell people what cryptocurrency to invest in, he reiterates Anderson’s earlier comment that the crypto-sphere is still an emerging, unregulated market.

“Be careful about what you’re buying into, do not chase skyrocketing token prices in projects you’re not familiar with or do not understand,” he says. “I say the same thing about penny stocks and I think the same story goes for cryptocurrencies.”

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