Cryptocurrencies, also known as digital currencies or digital assets, are digital representations of value that can be used to purchase goods and services. Unlike traditional currencies, they are typically decentralized and secured through encryption and blockchain technology. For Canadian investors interested in this dynamic asset class, navigating the landscape begins with selecting a reliable platform.
This guide covers the fundamentals of cryptocurrency and outlines practical steps for acquiring digital assets in Canada. We will explore some of the top platforms available to Canadian residents, discuss various buying and depositing methods, and review associated fees.
Understanding Cryptocurrency
Cryptocurrencies function similarly to conventional currencies but exist solely in digital form. They can be traded on specialized platforms called cryptocurrency exchanges, much like fiat currencies are traded on the foreign exchange market.
A key distinction is that cryptocurrencies are generally not controlled by a single central authority. Instead, they are protected by advanced encryption and maintained on a distributed public ledger known as a blockchain, which is transparent and accessible to all participants.
Cryptocurrency Regulation in Canada
Canada has adopted a proactive stance towards cryptocurrency regulation. It was the first nation to implement anti-money laundering (AML) rules specifically for cryptocurrency service providers. These platforms are regulated under provincial securities laws as money service businesses (MSBs) to protect the public.
Since 2013, the Canadian Revenue Agency has treated cryptocurrencies as taxable commodities. This means while they are legal to buy and use for payments with accepting merchants, they are not considered legal tender. Canada also made history by launching the world's first publicly accessible Bitcoin ATM in Vancouver in 2013.
The country supports a regulated environment for cryptocurrency mining. In 2019, Quebec's energy regulator mandated that Hydro-Quebec allocate 300 megawatts (MW) to the blockchain industry, further cementing Canada's role in the digital asset ecosystem.
Top Platforms for Buying Crypto in Canada
While Bitcoin ATMs offer one method for acquisition, cryptocurrency trading platforms provide the most convenient and practical way to buy digital currencies in Canada. Selecting the right platform is crucial for security, cost-effectiveness, and overall experience.
Here are three reputable platforms that cater to Canadian investors.
VirgoCX
Established in 2018, VirgoCX is a regulated Canadian cryptocurrency trading platform known for its strong liquidity, advanced technology, and high security standards. It serves both retail and institutional investors, offering a user-friendly experience for trading a wide variety of digital assets, including Bitcoin and Ethereum.
The platform distinguishes itself with a transparent, commission-free pricing model and tight spreads. It also provides an over-the-counter (OTC) solution for large trades exceeding $30,000 CAD. VirgoCX is registered as an MSB with FINTRAC, ensuring regulatory compliance.
Getting Started with VirgoCX
To begin buying crypto on VirgoCX, follow these steps:
- Register for an Account: Sign up on the VirgoCX website or mobile app.
- Complete Verification: Provide basic personal information to comply with AML and ATF policies.
- Fund Your Account: Deposit Canadian or U.S. dollars via INTERAC e-Transfer (instant and fee-free) or wire transfer.
- Start Trading: Use the intuitive Quick Trade feature for market orders or the Advanced Trade interface for technical analysis and limit orders.
VirgoCX offers a robust and secure environment for trading digital currencies. 👉 Explore more strategies for trading crypto
Wealthsimple Crypto
Wealthsimple Crypto, offered by a leading Canadian online financial manager, is known for its easy-to-use interface, making it suitable for beginners. The platform supports trading for 29 different cryptocurrencies and does not require a minimum account balance.
A notable limitation is that users cannot withdraw their cryptocurrencies to external wallets; assets are custodied by Gemini Trust Company, which provides cold storage insurance. Wealthsimple charges a spread-based operation fee of 1.5% to 2% on each transaction, which is higher than some competitors.
Getting Started with Wealthsimple Crypto
- Download the App: Available on iOS and Android.
- Fund Your Account: Link your Canadian bank account or use existing Wealthsimple funds.
- Buy Crypto: Execute market or limit orders directly through the mobile app. The platform also offers auto-deposit features for regular investing.
Coinbase
Coinbase is a globally recognized cryptocurrency exchange operating in over 100 countries. It offers brokerage services for beginners (Coinbase), a professional trading interface (Coinbase Pro), and institutional services (Coinbase Prime). The platform is fully regulated and complies with international KYC and AML laws.
A significant drawback for Canadian users is that Coinbase only supports debit card payments for purchasing crypto and does not allow funding from Canadian bank accounts. This results in higher fees, including a 3.99% debit card fee plus a 0.50% transaction fee.
Getting Started with Coinbase
- Create an Account: Sign up and complete the identity verification process.
- Link a Debit Card: Add a debit card as your payment method through the 'Settings' menu.
- Purchase Crypto: Use the simple 'Buy/Sell' button to execute transactions once your card is verified.
How to Choose the Right Platform
Selecting the best platform depends on your individual needs and priorities. Consider the following factors before making a decision:
- Fees: Compare trading fees, spread costs, and deposit/withdrawal charges.
- Payment Methods: Ensure the platform supports your preferred funding method, such as INTERAC e-Transfer or wire transfer.
- Supported Assets: Check if the platform offers the specific cryptocurrencies you want to buy.
- Security: Prioritize platforms that are regulated in Canada and use robust security measures, including cold storage for assets.
- Usability: Choose an interface that matches your experience level, from simple buy/sell options to advanced charting tools.
Storing Your Cryptocurrency
Once you purchase cryptocurrency, you need a secure place to store it. There are two main types of wallets:
- Hot Wallets: Software-based wallets connected to the internet. They are convenient for frequent trading but are more vulnerable to online threats.
- Cold Wallets: Physical devices (like USB drives) that store your assets offline. They offer the highest level of security for long-term storage.
Many investors use a combination: keeping a small amount in a hot wallet for trading and the majority of their holdings in a secure cold wallet.
Frequently Asked Questions
Is cryptocurrency legal in Canada?
Yes, cryptocurrency is completely legal in Canada. The government classifies it as a commodity, meaning you can legally buy, sell, trade, and mine it. Transactions are subject to Canadian tax rules.
What is the easiest way to buy crypto in Canada?
The simplest and most common method is through a regulated cryptocurrency trading platform. These online marketplaces allow you to fund your account with Canadian dollars and easily buy, sell, and trade a wide range of digital assets.
Can I buy cryptocurrency without a special platform?
Yes, alternative methods include using a Bitcoin ATM or gaining exposure through cryptocurrency Exchange-Traded Funds (ETFs) available on traditional stock exchanges. However, dedicated crypto platforms often provide the widest selection and most competitive fees.
What are the risks of buying cryptocurrency?
Cryptocurrencies are highly volatile and considered high-risk investments. Prices can fluctuate dramatically, and you should be prepared to lose any money you invest. It's crucial to only invest what you can afford to lose and to conduct thorough research.
How do I keep my cryptocurrency safe?
Use strong, unique passwords and enable two-factor authentication (2FA) on all your exchange accounts. For significant holdings, transfer your crypto to a private wallet whose private keys you control, preferably a cold storage hardware wallet for maximum security.
Are my crypto profits taxable in Canada?
Yes. The Canada Revenue Agency (CRA) treats cryptocurrency as a commodity. This means any profits from selling or trading crypto are considered taxable income and must be reported on your annual tax return.