This post may contain affiliate links. Please read our disclosure for more info.

Bitcoin is the world’s most popular digital currency and the strongest contender for a decentralized currency that could rival fiat money as a legal tender someday.

When you consider that the Canadian dollar (i.e. fiat currency) we use to conduct everyday buy and sell transactions has no intrinsic value other than that bestowed upon it by government, the concept of electronic money begins to take shape.

Fiat money is a currency (a medium of exchange) established as money, often by government regulation, but that does not have intrinsic value (value independent of the nominal value, such as a precious metal might have). Fiat money does not have use value (inherent utility, such as a cow or beaver pelt might have), and has value only because a government maintains its value, or because parties engaging in exchange agree on its value.

Wikipedia

Bitcoin and altcoins such as Ether, Litecoin and XRP are somewhat similar to fiat currencies. Simply put, their intrinsic value is tied to the value placed on them by users.

Other factors that determine cryptocurrency values include their supply, demand, acceptability, cost of mining them, and government regulation or lack thereof.

Read on to learn about Bitcoin, how to trade it in Canada, and whether it is safe.

What is Bitcoin?

Bitcoin is what comes to mind when you think about digital currencies. It is a cryptocurrency that was invented in 2008 by a person or group of persons known as Satoshi Nakamoto.

The ‘crypto’ in cryptocurrency refers to the use of cryptography to create new units of cryptocurrency as well as verify and secure transactions on the peer-to-peer network.

Since Bitcoin is decentralized, no Central Bank or intermediary is involved and the system relies on technology and code. This decentralization has also made it a target of hackers and it has been used to fund various illegal activities including terrorism and money laundering.

New Bitcoin is created by Bitcoin miners who use high-speed computers to solve complex mathematical problems.

In exchange for adding new records to the public ledger (also called Blockchain) and verifying transactions in the network, a miner is rewarded with Bitcoin tokens.

The maximum amount of Bitcoin that can ever be mined is 21 million. You can purchase very small units of Bitcoin, with the smallest amount equal to 0.00000001 BTC (also referred to as 1 Satoshi).

Bitcoin is traded under the symbol BTC or XBT and its value changes all through the day similar to stock prices on an exchange.

The highest value of 1 Bitcoin was reached on December 17, 2017, when it sold for an all-time high of $19,783.06 USD.

The Top-10 Cryptocurrencies by Market Capitalization

The top-10 cryptocurrencies by market capitalization as of September 24, 2020, are:

Cryptocurrency
Symbol
Market Cap
1. Bitcoin
BTC
$190.43B
2. Ethereum
ETH
$36.66B
3. Tether
USDT
$15.21B
4. XRP
XRP
$10.07B
5. Bitcoin Cash
BCH
$3.87B
6. Polkadot
DOT
$3.52B
7. Binance Coin
BNB
$3.34B
8. Crypto.com Coin
CRO
$2.99B
9. Litecoin
LTC
$2.85B
10. Chainlink
LINK
$2.90B

How and Where To Buy Bitcoin in Canada

There are several ways to get your hands on Bitcoin in Canada.

Your options include buying it from an online cryptocurrency broker or trading platform (e.g. Wealthsimple Crypto and MogoCrypto), a cryptocurrency exchange (e.g. Coinsquare and Bitbuy), or at a Bitcoin ATM.

There are also ways to purchase Bitcoin through peer-to-peer (P2P) networks or Over-the-Counter (OTC).

1. Wealthsimple Crypto

Wealthsimple Crypto is the first regulated cryptocurrency platform in Canada, having received authorization to operate by the Canadian Securities Administrators (CSA).

If you are not familiar with Wealthsimple, it is the most popular online wealth management platform in Canada.

Wealthsimple Crypto is a simple and secure way to buy and sell Bitcoin and Ethereum right from your phone. Its UX is particularly optimized for beginners who are new to digital currency trading.

After signing up for a Wealthsimple Crypto account and funding your account, you are able to trade cryptocurrency via the app in just a few clicks.

Wealthsimple Crypto works like a broker. When you put in an order to purchase or sell crypto, they connect you to a market maker(s) who finds the best price available on the largest exchanges.

Your crypto holdings are then held with a regulated custodian (Gemini) which keeps your cryptocurrency secure in cold storage.

The cryptocurrency market does not sleep, so you can make Bitcoin and Ethereum trades 24/7 using the Wealthsimple Crypto app.

  • Best for: Beginners
  • Coins offered: Bitcoin and Ethereum
  • Account funding options: Bank transfer
  • Trading fees: Spread on bid and ask prices; no hidden costs
  • Limits: Not applicable
  • App: Available on iOS and Android
  • Promotion: None for Wealthsimple Crypto; $10 cash for Wealthsimple Trade; $50 for Wealthsimple Invest
  • Referral program: Get $10 when you refer a friend and they deposit and trade at least $100
  • Review: Wealthsimple Crypto review

Is Wealthsimple Crypto Safe?

Cryptocurrency trading is very risky, so there is that.

With regards to the security afforded your account, Wealthsimple Digital Assets (the company offering Wealthsimple Crypto) is registered as a restricted dealer in all jurisdictions of Canada except Quebec. In Quebec, the company is registered as a derivatives dealer.

Your Crypto assets (i.e. Bitcoin and Ethereum) are held in cold storage by Gemini Trust Company LLC. Gemini uses FIPS 140-2 Level 3-rated or higher hardware security modules (HSMs) and is subject to regulation by the New York Department of Financial Services.

Gemini has $200 million in cold storage insurance. Its CEO and President are the Winklevoss twins (co-founders of Facebook).

Pros of Wealthsimple Crypto

This account offers several benefits including:

  • You can sign up and create an account within minutes
  • There are no account minimums and you do not pay a fee to deposit or withdraw your funds
  • Wealthsimple Crypto is regulated and is owned by a reputable company
  • The app offers instant trades and real time quotes
  • Their custodian, Gemini, is a trusted name in the cryptocurrency space
  • Wealthsimple Trade and Wealthsimple Crypto are accessible through the same app, making life easier for you if you also plan to purchase stocks and ETFs using a discount brokerage platform.
  • The platform is available in all 13 provinces and territories in Canada

Cons of Wealthsimple Crypto

Downsides of Wealthsimple Crypto include:

  • You can only trade Bitcoin and Ethereum. Other cryptocurrencies are not available
  • Your crypto assets cannot be moved to your own private wallet. It is held by Gemini Trust Company, LLC
  • You can’t transfer your existing cryptocurrency from other institutions to Wealthsimple Crypto
  • Funding your account with fiat currency occurs by bank transfer and takes 5 business days before it is available in your Crypto account. Also, you can only fund your account in Canadian dollars
  • Your assets are not eligible for protection by CIPF or CDIC
  • Trading spreads may cost you more than the fees charged when you purchase cryptocurrencies directly on an exchange

How To Open an Account With Wealthsimple Crypto

To open an account, you must be at least 18 years of age, have a social insurance number, and be a resident of Canada.

If you are not already a Wealthsimple client, you will also need to verify your identity in line with FINTRAC (Financial Transactions and Reports Analysis Centre of Canada) requirements.

Open a Wealthsimple Crypto Account

2. MogoCrypto

MogoCrypto is a cryptocurrency trading platform in Canada. In addition to cryptotrading, Mogo also offers other products including:

Mogo is a Canadian financial technology company with offices in Vancouver, Surrey and Winnipeg. The parent company, Mogo Inc., is publicly traded on the Toronto Stock Exchange and NASDAQ.

Similar to Wealthsimple Crypto, MogoCrypto functions as a broker that makes it easy to purchase cryptocurrency in just a few clicks.

MogoCrypto only offers trading in Bitcoin and Mogo members can place trades using the Mogo app or portal.

To gain access to the platform, sign up for a Mogo Account (takes about 3 minutes). After, you can fund your account using Interac e-Transfer.

MogoCrypto uses Coinsquare (goNumerical Ltd.) to facilitate purchases and sales of Bitcoin and to hold it.

MogoCrypto bitcoin trading
  • Best for: free credit scores
  • Coins offered: Bitcoin
  • Account funding options: Interac e-Transfer
  • Trading fees: 1%; Exchange Partner’s price may include fees or mark-ups
  • App: Available on iOS and Android
  • Limits: Minimum of $10 per funding transaction and a maximum of $3,000 every 24 hours
  • Promotion: Get $5 when you sign up
  • Referral program: Earn $5 for every person who signs up using your referral link
  • Review: Mogo Canada review

Pros and Cons of Bitcoin Trading with MogoCrypto

The benefits and downsides of trading Bitcoin with MogoCrypto are as follows:

Pros of MogoCrypto

  • You can easily create a free account within minutes
  • The platform offers instant trades in Bitcoin
  • Funding your account using Interac e-Transfer can be completed within 30 minutes
  • The cryptocurrency exchange by Mogo is based in Canada. Coinsquare keeps your coins safe by putting 95% of crypto assets in cold storage
  • Mogo is a publicly-traded company with more than 1 million members

Cons of MogoCrypto

  • The 1% trading fees does not include mark-ups that may be charged by Coinsquare
  • MogoCrypto only offers trading in Bitcoin. Other cryptocurrencies are not available
  • You cannot transfer your Bitcoin from MogoCrypto to any other wallet or exchange. Also, you cannot transfer Bitcoin purchased elsewhere to the platform
  • There is a hold period when you want to withdraw funds from your account
  • Coinsquare recently had to pay significant fines after it was found misleading investors and inflating trading volumes between July 2018 and December 2019
  • MogoCrypto is only available to residents of Manitoba, Ontario, British Columbia, Alberta, New Brunswick, Prince Edward Island, Newfoundland and Labrador, and Nova Scotia

Is MogoCrypto Safe?

It bears repeating that trading cryptocurrency is a high-risk gamble. You may win big, or lose a lot of money.

Mogo Inc. is a legitimate company in Canada with an A+ rating on the Bettter Business Bureau. Your MogoCrypto assets are held with Coinsquare, an exchange that has been around since 2015.

Coinsquare uses SSL and 2FA plus 95% cold storage to protect your account.

The company recently ran afoul of the Ontario Securities Commission and both the founder and CEO had to step down.

Visit MogoCrypto

3. Binance

Binance is one of the largest cryptocurrency exchanges in the world with an average volume of $2 billion in trades per day.

The company was founded by Changpeng Zhao and is based in Malta.

  • Coins offered: 230+
  • Trading fees: Depends on your membership tier; up to 0.1%
  • Funding options: Cryptocurrency, Interac e-Transfer, debit card, credit card, third-party payments, bank deposit with SEPA
  • Security: 2FA, Withdrawal Address Management, and cold storage

Binance also offers an OTC platfform for large trades.

Visit Binance

4. Bitbuy

Bitbuy is a Canadian cryptocurrency trading platform founded in 2013 and based in Toronto. It offers trading in Bitcoin, Litecoin, XRP, Stellar, EOS, and Bitcoin Cash.

  • Coins offered: 7 types
  • Trading fees: Spread on bid and ask prices
  • Funding options: Interac e-Transfer, bank wire and cryptocurrency
  • Security: 95% cold storage policy and 2FA on all transactions; Bitcoin balances are insured 1:1 by Knox Custody

Bitbuy is a registered Money Services Business (MSB) by FINTRAC.

Visit Bitbuy

5. Coinbase

Coinbase is a cryptocurrency brokerage platform based in the United States and open to members from 102 countries.

It has over 1,000 emplyees, 35 million users, and has traded more than $200 billion worth of cryptocurrency.

  • Coins offered: 27
  • Trading fees: Varies based on your location and includes a spread (~0.50%), cost of funding option (up to 3.99%), and a Coinbase Fee for transactions below $200
  • Funding options: Credit and debit cards, bank account, wire transfer, and cryptocurrency
  • Security: 98% cold storage, 2-step verification, hot wallet holdings are insured

Coinbase has a crypto exchange, Coinbase Pro, with lower trading fees, charting tools, and advanced options.

Visit Coinbase

6. Coinmama

Coinmama is a popular cryptocurrency vendor platform founded in 2013. It has millions of users and is available in 188 countries.

Users of the platform can buy 8 different currencies including Bitcoin, Ethereum, Litecoin, XRP (Ripple), Bitcoin Cash, Cardano and Quantum.

  • Coins offered: 10 types
  • Trading fees: Fees vary with your loyalty level. On “buy” trades, fees can be up to 5.90%; your funding method e.g. credit card can add an additional 5% processing fee
  • Security: Coinmama does not hold your crypto assets. You are required to move them to your own wallet

You can buy various cryptocurrencies on Coinmama, but can only sell Bitcoin. Since it’s not a trading platform, you can only purchase crypto with fiat currency.

Visit Coinmama

7. Bitcoin ATM

You can purchase Bitcoin at a vending machine specifically designed for buying and selling cryptocurrency. Generally, you should already have a Bitcoin address where your Bitcoin will be deposited and you pay using cash.

Some Bitcoin ATMs also allow you to exchange Bitcoin for cash.

The commissions charged by Bitcoin ATMs are typically higher than what you’d pay on an exchange.

As of this writing (September 2020), there are 891 Bitcoin ATMs in Canada. You can locate the ones in your area here.

How To Store Your Bitcoin

Bitcoin is stored on a wallet which can be installed on your computer or phone. You can also use a hardware wallet or even a paper wallet.

A wallet works like a traditional wallet or bank account and contains your private and public keys.

Your public key is the string of alphanumeric symbols you provide to someone who is sending you Bitcoin. Your private key is what gives you access to your coins and you should guard it carefully.

If your private key is compromised, you can lose all your funds.

The four main types of Bitcoin wallet are:

  • Desktop wallets
  • Mobile wallets
  • Web wallets
  • Hardware wallets

Hardware wallets are offline (aka cold storage) and are the most secure types of wallets available. They can be a bit expensive compared to software wallets.

You can also simply print off your private and public keys and corresponding QR codes on paper and store it in a safe place.

Bitcoin tading platforms like Wealthsimple Crypto and MogoCrypto keep your cryptocurrency in cold storage with their custodians or exchange partners.

Is Bitcoin Trading Legal in Canada?

It is legal to buy, sell, and spend Bitcoin in Canada. However, the Financial Consumer Agency of Canada wants you to know that Bitcoin and other cryptocurrencies are not legal tender in Canada.

Only bank notes issued by the Bank of Canada under the Bank of Canada Act and coins issued under the Royal Canadian Mint Act are considered to be legal tender.

This does not stop you from using Bitcoin to pay for goods and services wherever it is accepted as a means of payment.

Also, it is perfectly legal to buy and sell Bitcoin and make a profit or capital gain when you sell your coin for more than you paid for it.

If you are tech savvy enough to indulge in Bitcoin mining, this activity is also legal in Canada. I should note that as the competition as increased over time, Bitcoin mining has become a lot more expensive.

Is Bitcoin Safe?

Bitcoin is a speculative investment and you should not trade it using funds you cannot afford to lose.

Having lost thousands of dollars day-trading S&P 500, NASDAQ, and Dow Jones Industrial Average (DJIA) e-mini futures in the early 2000’s, I’m no stranger to speculative investments and high-risk trading.

These days, only a negligible portion of my net worth goes towards non-traditional assets (e.g. Bitcoin and P2P lending). My portfolio is largely composed of hassle-free one-ticket ETFs.

Bitcoin and other cryptocurrencies can make you a lot of money, but you can also lose 100% of your investments.

A good example of how this can happen is Quadriga. When this crytocurrency exchange went belly-up in 2019 following the alleged death of its founder, Gerald Cotten, customers lost $215 million.

I lost approximately $600 or so in Ether when this happened.

In addition to unscrupulous exchanges, there is also a challenge with hackers who steal Bitcoin from exchanges through ransomware and other fraudulent means.

As per this Forbes article, over $4 billion worth of cryptocurrencies was stolen in the first half of 2019 alone.

It goes without saying that Bitcoin trading is a very risky venture and you should only invest in it after doing your due diligence.

In order to decrease the chances that you could lose your funds, use a regulated cryptocurrency trading platform and avoid leaving your Bitcoin in a hot wallet.

Pros and Cons of Trading Bitcoin

There are many advantages and disadvantages of trading Bitcoin in Canada.

Pros of Bitcoin

  • Bitcoin has the largest market capitalization among cryptocurrencies and is easy to buy and sell i.e. it is liquid
  • Its acceptance as a means of payment for goods and services has increased and it has real-life utility. You can also exchange Bitcoin for fiat currencies e.g. CAD, USD, EUR,GBP, and others
  • You can make money trading Bitcoin if you buy low and sell high
  • It has a finite supply which infers it should be able to hold intrinsic value over the long term. This also makes it less sensitive to inflation
  • It is a decentralized system and is theoretically not subject to the whims and caprices of any Central Bank
  • Bitcoin offers in-built privacy protections and transactions are anonymous

Cons of Bitcoin

  • The value of Bitcoin fluctuates wildly and often there are no concrete fundamentals to explain the big movements in price
  • Hackers can steal Bitcoin from wallets especially those online. Stolen digital currencies are often not recoverable. You can also lose your keys and access to your coins
  • There is limited regulatory oversight of digital currencies by the government. So, if you are a victim of fraud, you may have limited recourse to get your money back
  • Your funds are not protected by Canada Deposit Insurance Corporation (CDIC) or the Canadian Inevstor Protection Fund (CIPF)
  • There are lots of competing alternative coins (alt-coins) and many Initial Coin Offerings (ICOs) are introduced each day. As the numbers increase, Bitcoin becomes less dominant
  • Bitcoin is not accepted as a means of payment by most businesses and it is banned in a few countries
  • Bitcoin mining uses a lot of electricity (energy) which is detrimental to the environment

Bitcoin Taxation in Canada

Gains from cryptocurrency trading are taxable in Canada. As per the Canada Revenue Agency (CRA), cryptocurrency is treated like a commodity under the Income Tax Act.

How you report the gains or income from digital currencies depends on whether you are:

  • Accepting payments in cryptocurrencies
  • Trading cryptocurrencies, or
  • Mining cryptocurrencies

Let us start with the business owner who accepts Bitcoin as a means of payment. In this case, tha value of Bitcoin received is reported as business income for tax purposes.

In order to figure out the value of the transaction, you can use the exchange rate available at the time of the transaction in Canadian dollars.

If your business is registered to collect GST/HST, you must also collect and remit this tax amount.

Infrequent Bitcoin users may also have to pay taxes on Bitcoin usage.

For example, if you bought Bitcoin in order to pay for goods and services and it increases in value, you are required to declare a capital gain when you dispose of it. The same applies to buy and hold investors.

Capital gains are taxed differently from income. Only 50% of your gains is added to your taxable income for the year.

If you incur a loss, it is treated as a capital loss and can be offset against capital gains for the year or any of the preceeding three years.

If CRA classifies you as a day trader based on the nature of and frequency of your transactions, your profits may be taxable as business income.

Cryptocurrency miners who are deemed to be conducting a business will have to report profits as taxable income.

There are many angles to how the CRA considers cryptocurrency profits. For instance, taxable income or capital gains may also be generated when you exchange one cryptocurrency for another e.g. Bitcoin for Ethereum.

You can check this CRA guide for more information.

Wealthsimple Crypto vs. MogoCrypto

Wealthsimple Crypto
MogoCrypto
Cryptocurrency offered
Bitcoin and Ethereum
Bitcoin
Funding methods
Bank transfer
Interac e-Transfer
Fiat currency accepted
CAD
CAD
Regulated
Canadian Securities Administrators (Regulatory Sandbox)
No
Cold wallet storage
Gemini Trust Company, LLC
Coinsquare
Exchange used
Market maker access to multiple exchanges (none specified)
Coinsquare
Trading fees
Spread; no deposit or withdrawal fees
1% and exchange mark-up
Referral program
Get $10 when you refer a friend*
Get $5 when you refere a friend*
Other offerings
Robo-advisor and brokerage platform; high-interest savings account; tax software
Free credit score; identity fraud protection service, mortgage, personal loans
Learn more

*Terms and conditions apply.

Have you traded any crytocurrencies since they took to the airwaves? Let us know about your experiences in the comments.