How to buy crypto in Canada

If you’re wondering how to buy crypto in Canada, you’re not the only investor thinking the same thing! When the price is down, it’s time to fill your bag - here’s our simple step by step guide on how to buy crypto in Canada, including the best places to buy crypto in Canada, the best way to buy crypto in Canada and which credit cards let you buy crypto in Canada. Let’s go!

How to buy crypto in Canada

According to the Ontario Securities Commission (OSC), around 13% of Canadians now own crypto assets. All this to say, if you're wondering how to buy crypto - you're not the only one.

But Canadian regulation around crypto assets, especially at a provincial level, can be complicated. Some popular Canadian crypto exchanges aren't regulated to operate in all provinces and indeed some popular worldwide exchanges aren't regulated to operate in Canada at all. To top this off, some Canadian debit and credit cards will not allow crypto purchases. Which is why we've put together our simple 3 step guide on how to buy crypto in Canada for those completely new to the crypto market:

• Pick your cryptocurrency
• Pick your crypto exchange
• Buy your crypto

How to pick a cryptocurrency to purchase

There’s more than 14,000 cryptocurrencies to pick from - so how do you know which crypto you want to buy? 

First up - no crypto investment is risk free, and don’t believe anyone who tells you it is. Cryptocurrencies are decentralized, largely unregulated and the value driven by market forces. But as many early adopters know now - with high risk often comes high reward.

There is no simple answer when it comes to which crypto to buy, it all comes down to your specific circumstances, but some factors to consider include:

• Whitepapers: It’s a common misconception that all cryptocurrencies are simply decentralized alternatives to fiat currencies, but it’s not the case. Many cryptocurrencies are investments in an underlying technology, usually focused on solving traditional financial market issues. For example, Ethereum blockchain is a blockchain focused on executing smart contracts - which are pieces of code that automatically execute financial transactions with no need for intermediaries like a bank. A reputable cryptocurrency will have a whitepaper (and a roadmap) that will explain all of this and what they aim to achieve.
• Max and total supply: Maximum supply, also known as fixed supply, is the maximum number of coins that will ever be in supply for a given cryptocurrency, while total supply refers to the number of coins currently in supply - including circulating and locked coins. A good example of this is the Bitcoin maximum supply is 21 million, while the total supply currently is around 19.7 million. So there will only ever be 21 million Bitcoins in supply, and this scarcity often means the value is driven up, while a high maximum supply often means the value is driven down. 
• Market cap: Market cap, or market capitalization, refers to the total fiat market value of all the coins for a given cryptocurrency. This fluctuates (a lot!) but it can be a helpful figure in helping you determine how popular the crypto asset you’re looking at investing is, as well as the potential profitability of an investment.

How to pick a crypto exchange

Canada regulations around crypto exchanges are quite heavy compared to many other countries. All crypto exchanges, or virtual asset service providers (VASPs) are considered Money Services Businesses (MSBs) and must register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) and adhere to the MSB requirements. These requirements include KYC processes, as well as reporting any crypto transfers over $10,000 (CAD) to FINTRAC.

Canadian regulation for crypto exchanges also distinguishes between crypto-asset trading platforms (CTPs) which immediately deliver crypto assets to clients (non-custodial exchanges) and exchanges that hold custody of the assets (custodial exchanges). Assets held on custodial exchanges are treated as security or derivatives, and the exchange is regulated as such with more stringent requirements due to the need to register with provincial securities administrators like the OSC.

As well as this, the Canadian Securities Administrators (CSA) has guidelines for Canadian crypto exchanges to help prevent MSBs from distributing inaccurate or misleading information to clients.

It’s a lot of red tape - but the reality is that Canadian crypto investors are very well protected thanks to the regulation. In the wake of the collapse of huge, largely unregulated, exchanges like FTX, Canadian crypto investors can rest assured that the majority of crypto exchanges accessible in Canada are well regulated.

You can read our guide on the best crypto exchanges in Canada to help you pick a crypto exchange, but in general, you’ll want to consider the following factors: 

• Cryptocurrency selection: Some smaller exchanges only offer a very limited selection of more popular cryptocurrencies. This may not be a problem for you if you’re sticking to the top cryptocurrencies, but if you’ve got your heart set on a less popular token, then you’ll need to check if the exchange you want to use offers your chosen cryptocurrency.
• Security: Crypto exchanges present a very appealing target for hackers and many have been hacked over the years. You need to know your assets are safe for the period they’re on the platform. 
• Fees: Almost all crypto exchanges charge fees when you’re buying, selling or trading crypto. Although most of the fees will be in a similar price range, you’ll definitely find crypto exchanges on the lower or higher end of average. If you’re buying a large amount of crypto, these fees can wrack up as they’re usually a percentage of your overall purchase price. So while 1% on $50 of crypto is minimal, 1% on $10,000 is pretty costly!

Remember, you shouldn’t leave your crypto stored on any crypto exchange if you want to follow best security practices. Even though the majority of reputable crypto exchanges store your crypto in offline, cold storage - the mantra of not your keys, not your crypto rings true. You should always store long-term investments that you’re not actively trading with in secure offline wallets. Not sure which? Check out our best crypto wallet guide.

How to buy your crypto

Once you’ve chosen your crypto and exchange… you just need to buy your crypto.

Most reputable exchanges let you use a credit or debit card to make your crypto purchase and this is usually the easiest way to buy your crypto, as well as adding you the added protection from your banking provider.

This said, some credit and debit card providers in Canada block transactions of crypto as standard - so picking the right card to use is key for an easy transaction.

For a smooth transaction, you can use Koho prepaid Mastercard. Koho makes buying crypto in Canada simple and secure, all you need to do is:

1. Create an account with your chosen crypto exchange. You’ll generally also need to complete KYC processes in order to purchase your crypto, so you may need to provide personal information like your name, address, photo ID and more.
2. Select the buy crypto with card option.
3. Pick the cryptocurrency you want to purchase and the amount of crypto you want to purchase.
4. Enter your card details and complete any verification.
5. Wait to receive confirmation you’ve purchased your crypto. You may also wish to then move your crypto to a secure, offline wallet by transferring it from your exchange.

What are the tax implications of buying crypto in Canada?

Buying crypto with fiat currency like CAD in Canada is tax free! However, if you buy over $10,000 in crypto, your exchange may be required to report your transaction to the relevant financial service regulators. 

While buying crypto might not be taxed, many other transactions will be. For example, buying crypto using another cryptocurrency is seen as a disposition and any gain subject to tax.

As well as this, despite purchases of crypto with CAD being tax free - you’ll still need to keep good records of your cost basis (how much your crypto cost you) so you can calculate your gains and losses when you sell, spend or gift crypto later on. The best way to do this is with a crypto tax calculator like Koinly. Koinly tracks your cost basis and calculates your gains and losses using the CRA approved ACB method with the Superficial Loss Rule - making crypto tax simple.

You can learn more about how crypto is taxed in our Canada Crypto Tax Guide.