How to buy Bitcoin in Canada

Key takeaways

• As of 2024, around 10% of Canadians held cryptocurrencies, including Bitcoin, positioning the country ahead of Australia, Germany and Norway in adoption.
• Bitcoin is classified as a commodity in Canada, allowing individuals and businesses to use it legally. Crypto exchanges must comply with regulations set by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).
• Canadians can purchase Bitcoin through centralized exchanges, decentralized exchanges, non-custodial wallets, Bitcoin ATMs and Bitcoin ETFs.
• Bitcoin holders can store their funds in custodial, non-custodial or cold wallets for enhanced security.

Canada is one of the leading countries when it comes to Bitcoin adoption. According to a Triple-A report, as of 2024, 10.1% of Canadian residents own cryptocurrencies, including Bitcoin (BTC), putting the country ahead of Australia (9.6%), Norway (8.7%) and Germany (8.3%). Notably, a balanced regulatory environment has helped crypto evolve in the country. 

When it comes to purchasing Bitcoin, Canadians and other residents have several options. Canadians can buy Bitcoin on a centralized exchange (CEX), a decentralized exchange (DEX), via a non-custodial wallet or a Bitcoin ATM. 

This article briefly explains the regulatory landscape for Bitcoin in Canada and walks you through multiple options to purchase BTC. It also informs how you can store Bitcoin safely in Canada.

Understanding Bitcoin regulations in Canada

The Canada Revenue Agency (CRA) regards Bitcoin as a commodity. The classification comes from how the CRA interprets and applies existing tax laws to crypto transactions. While Bitcoin is not recognized as a legal tender in the country, individuals and businesses can lawfully purchase, sell and use it in transactions. Crypto platforms facilitating Bitcoin exchanges and traders must comply with regulations, though.

The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) implements Anti-Money Laundering (AML) and counter-terrorism funding (CTF) regulations in Canada. 

These regulations require crypto exchanges in Canada to register as Money Services Businesses (MSBs) and adhere to Know Your Customer (KYC) regulations. This includes authenticating user identities, tracking transactions and reporting suspicious activity to FINTRAC.

Canada taxes 50% of crypto earnings as capital gains. For instance, if you make a $10,000 profit from a Bitcoin transaction, only $5,000 is considered taxable income. This amount is then added to your total income, and since Canada follows a progressive tax system, the actual tax rate applied depends on your overall earnings.

Business income is treated differently in Canada. Cryptocurrency activities considered part of a business or profession, such as mining, referral bonuses or staking rewards, are taxed as business income, not capital gains.

Crypto users must keep records of all cryptocurrency transactions, including purchase prices, sale prices and dates of transactions. Maintaining detailed records is essential for accurate tax reporting and compliance with Canada’s tax regulations. It means failure to record Bitcoin earnings may result in penalties or audits by the CRA.

Also, income tax rates in Canada vary by province. To calculate your total income tax, you will need to combine the federal tax rate with the rate specifically applicable to your province or territory of residence. 

Did you know? The Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) regulate crypto trading platforms in the country.

Key considerations before buying Bitcoin in Canada

Before you buy Bitcoin in Canada, you need to complete some steps, as explained below. Moreover, to keep your Bitcoin safe, you also need a cold wallet. Here is more information regarding these steps:

Register on a platform

The first step to buying Bitcoin in Canada is creating an account on a regulated cryptocurrency exchange or a wallet. To sign up, visit the exchange’s website or download its app, then register using your email and set up a strong password.

In Canada, crypto exchanges are required to follow KYC regulations. It means you must verify your identity by submitting government-issued identification and proof of address. Once verified, you can deposit Canadian dollars using wire transfers or credit/debit cards. Some wallets allow you to pay for Bitcoin in real-time.

Set up a non-custodial wallet

Crypto platforms provide a built-in custodial wallet where you can keep your Bitcoin. But it is the exchange that controls the private keys. 

While convenient, keeping large amounts of Bitcoin on the centralized platform is risky due to potential hacking threats. 

In contrast, a non-custodial wallet, such as Trust Wallet or MetaMask, gives you complete control over your Bitcoin. The downside is that if you lose your password or recovery phrase, you risk losing access to your funds permanently.

Get a cold wallet

If you want to keep Bitcoin for the long term, consider getting a cold wallet (hardware wallet). You can store Bitcoin on these devices offline, protecting it from online hacks. You only connect the wallet to the internet when making transactions, significantly reducing security risks.

Did you know? Canada is the first country to approve a Bitcoin exchange-traded fund (ETF), with several trading on the Toronto Stock Exchange.

How to buy Bitcoin on a centralized exchange in Canada

Buying Bitcoin on a centralized exchange is the most straightforward way to get the cryptocurrency. You can buy Bitcoin from global exchanges operating in Canada, such as Binance, Coinbase and Kraken, as well as native Canadian exchanges like Newton, VirgoCX and Ndax. 

The example below uses Binance for illustration purposes and assumes that you have registered on the platform:

Step 1: Set a fiat currency

Click the “Deposit” button in the upper-right corner. In the menu that appears, select a fiat currency on the scroll box at the top. This example has the Canadian dollar (CAD) as the chosen fiat currency. Thereafter, click “Buy with CAD” and complete the process. Crypto exchanges generally allow you to pay using your debit/credit card or a wire transfer. 

Step 2: Buy Bitcoin

When you click “Buy with CAD,” a “Buy/Sell” panel will appear. On the “Buy” panel, fill in the amount in CAD. The “Receive” box will reflect the corresponding value in Bitcoin. Select the preferred method of payment.

Complete the buying process, and Bitcoin will appear in your exchange wallet.

You can also acquire Bitcoin through over-the-counter (OTC) trading or peer-to-peer (P2P) trading on a centralized exchange. 

In OTC trading, the crypto exchange facilitates the buying and selling of the cryptocurrency directly between two parties. Such trades typically involve large sums with a minimum order size. For example, Binance requires a minimum of $200,000 for OTC Bitcoin trades. 

For smaller amounts, P2P trading is a viable option. For this method, the exchange acts as a secure intermediary between the buyer and seller, holding the crypto in escrow until the money transfer is confirmed. Depending on the seller’s preferences, buyers can use fiat currency or other cryptocurrencies to complete the purchase.

How to buy Bitcoin in Canada using a non-custodial wallet

Unlike centralized exchanges, non-custodial wallets give you complete control of your Bitcoin. Here is how to buy Bitcoin using a non-custodial wallet with Trust Wallet as an example. It assumes you have created a new wallet on Trust Wallet after setting up a password and securely storing your 12-word recovery phrase.

To begin the buying process of Bitcoin, tap the “Buy” button on Trust Wallet Home screen.

Search for “Bitcoin” or “BTC” and select it. Fill in the amount and complete the purchase.

Verify all purchase details and tap “Confirm” to complete the transaction. Once the network processes the transaction, the purchased Bitcoin will appear in your Trust Wallet.

Did you know? Canada is experiencing a surge in cryptocurrency adoption. By 2028, nearly 13 million Canadians, or about 32% of the population, may be using cryptocurrencies.

How to get Bitcoin on a decentralized exchange (DEX)

Decentralized exchanges (DEXs) enable peer-to-peer (P2P) cryptocurrency transactions without any central authority. Smart contracts automate trade execution based on user input, eliminating the need for intermediaries. DEXs never take custody of user funds, giving users complete control over their assets.

DEXs operate on blockchains like Ethereum and Solana, which support smart contracts. Bitcoin’s blockchain does not have this functionality, so you can’t trade native Bitcoin on these DEXs. Instead, you’ll need a “wrapped” or “bridged” version of Bitcoin, such as Wrapped Bitcoin (WBTC).

While some DEXs are beginning to offer fiat on-ramps, often, you’ll need to trade another cryptocurrency for WBTC or another bridged Bitcoin token. 

To use a DEX, you’ll need to connect your non-custodial crypto wallet. The following example demonstrates how to acquire Bitcoin on a DEX like Uniswap, assuming you’ve already set up your wallet.

Step 1: Connect your wallet

Tap the box icon at the top to connect the DEX to your wallet.

Step 2: Swap for WBTC

Tap the “Swap” button at the bottom of the screen. Select the tokens and amount you want to swap.

How to buy Bitcoin using a Bitcoin ATM in Canada

Bitcoin ATMs offer a convenient way to purchase Bitcoin in Canada. You can find these ATMs in malls, coworking spaces and convenience stores. One such location is Outlet Collection at Niagara.

Use platforms like CoinATMRadar to locate an ATM that allows Bitcoin purchases. But before using one, ensure you have a Bitcoin wallet ready to receive your funds. 

Follow these steps to buy Bitcoin using a Bitcoin ATM:

1. Verify your identity: ATMs generally require you to scan a government-issued ID for verification.
2. Start the transaction: Select “Buy Bitcoin” on the screen and enter the amount in CAD or BTC.
3. Enter your wallet address: Scan your wallet’s QR code (deposit address) to receive the Bitcoin you’re about to buy.
4. Insert cash: Deposit the equivalent amount in Canadian dollars into the ATM.
5. Confirm the purchase: Review transaction details, including fees, and confirm your purchase.

Once confirmed, the Bitcoin will be processed on the blockchain and transferred to your wallet.

How to buy Bitcoin ETFs in Canada

If you prefer not to invest directly in Bitcoin, you may consider spot Bitcoin exchange-traded funds (ETFs), which track the underlying asset’s (Bitcoin’s) price.

Here is how you can invest in Bitcoin ETFs in Canada:

1. Select a brokerage: Open an account with a trusted brokerage that offers Bitcoin ETFs.
2. Verify your identity: Complete the KYC process by submitting the necessary documents, such as your ID and proof of address.
3. Fund your account: Deposit money into your brokerage account via bank transfer, debit/credit card or other supported methods.
4. Find Bitcoin ETFs: Use the brokerage’s search tool to locate Bitcoin ETFs listed on stock exchanges.
5. Place an order: Choose the number of ETF units you want to buy. Opt for a market order (buy at the current price) or a limit order (set a preferred price).
6. Confirm and finalize: Review the details and confirm your purchase. The ETF will be added to your investment portfolio once the transaction is complete.

How to store Bitcoin in Canada

Keeping your Bitcoin secure is important. There are different types of Bitcoin wallets, including desktop, mobile, online, hardware and paper wallets. 

While you may leave your Bitcoin on exchanges, it is the exchange that controls your crypto, as it holds the private keys, not you.

For maximum security, hardware wallets and paper wallets store Bitcoin offline, protecting it from hackers; however, losing the private key or paper wallet could mean losing access to funds. 

Conversely, mobile wallets provide convenience, allowing users to access Bitcoin anytime; however, they face several drawbacks as well, including security risks, privacy concerns and technical issues.

Cold wallets enhance the security of your Bitcoin by storing your digital assets offline. It cuts off the hackers from accessing your crypto, eliminating any chance for them to steal your private keys. Though less convenient for active trading, they provide a robust solution for securing your Bitcoin investments for the long term.

Does the Canadian six-year rule for capital gains tax apply to Bitcoin?

Canada’s six-year rule primarily applies to capital gains tax exemptions on principal residences. This rule allows homeowners to claim an exemption on capital gains tax if they have lived in the property as their primary residence for at least six years. This exemption applies to housing units owned and inhabited by the owner, their spouse or their children.

However, this rule does not apply to Bitcoin or any other cryptocurrency. Since Bitcoin is considered a digital asset and not a principal residence, it does not qualify for capital gains exemptions under this rule. As mentioned, any profits made from Bitcoin transactions are subject to Canada’s capital gains tax rules, where 50% of the gain is taxable based on your total income.

How to claim crypto losses on taxes in Canada

In Canada, claiming crypto losses depends on how the CRA classifies your activity — capital gains/losses or business income/losses.

• Capital losses: If you invest in cryptocurrency and sell at a loss, it is considered a capital loss. You can use this loss to offset capital gains from the same tax year or carry it forward/backward as per tax regulations.
• Business losses: If you trade crypto actively as a business, losses may be classified as business losses, which can be deducted from other sources of income such as employment or investments.

The CRA determines business activity based on factors like:

• Frequency of trades
• Use of trading strategies
• Level of organization and intent to generate profit

To report crypto losses, be aware that:

• Capital losses go on Schedule 3 (Capital Gains/Losses).
• Business losses should be reported on business tax forms.

Record-keeping is crucial; maintain detailed records of all transactions, including:

• Purchase and sale dates
• Transaction amounts
• Wallet addresses
• Exchange records

Having proper documentation ensures smooth tax filing and compliance with CRA regulations. If needed, seek guidance from a qualified tax professional to better understand your specific obligations.