Cryptocurrencies are a great addition to any portfolio and not having some level of exposure to crypto markets is a bad idea when considering the direction in which they’re headed. If you live in Canada, you’re in a great place to buy and sell cryptocurrency as the government seems to view them favorably.
You have to know, however, that trading cryptocurrencies is not quite like trading other kinds of assets. There are some things you’ll need to get familiar with first and you’ll need to understand the basics of cryptocurrency trading before getting started. Let’s take a look at how you can start trading cryptocurrency in Canada in three steps.
Understand How They’re Taxed
While the country is very open to crypto, the tax situation around them is very complicated. First of all, cryptocurrencies are treated as a commodity by the CRA, but the profits from crypto trading are considered as either capital gains or business income. This is where things get complicated. Only 50% of capital gains are taxed while 100% of business profits are taxable. The problem is that the definition of business trading is very loose.
According to the CRA, your trading will be considered a business if you conduct day-to-day transactions in a commercially viable way. That can be very difficult to assess and you may need to sit down with an accountant to understand if you’ll be taxed as a business or not. And, since cryptocurrencies are commodities under the tax code, every event is taxable, even crypto to fiat exchanges. So, you might want to speak with an expert first if you want to trade seriously to avoid tax issues.
Find a Wallet
Know that you don’t necessarily need to get a wallet when trading crypto, but it’s highly recommended. Leaving coins on an exchange is a very bad idea and pretty much means that the exchange owns your crypto. Some exchanges have been hacked and have even disappeared without leaving a trace, so be careful.
When looking at a Bitcoin Wallet Canada, you’ll have the choice between either a cold wallet or a software wallet. Software wallets are more convenient but cold wallets are safer since they don’t need to be connected to the internet. We would suggest that you do your research on both types and consider using both.
Find a Good Exchange
Now that you have a wallet, you can start looking at exchanges. You need to be very careful though, as not all exchanges are reputable and they’re not as tightly regulated as other types of exchanges.
You need to look at what type of security measures they take and how they secure their users’ funds. You also need to know if they allow you to exchange fiat for cryptocurrencies as it’s not an option on all exchanges.
This is all you need to know if you want to start trading cryptocurrencies in Canada. Make sure that you know the rules surrounding them and only transact over a proven exchange that is highly respected by the community.