What is cryptocurrency?<\/h2>\n\n\n\n
Cryptocurrency is made possible by a ledger technology called blockchain that relies on advanced computer algorithms to track transactions.<\/p>\n\n\n\n
One of the most well-known cryptocurrencies is Bitcoin, which was introduced in 2009. Since then, cryptocurrencies have become incredibly popular. By some estimates, there are over 10,000 digital currencies in circulation worldwide.<\/p>\n\n\n\n
In Canada, traditional units of currency are known as dollars. In contrast, individual units of cryptocurrencies are often referred to as coins or tokens.<\/p>\n\n\n\n
Unlike traditional currency, which is approved by a nation as legal tender and regulated by a national government and centralized bank, cryptocurrency is largely unregulated and there is no single overarching financial entity that oversees its use. As such, crypto is not considered legal tender in Canada.<\/p>\n\n\n\n
Cryptocurrencies are designed for several different purposes:<\/strong><\/p>\n\n\n\n Reasons for crypto\u2019s growing popularity include its decentralized, unregulated nature; a unique and arcane creation process; and the fact that transactions can\u2019t be traced. The constant headlines cryptocurrency seems to command in the news \u2014 mostly due to volatile value fluctuations \u2014 also add to its allure, even if those stories are often about the unpredictable nature of crypto as an investment.<\/p>\n\n\n\n If you were to name the single moment when digital currency went from outlier to mainstream news item, you would likely go back to 2017, when the value of a single bitcoin went from $3,000 to $20,000 in six months. A year later, the value had plummeted back down to around $4,000. As of the time of this writing, the pendulum had swung back the other way, with a bitcoin trading at over $55,000. The rollercoaster-like ride and high-risk status of the the investment are features that attract some to crypto, while serving as a warning to others.<\/p>\n\n\n\n \u00bb MORE:<\/strong> Scams to watch out for in Canada<\/a><\/p>\n\n\n\n Some of the most widely traded digital currencies in Canada include Bitcoin, Ethereum, XRP, Litecoin, Ripple, EOS, Chainlink, Polkadot, Uniswap, Polygon and Dogecoin.<\/p>\n\n\n\n Canadians can access digital currencies via a number of crypto trading platforms, like Binance, Bitbuy, Coinbase, Crypto.com and Kraken. Binance, for example, is the largest crypto exchange in the world and sells over 350 different varieties of cryptocurrency. Note: As of June 2021, Binance ceased operations in Ontario due to regulatory pressure from the Ontario Securities Commission.<\/p>\n\n\n\n \u00bb MORE:<\/strong> How do online-only banks work?<\/a><\/p>\n\n\n\n In Canada, the main way to buy and sell digital assets is by using an online crypto exchange. These exchanges operate much like a traditional brokerage trading platform, though with a crypto exchange you may have the option to buy digital currencies with your own traditional currency (Canadian dollars) or any existing crypto assets you own. You may be able to use a credit card<\/a>, bank wire, Interac e-Transfer, or other payment method for the transaction.<\/p>\n\n\n\n While some platforms hold your assets for you in their own proprietary \u201cwallet\u201d specially designed to store digital currency, you may have the option of moving your crypto assets into your own, non-hosted wallet (i.e., one that\u2019s not overseen by a crypto platform). More experienced digital traders usually like to have absolute control over their own assets and so will often opt to house crypto into their own wallet.<\/p>\n\n\n\n Online wallets are less secure than hardware\/offline wallets because they\u2019re connected to the internet and can therefore potentially be hacked. However, it\u2019s much easier to lose a hardware wallet<\/a>. All wallets feature advanced software that is specially encrypted and protected by a personal identification number (PIN) that you\u2019ll need to access your crypto. If you lose your PIN or a hardware wallet, you lose your crypto \u2014 that\u2019s one of the dangers of investing in a non-regulated, decentralized currency.<\/p>\n\n\n\n Be aware that not all crypto trading platforms allow you to actually store digital assets off of the platform in your own wallet, so check the details before you sign up.<\/p>\n\n\n\n \u00bb MORE:<\/strong> Are you ready for a digital wallet?<\/a><\/p>\n\n\n\n Cryptocurrency is one of the most volatile investments in the world. While you could certainly see huge gains, you\u2019re just as likely to experience massive drops in value. Because digital currency is fairly new and unregulated, performance is difficult to predict, making it tough for beginner investors<\/a>.<\/p>\n\n\n\n For those looking to experience the excitement of trading in digital assets but who also want to minimize risk, investing in a cryptocurrency exchange traded fund (ETF) could be the answer.<\/p>\n\n\n\n Canada has numerous cryptocurrency ETFs available, including several that focus solely on Bitcoin and even a carbon-neutral crypto ETF. Another advantage is that crypto ETFs can be held in registered accounts (like RRSPs and TFSAs<\/a>), whereas individual cryptocurrencies can\u2019t.<\/p>\n\n\n\n \u00bb MORE: <\/strong>How to invest in a TFSA<\/a><\/p>\n\n\n\n Cryptocurrency is not a widely accepted form of payment in Canada. Because the value of any kind of digital currency is erratic, many merchants are reluctant to accept it in exchange for goods and services.<\/p>\n\n\n\n One way to spend your cryptocurrency in Canada is to buy gift cards at Coincards.ca. This platform allows you to exchange cryptocurrency for gift cards from a wide array of retailers like Starbucks, Amazon.ca and Air Canada. The site also offers prepaid Visa and Mastercards<\/a>.<\/p>\n\n\n\n A crypto rewards credit card<\/a> can be another way to both earn and spend digital currencies. With a crypto rewards card, you have the option to earn digital currencies \u2014 rather than points<\/a> or miles \u2014 in exchange for typical spending. Certain crypto rewards cards also act like their own exchange, allowing you to buy goods and services with your digital currency.<\/p>\n\n\n\n In 2021, the Canada Revenue Agency (CRA) introduced a guide<\/a> detailing the tax implications of owning and trading in cryptocurrency. The CRA announced that it will treat cryptocurrency like a commodity for purposes of the Income Tax Act<\/a>. Any income generated from transactions involving digital currency will be treated as either business income or as a capital gain, depending on the taxpayer\u2019s circumstances.<\/p>\n\n\n\n Sandra MacGregor is a freelance writer who has been covering personal finance, investing and credit cards for over a decade. Her work has appeared in a variety of publications like…<\/p>\n\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\tRead more about Sandra MacGregor and explore their articles<\/span>\n\t\t\t\t\t\t<\/a>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t<\/div>\n<\/div>\n\n\n\n\t Store your interest-bearing or capital gains and dividend investments in a TFSA to increase your wealth without paying taxes on it.<\/p>\n\t<\/div>\n\n\t The tax-free withdrawals of a TFSA offer more flexibility, but the tax-deferred contributions of an RRSP are great for retirement. The type of account you choose will depend on your savings goals.<\/p>\n\t<\/div>\n\n\t The best high-interest tax-free savings accounts (TFSAs) have minimal fees and earn high rates of interest.<\/p>\n\t<\/div>\n\n\t\n
Why are cryptocurrencies popular?<\/h2>\n\n\n\n
What cryptocurrencies are available in Canada?<\/h2>\n\n\n\n
How to buy cryptocurrency in Canada<\/h2>\n\n\n\n
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Is it safe to invest in cryptocurrency?<\/h2>\n\n\n\n
What can I do with my cryptocurrency?<\/h2>\n\n\n\n
Taxes and cryptocurrency<\/h2>\n\n\n\n
\n\t\t\tAbout the Author\t\t<\/h4>\n\n\t\t\t\t\t
\n\t\t\t\tDIVE EVEN DEEPER\t\t\t<\/h4>\n\t\t\n\t\t
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Nora Dunn<\/a>\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t<\/div>\n\t\t<\/div>\n\t<\/div>\n<\/div>\n<\/div>![\"TFSA](\"https:\/\/www.nerdwallet.com\/ca\/wp-content\/uploads\/sites\/2\/2021\/07\/TFSA-vs-RRSP-e1626728346207-460x191.jpg\")
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Hannah Logan<\/a>\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t<\/div>\n\t\t<\/div>\n\t<\/div>\n<\/div>\n<\/div>![\"Best](\"https:\/\/www.nerdwallet.com\/ca\/wp-content\/uploads\/sites\/2\/2021\/12\/Best-High-Interest-TFSA-e1639177706748-460x191.jpg\")
\t<\/a>\n\t\t\t\n\t\n\t\tBest Tax-Free Savings Account Rates in Canada for 2025\t<\/a>\n<\/h4>\n\n\t
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