Interest in bitcoins and other crypto currencies is growing around the world, but one of the first hurdles to overcome for someone interested in trying out the technology is obtaining bitcoins by exchanging the fiat currency from their home economy.
For residents of Canada, obtaining bitcoins is pretty easy, but the situation is complicated by Canadian anti-money laundering (“AML”) laws. These laws are put in place by governments in order for them to track money flows. Among other things, AML laws require financial intermediaries such as banks and payments processors to obtain the identity of their customers (also known as know your customer “KYC” rules). If Canadians want to purchase bitcoins online, they’ll likely need to comply with our AML rules. So be prepared to verify your identity.
When Canadians are deciding how to buy and sell bitcoins, they should also keep in mind how bitcoins work. Bitcoin balances are recorded on a digital ledger called a “blockchain”. The blockchain keeps track of all the bitcoins in existence on various bitcoin “addresses”. Each bitcoin address has a record of the transactions associated with it. Ultimately, if you want bitcoins of your own, they will be stored and recorded on a bitcoin address. Whether you control this address directly or you rely on a “wallet” service depends on your level of sophistication. Bitcoin “wallets” are service providers who enable their customers to more easily interact with bitcoins by providing bitcoin addresses for their customers to use, view transaction histories, provide account protection services, etc. There are pros and cons to using a bitcoin wallet service, but for the average bitcoin enthusiast, using an online bitcoin wallet is a good place to start. The most popular online wallets are those such as Coinbase, Blockchain.info, Circle, and Xapo. Once you have a bitcoin wallet, you’ll have a type of bitcoin payment account where you send and receive payments, and store your bitcoins.
Although wallets are good to use for bitcoin payments and storage, Canadians won’t be able to buy and sell bitcoins for Canadian dollars using any of the main bitcoin wallet providers. That’s because its too costly for these services to comply with Canadian AML laws. The market for these types of payment processors is pretty shallow in Canada as we don’t have a financial system that encourages innovation. The result is Canadians must now use an exchange such as QuadrigaCX to trade their Canadian dollars for bitcoins.
QuadrigaCX is a small company in Vancouver that provides a online currency exchange. Once their customers provide the information to satisfy Canadian AML requirements, customers can deposit Canadian dollars using the Interac payment system and exchange those Canadian dollars for bitcoins, ether, and US dollars on the QuadrigaCX market. For someone who is new to foreign exchange, QuadrigaCX might seem intimidating. That’s because its an open market where buyers and sellers post bids and offers. You can see the price for bitcoins is not set by any central authority, the price for bitcoins is simply based on a market of supply and demand. To buy bitcoins on the exchange, either post a bid for your price and amount, or if you don’t really care too much about price, simply pay the lowest current offer.
Once you’ve exchanged your Canadian dollars for bitcoins on the QuadrigaCX exchange, you can transfer those bitcoins to your bitcoin wallet or to another place where you intend to use your bitcoins. When you’d like to exchange your bitcoins for Canadian dollars again, simply reverse the process described above.
