How to store cryptocurrency
Of course, to spend cryptocurrency you first need to have a safe way to store it that gives you easy access to your digital funds. Here are some of the most popular ways to store your coins.
One of the easiest ways to store your digital currency is with a cryptocurrency exchange. An exchange is a service that lets buyers convert fiat money (like Canadian dollars) to a cryptocurrency like Bitcoin. The exchanges hold your digital assets (a bit like a bank does, though without the paper trail and government oversight) in secure offline or online storage until you withdraw it.
One of the most well-known crypto exchanges is Coinbase. However, many serious virtual currency users don’t use exchanges to hold their crypto because there have been security issues in the past where exchanges have been hacked and people’s assets were stolen. One of the worst examples of cryptocurrency exchanges potential security issues in recent years was when hackers got away with $40 million in digital assets from Binance Finance.
Furthermore, it’s important to keep in mind that virtual funds kept in cryptocurrency exchanges aren’t protected from theft and bankruptcies the same way funds with traditional investment firms and banks are. For example, in Canada, money held by banks and investment firms is protected by events like bankruptcy by entities like the Canada Deposit Insurance Corporation and the Canadian Investor Protection Fund. Furthermore, with a crypto exchange, you don’t actually have full control over your digital currency, rather it’s the exchange that in essence has control and oversight over your currency.
Generally speaking, cryptocurrency connoisseurs like to have total control over their own digital assets so wallets tend to be the way to go. Wallets are either physical devices or digital apps that safeguard your private keys (complex passwords that allow you to access your cryptocurrencies). Without these keys, there is no way to access your digital funds. Note that while crypto exchanges often refer to the way they store your crypto asset as a wallet, you don’t retain sole control of the wallet as you do with physical wallets and some apps.
There are two main kinds of wallets: hot and cold. A hot wallet is connected to the internet and you can conveniently access it via your browser or mobile phone. While easy to use, hot wallets are considered more vulnerable to attacks by hackers and if your key is stolen by a hacker who then steals your crypto there is no way to recoup your losses. A cold wallet is not connected to the internet and is rather a physical device that resembles a flash drive. It’s not as convenient as a hot wallet but is much more secure. Of course, a cold wallet is also much easier to lose.
Whatever method you choose to store your digital assets, just be sure it’s secure and you are comfortable with it and confident that you understand how to access your own funds.
How to spend cryptocurrency
A few years ago, most Canadians would have been very hard-pressed to find even a couple of ways to spend their cryptocurrency. Luckily, the popularity of digital currency has been growing steadily and so too have the options to spend it (though by and large, your options remain quite limited for now in Canada). Here are some of the best ways to spend your cryptocurrency in Canada.
1. Sell your crypto back to an exchange
You can use a crypto exchange to simply convert your virtual currency into cash. Reputable crypto exchange platforms with pretty reasonable fees and strong security include Bitbuy, Coinsmart and Netcoins.
2. Use a crypto ATM
There are a growing number (800 and counting!) of Cryptocurrency ATMs starting to spread across Canada. Though many only allow you to purchase digital currency (mostly Bitcoin, though there are other alternative currencies available at some), there are some ATMs that let you convert your digital currency into Canadian dollars. You can find a list of cryptocurrency ATM locations here.
3. Load crypto onto a prepaid card
While the choice is still very limited, there are some prepaid cards in Canada that let you load it with your cryptocurrency and use it as a regular prepaid card to make purchases. You don’t actually pay with your digital currency, but rather your cryptocurrency is converted to Canadian dollars when you make a purchase, making these cards convenient and easy to use.
So far, however, most of these types of cards still haven’t fully launched and unlike regular credit cards, crypto cards aren’t quite ready for everyday use. The Crypto.com prepaid card is now available in Canada but you first have to convert your crypto to Canadian dollars to load it on the card. Furthermore, you need to buy and hold a stake in CRO tokens (the company’s version of digital currency) for at least 180 days to even be able to apply for the card. A more straightforward option is to simply use your cryptocurrency to buy a Canadian dollar prepaid card via Coincards.ca.
4. Buy gift cards
Possibly the most flexible option to use your alternative currency is to buy gift cards at Coincards.ca. The website sells gift cards from over a hundred Canadian retailers like Starbucks, Uber, Amazon.ca, Air Canada and more. Best of all, you’re not limited (as you are with some websites) to being able to only convert Bitcoins into gift cards. Coincard accepts cryptocurrencies like Bitcoin, Lightning Network, Litecoin, Dash, Dogecoin, Monero, Ethereum and more. While the option to buy gift cards is certainly convenient, pay attention to transaction fees.
5. Pay bills
If you’re looking for a way to use your Bitcoin, you might want to take a look at Bylls. The website allows you to exchange your Bitcoins for Canadian dollars. Once converted, you can use your cash to pay bills directly or send the funds to any Canadian bank account.
6. Make a donation
If you are all shopped out and are looking to make a donation to a worthy cause there’s a growing number of Canadian and American charities that have started to accept some forms of digital currency as a donation. Some charities you can consider include:
- War Child Canada
- Pathways to Education
- Against Malaria Foundation
- Save The Children
- David Suzuki Foundation
- BC SPCA (allows you to buy items from their giftshop using crypto)
7. Use cryptocurrency like cash to buy things directly
While there is not yet a large selection of merchants in Canada who accept cryptocurrency in the same way as they would accept cash, there are some that allow you to make purchases with digital currency. Interestingly, Shopify, Canada’s multi-national e-commerce company, has recently started to allow its merchants to add a digital asset payment processor to their store’s site so that they can accept cryptocurrency as a form of payment.
Here’s a list of a few of the retailers accepting digital currency as payment, though some are only accepting Bitcoin at the moment:
- Alternative Airlines
If you are still looking for more purchasing options, check out Coinmap.org. The map provides more details about which specific stores in your city and region accept virtual currency. It also has a map of regional ATMs that you can use to buy or exchange crypto.
Pros and cons of using cryptocurrency as a form of payment
There’s a reason that digital currencies have not gone mainstream and are not yet widely accepted. While they have risen in popularity, crypto isn’t about to replace real money. Here are some of the pros and cons of paying with cryptocurrency.
- No banking fees: you don’t have to worry about overdraft fees or late fees as you would with a credit card or debit card, nor do you have to worry about high interest rates as you do with credit cards if you don’t pay off your balance
- Anonymity: When spending digital currency, you and your purchases are anonymous and there is no way for a credit card company, bank or loyalty program to track your shopping habits
- Accessibility: Unlike with a credit card where you must apply and possibly have a specific income or credit score to be accepted, cryptocurrency is accessible to anyone with the money and interest to buy digital assets
- Volatility: The value of cryptocurrencies are notoriously volatile so you don’t necessarily have a good sense of how much purchasing power your digital asset has
- Purchase Protection: Because of the inherent anonymity of cryptocurrency and the fact that payments are not overseen by a bank, your transactions are not reversible, so if a purchase goes wrong you really can’t get your money back unless the seller agrees
- Availability: At the moment there are not a lot of options in Canada for shopping with cryptocurrency and it may still be years before it becomes mainstream enough to be widely accepted
- Maintenance: Because you can’t use a traditional bank to store your cryptocurrency, users have to inform themselves about cryptocurrency exchanges and wallets and keep their keys secure from hackers
Though I appreciate the novelty and anonymity of using digital currency, personally, when making purchases I tend to put almost anything I can on my credit card because of the fraud protection, ability to dispute questionable charges and ease of making returns. You don’t have those same protections with digital currency and so, at least for now, using cryptocurrency to make purchases can be risky.