What to look for in a cryptocurrency exchange

Fees

User fees are the primary source of income for crypto exchanges. These can vary depending on the platform, but the most common are transaction fees and deposit/withdrawal fees. 

Transaction fees are extra charges laid upon both the seller and buyer of a cryptocurrency. Depending on the exchange, these can be per-transaction or a tiered system based on trade volume, as illustrated below:

Deposit and withdrawal fees, meanwhile, are percentages charged for adding or taking funds out of your account. As exchanges want to encourage users to put more money in their digital wallets, deposit fees are typically less common than withdrawal fees.

It’s important to consider an exchange’s transaction fee structure and pick one that matches your intended use level. For example, if your aim is to make lots of transactions on a consistent basis, you’re going to want to use an exchange that will give you the cheapest transaction fees possible.

Security

Security should be a big feature when using a crypto exchange, especially if you intend to be a frequent, high-volume user. In general, you want to invest your money with a platform that would provide some kind of protection or recourse in the event that anything went wrong. Find out if the exchange is licensed to operate in its country of origin and who it’s insured by (if anyone). Do they provide any kind of customer service or support if you have questions or concerns?

Is the exchange you’re considering a publicly traded company? While plenty of non-public exchanges have very reliable security, being public means they’ve been audited and subjected to regulatory checks, which adds an extra layer of confidence.

Other things to look at: does the exchange keep the majority of its funds in cold storage (meaning they’d be inaccessible in the event of a hack)? Do they require two-factor authentication for login? Details like this will give you a good idea of how safe your assets will be in their care.

Selection

Finally, take a look at how many different types of cryptocurrency an exchange offers. While virtually every exchange works with big names like Bitcoin, Etherium, and Litecoin, others offer a far wider selection encompassing smaller, lesser-known currencies. If you’re interested in trading more exotic types of crypto, dig further to find an exchange that will accommodate that.

The best cryptocurrency exchanges in Canada

Coinsmart

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Toronto-based Coinsmart began in 2018 when founders Justin Hartzman and Jeremy Koven were met with challenges while trying to sign up and fund on other platforms. Their goal? To create a cryptocurrency exchange that was safe, easy-to-use, and welcoming to both new and experienced investors.

As a result, Coinsmart is one of the most user-friendly crypto exchanges in Canada. With a fast and efficient signup process, straightforward interface, and same-day deposits, those searching for relief from the sometimes-frustrating experience of other crypto platforms can find solace here. Their fees are some of the lowest in the market: traders are only charged 0.20% for a single trade and 0.30% for a double trade, while deposits and withdrawals range from 0%-6% depending on the method and amount. Plus, as a FINTRAC-registered business, they’re licensed and obligated to comply with regulatory standards, meaning your funds will be looked after responsibly. They also feature two-factor authentication and keep the majority of their holdings in cold storage, keeping it secure from hackers.

The only current drawback is their relatively limited selection of tradable coins, but as more variants get added to their roster regularly, that’s quickly changing.

NDAX

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Based out of Calgary, NDAX (or National Digital Asset Exchange) has you covered no matter your experience level. While they offer an approachable, easy to use interface for beginners, they also have advanced tools and features designed for veteran traders. Plus, their selection of over 30 different coins gives traders a wide variety of options.

One of the most attractive qualities about NDAX is their low trading fees. Their modest fee of 0.2% for buyers and sellers is proportional to the value of the trade, meaning bigger transactions pay a larger fee (and vice versa). This equitable approach is especially valuable to new users starting out small, as they won’t get stuck with a huge fee eating into the value of their trade. The NDAX site even features a fee calculator, allowing traders to see how much they’ll have to pay before they begin the transaction. In a market that can be tricky to navigate, that sort of fairness and transparency doesn’t go unnoticed. When it comes to funding your account, NDAX allows you to do that for free (regardless of method), but they do charge a $25 flat rate for withdrawals. While that may not be significant for those regularly making huge trades, newbies making much less on their transactions may feel the sting a bit more.

When it comes to security, beginner traders will be happy to hear that NDAX is a custodial platform, meaning they will take care of the safe storage of your funds. Their partnership with Ledger Vault assures your assets remain in cold storage, impervious to hackers and thieves. That being said, advanced users who prefer to keep their crypto in a separate wallet can easily transfer their funds off the platform for a fee.

Wealthsimple Crypto

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Launched in 2020, Wealthsimple Crypto is the crypto-trading arm of robo-advisor Wealthsimple and the first regulated exchange in Canada. They offer over 50 different tradable coins and can be accessed through the Wealthsimple Trade app. Designed primarily for new investors, it features an easy-to-navigate interface and low fees.

While the platform doesn’t take commissions on trades, users who want to buy, sell, or trade pay a fee of 1.5%-2% per transaction. The good news? Deposits and withdrawals are always free, so cashing out won’t eat into your profits.

For those keeping their assets on the exchange, the majority will be held in secure cold storage through Gemini Trust Company. And while the rest is kept in hot wallets, even those are insured by Coincover, meaning you’ll still be protected in the event of any hacks or leaks.

More on cryptocurrency

What is cryptocurrency?

A cryptocurrency (or “crypto” for short) is a purely-digital asset circulated without the involvement of governments or banks. Similar to traditional currencies, different cryptos have unique values attached to them and can be measured in dollars or any other desired currency. It can be used as an investment or to purchase goods and services (with limitations, of course - not every business accepts cryptocurrency as payment). And, like any other exchangeable currency, its value can appreciate or depreciate over time.

But how are crypto transactions protected if not by a governing financial body? The answer lies in something called cryptography - a set of private communication techniques that allow for the safe buying, selling, and trading of online assets without any third-party involvement.

How does cryptocurrency work?

Blockchain

Most cryptocurrencies (including Bitcoin) are based on blockchain technology. Blockchain is very much what it sounds like: a connected series of blocks on a shared virtual ledger that provides a secure, up-to-date history of verified transactions within its network. In order to add a new block to the chain, it must be validated by each member of the network, meaning it would be virtually impossible to forge a transaction. The introduction of this technology was instrumental in eliminating an early problem with cryptocurrency: how to stop users from duplicating their assets and spending them more than once.  

What is the best way to buy cryptocurrency in Canada?

Cryptocurrency exchanges

Crypto exchanges are platforms that facilitate the buying, selling, and trading of various cryptocurrencies between users. While the fees associated with exchanges are relatively low, they also feature elaborate interfaces and tools that can seem overwhelming to new investors. That being said, many larger and established exchanges also offer more user-friendly options for the inexperienced. 

One caveat: make sure your exchange of choice offers fiat (government issued) currency transfers and purchases, as you’ll need Canadian dollars in order to make your first crypto buy.

Cryptocurrency brokers

For brand-new investors intimidated by the complex interfaces used by some exchanges, crypto brokers offer a much easier, streamlined experience (albeit at a slightly higher cost). These services offer the convenience of interacting with crypto exchanges on your behalf, making purchases, sales, and trades at your request. One thing to keep in mind, however, is that some crypto brokers have restrictions around moving your money off their platform. While this may not be an issue for amateur users just learning the ropes, more experienced traders who would rather keep their assets in a crypto wallet may find it frustrating.

How to buy cryptocurrency in Canada

Check with your bank

Because you’ll need to link your bank account or debit card to any crypto exchange you use, the first thing you’ll want to do is ensure that your bank allows crypto transactions. Many financial institutions still currently block them, so give your provider a call and find out if you can even purchase crypto with them to begin with.

Select an exchange to use

When shopping for the right crypto exchange, you’ll find that they can vary when it comes to fees, selection of supported cryptos, and more. In general, you’ll want to pay attention to a few basic things:

Purchase cryptocurrency

Once you’ve decided on which exchange you’d like to use, the next step is to link it to a payment method such as a chequing account or debit card. One thing to consider is that crypto exchanges will give you a discounted fee for linking a bank account as opposed to a debit card, so it may be worth it to go that route if it will save you money.

Once your account is linked, you can begin to place orders. 

Make sure your cryptocurrency is secure

One you’re set up to begin making crypto transactions, you’ll receive what’s known as a “private key”. This is a secret code connected to your account that lets you buy, sell, and trade as well as prove ownership of your assets. 

Now that you’ve got some crypto to your name, you’ll want to protect that key at all costs. While lots of exchanges offer the ability to store your key and crypto internally, it’s worth it to also invest in a crypto wallet - an application that will store all the private keys you use for transactions as well as provide a platform to access your holdings.