Canadian Cryptocurrency Landscape Analysis and Outlook Update — July 2020

Happy Canada Day! To celebrate Canada’s 153rd birthday, we’re here to help you find the best cryptocurrency exchange in Canada! I first wrote about the Canadian cryptocurrency landscape back in January (part 1). A lot has changed since then. The world is recovering from a pandemic, stock markets hit circuit breakers for consecutive days, and Bitcoin wrapped up another halving. I wanted to provide an update to my previous post to give users more perspective of their options in Canada and how we at PayTrie [pey-tree] think about where this space is moving. When reading this, please keep in mind that there may be biases but I will try to remain as objective as possible. If you disagree with anything in the article, feel free to let me know in the comments.

Canadian Cryptocurrency Exchange Options

In our previous article, our analysis of current Canadian exchange options garnered a lot of attention. We’re back to update the numbers and break down a few of the exchange features that may be important to you. In our previous analysis, I included 13 exchanges taken from the sidebar of the/r/BitcoinCA subreddit. I’ve decided to narrow down the list to 9 this time as a few of those exchanges provide little information and likely aren’t in contention for many of the readers here.

When analyzing the exchanges, I’ll include some caveats and policies that differ between the exchanges to help you make the best decision. Ultimately there are probably half a dozen decent options of buying crypto in Canada. We have come a long way since the days of QuadrigaCX. In many ways, we have a good selection of options available in Canada at very reasonable prices and funding methods. Each one specializes or prioritizes certain aspects that may be important to you. Have a look at the chart below to find a generalized understanding of the price differences between multiple exchanges. I’ve included a reference BTC/USDT price from Binance and CAD/USD price from xe.com. Using these market prices, I calculated a BTC/CAD reference price for comparisons at the bottom.

The chart above is a summary of fees that are taken by the exchange as well as current advertised market prices. There are a few ways an exchange makes money:

• Deposit Fee
• Withdraw Fee
• Fees for trading (Maker/Taker Fees)
• Spread

A combination of these fees will net you your final cost to purchase crypto from these exchanges. I’ve decided to model out a few different scenarios from $100 to $2,000 simulating a buy and sell order on the exchange. The result will be the amount you receive back after making a CAD deposit, buying BTC, selling BTC, and withdrawing the funds back to CAD.

I’ve taken the liberty to highlight the prices I feel are reasonable and fair in the Canadian market. Generally this means that the user is likely paying ~3% or less for crypto.

How to Choose a Cryptocurrency Exchange

KYC/AML

When picking a cryptocurrency exchange there are many factors you should look into. First and foremost, you should make sure they have their MSB license and are a regulated exchange in Canada. The exchanges above are all regulated by FINTRAC and must adhere to KYC and AML requirements, which means you will need to provide some sort of identification to use their service.

Typically, exchanges require you to provide a copy of your driver’s license, take a selfie and upload a utility bill. PayTrie is the first Canadian exchange to use Dynamic Knowledge Based Authentication. Under the new FINTRAC regulation set forth on June 1st 2020, all cryptocurrency exchanges are required to KYC (Know Your Customer) their users. This means the user will need to provide information that they are who they say they are, and anonymous transactions through regulated crypto exchanges are no longer possible. With dynamic knowledge based authentication, PayTrie minimizes the amount of information shared to the exchange. Users can get verified in under 2 minutes if the user satisfies the following conditions:

• Provide accurate name, address and date of birth
• 21 years of age or older
• Have a credit report at one of the major credit reporting agencies that have existed for 3 years or more
• Accurately answer the unique questions PayTrie provides

This method has significantly simplified the on-boarding process enabling users to buy crypto extremely quickly. But how is this safer? This method prevents you from uploading sensitive personal identification like passports and driver’s licenses unnecessarily or linking bank account information.

Funding

Speed matters. Getting your crypto fast may mean the difference between getting in or out of a position before significant market volatility approaches. When looking at the chart above, there are only 3 exchanges that provide real-time funding, real-time withdrawal, no withholding, and instant KYC. This means you are in possession of your crypto within minutes of using PayTrie, Bull Bitcoin or Shakepay. All three of these exchanges also accept Interac e-Transfers, which means you will get your funds extremely quickly. There are other methods that exchanges use to fund your account. For example, Newton uses a pre-authorized debit method of funding your account, and this method of transferring funds may take a few business days to settle and have a much higher chargeback risk, thus requiring them to withhold funds for a few days. Newton requires a 4 day withholding period as they wait for the funds to settle. Luckily for Newton users, Newton allows you trade on the same day you initiate the deposit. Exchanges that use this method will either require you to link your bank account with them to acquire your bank number, transit number and account number or require you to manually figure out what those words mean and provide them the figures separately. Newton uses Plaid and Flinks to access your account information to process your pre-authorized debit and possibly obtain information for KYC purposes. If you have concerns providing your banking credentials to Plaid and Flinks, Newton may not be an option for you.

PayTrie was the first cryptocurrency exchange to offer Interac Request Money Transfers. This new funding method is a simpler version of the standard Interac e-Transfers many Canadians are familiar with. With Interac Request Money Transfers, PayTrie is able to send you a pre-filled e-Transfer with all the details filled out and the fees paid for already. All you have to do is click a link in the email that Interac sends you, login to your preferred bank account and accept the request. There is no longer a need to input the amount or copy and paste a unique code or message into the memo field. This lowers the risk of human error and ensures your funds get processed faster and more securely.

Other funding methods offered by exchanges include wire transfers, credit cards, and debit cards. Wire transfers are expensive and generally prohibitive unless you are moving funds for a very large transaction. The user experience in sending a wire transfer is also quite annoying as the information to send a wire transfer is significantly higher. Credit cards are generally problematic in funding crypto transactions in Canada. Majority of banks that issue credit cards in Canada have either blocked crypto transactions or have put crypto transactions in the same category as cash-advances. This makes funding crypto with a credit card a poor option from the perspective of many users as the fees become prohibitive. Debit cards fall under a very similar category as credit cards mainly because it is still processed under the VISA or Mastercard network. You will notice most debit cards issued lately will include the VISA or Mastercard logo at the bottom. When making transactions online, it will be processed with the same rate as credit cards, which means at the minimum the merchant is charged 2.9% + $0.30 fee. Exchanges usually charge a fee on top of this, meaning you’re unlikely to buy crypto under 4% when funding with a debit card.

Custody

PayTrie and Bull Bitcoin are both non-custodial. You will need to create a wallet beforehand to use their service. Non-custodial exchanges are good for people that want full control of their crypto. Having control of your crypto is important if you want to prevent the same issues that resulted in users losing their funds when an exchange goes offline as seen with QuadrigaCX and Einstein exchange. Shakepay also provides a simple and quick method to withdraw your crypto to your own wallet, making it more secure for the user.

If you’re looking to:

• buy cryptocurrency at the lowest price with Interac e-Transfers
• securely hold your own crypto
• and minimize KYC

PayTrie is the best option for you.

What makes PayTrie different?

PayTrie uses a “choose your own exchange” model when buying BTC. PayTrie does not sell BTC directly. Instead of BTC, we offer stablecoins like USDC, USDT, DAI, etc. Stablecoins are highly versatile cryptocurrencies that does not fluctuate in price much, essentially a crypto version of the US dollar. This process requires you to buy crypto dollars on PayTrie and send it to an exchange of your choice like Binance, Coinbase, or any other exchange to buy your BTC at the optimal price. PayTrie takes a total of 2% in fees while your exchange takes their maker/taker fees. In our example, we used Binance as the exchange of choice where they take a 0.10% maker/taker fee, totalling 2.20% with little to no spread when coupled with PayTrie. This method requires a multi-step process to acquire BTC. But this trade-off allows you to buy any cryptocurrency you want since you are not limited to any particular exchange.

Creating a safer Canadian Crypto Environment

PayTrie pioneered a few features that no other cryptocurrency exchange in the world offers. PayTrie is fostering a new paradigm of exchanges where it actually recommends users to hold their own crypto. You don’t need to trust PayTrie since we only provide on/off ramp services. This creates a much safer avenue for users to buy cryptocurrencies. The major trade-off here is that you will need to be comfortable being own bank and this may be scary for some people. PayTrie recommends using hardware wallets like Ledger or Trezor to securely hold and manage YOUR crypto. If that is unavailable, look for a software wallet that is non-custodial like Argent. Argent provides a unique recovery mechanism that uses trusted friend to help you recover your crypto if your app or phone stops working or gets stolen.

Summary

Canadians are increasingly getting more options to buy cryptocurrency as more exchanges come online. We at PayTrie have a very unique perspective of what an exchange should provide. In Canada, it is unlikely for any exchange to provide the best price for cryptocurrencies as the market is not sufficiently big enough to provide low spreads that large global exchanges can provide. To get the best price for any cryptocurrency, you need sufficient liquidity and volume on the exchange which are likely only available outside of Canada. Therefore we think as the ecosystem matures, there will no longer be a need for dedicated local exchanges in any particular country. Exchanges will eventually converge to a global exchange model where exchanges in many countries will only offer on/off ramp solutions similar to PayTrie using a common stablecoin to fund global exchange accounts. Therefore PayTrie is pioneering a new set of global on/off ramps that will create greater market efficiency, provide greater choice and drive lower fees for everyone.