What are cryptocurrencies?

By: Peter, Zeneca

Cryptocurrencies are digital or virtual currencies that use cryptography (advanced coding techniques) for security. They are a form of money that exists only online, so you can’t hold them in your hand like you would with cash or a coin.

The most famous cryptocurrency is Bitcoin, but there are many others like Ethereum, Litecoin, and Ripple. These digital currencies are created and managed through a technology called blockchain, which we talked about on Day 1. Blockchain technology ensures that all transactions are secure, transparent, and difficult to tamper with.

Why should I own crypto?

There are many strong arguments for owning crypto, including:

1. They allow for fast and inexpensive transactions across the world, without the need for banks or other intermediaries.
2. They provide a level of privacy, as the transactions themselves don’t reveal personal information about the sender or receiver.
3. Some people see them as an investment, hoping their value will increase over time as adoption increases, as well as providing diversification into a new asset class.
4. There is a growing list of use cases for digital currencies, such as DeFi (Decentralized finance), NFTs (Non-Fungible Tokens), and DAOs (Decentralised Autonomous Organisations). We’ll cover these 3 in further detail later in this course.
5. The potential to bring financial services to the underbanked population in Canada, with nearly five million Canadians currently lacking proper banking access.

Where can I buy crypto?

Most people buy cryptocurrency through a crypto trading platform. It is important to ensure that the platform you use is regulated. In Canada, this means that the trading platform is registered with securities regulators and has committed to enforcing key investor protection measures such as  adequate insurance coverage, anti-money laundering and fraud monitoring, using third party custodians to hold assets in trust, and more. 

In Canada, crypto trading platforms are regulated by the Canadian Securities Administrators (CSA) or the Canadian Investment Regulatory Organization (CIRO, formerly known as IIROC), as well as the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). More on this in Day 12. 

Popular regulated crypto trading platforms in Canada include:

1. Coinsquare – Canada’s first CIRO-regulated crypto-native marketplace. Based in Toronto, Coinsquare clients can trade +40 currencies and over 900 trading pairs through its intuitive apps. Additionally, Wealth clients have access to white glove service for all their OTC needs.
2. NDAX – NDAX is a Canadian-based cryptocurrency trading platform that provides a seamless and innovative user experience for buying, selling, staking, and securely holding a wide range of digital assets. By combining a user-friendly interface with groundbreaking features, NDAX sets a new standard for effortless and secure cryptocurrency trading.
3. Shakepay – based in Montreal, Shakepay offers over one million Canadians the easiest way to buy, sell and earn Bitcoin and Ether.
4. Wealthsimple – one of Canada’s fastest growing and most trusted financial services companies. The company offers a full suite of simple, sophisticated financial products across managed investing, do-it-yourself trading, cryptocurrency, tax filing, spending and saving.

Those that buy crypto for investment purposes may opt for structured products like Ether Capital shares (NEO: ETHC) or Purpose Investment’s spot Bitcoin ETF (TSX: BTCC.B). The benefits of these products is that they provide exposure through the capital markets and allow a wider spectrum of investors to participate who otherwise might not be able to hold crypto assets directly.  

In our next section, we’ll cover: “What is bitcoin?”