Since I started working in crypto, I’ve had a lot of questions from friends and family about how (and whether) to invest in crypto. If you simply Google “how to buy crypto” you’ll get a lot of results that don’t apply to Canadians. A lot of these guides start with “Step 1) make an account on [website that doesn’t allow Canadian users]” and that’s no fun at all.

So for the purposes of this guide, I’m going to assume you live in Canada and that you have Canadian dollars that you want to convert into crypto tokens. Let’s begin.

The cheating way (that is also tax-free)

There’s a way to buy crypto in your TFSA and not pay any taxes on the gains. You can do it by buying one of the many crypto ETFs available on the TSX. You’ll need a TFSA that allows you to buy individual stocks. If you already have one, skip the next paragraph.

If you don’t already have a TFSA (tax-free savings account) you can make one at Wealthsimple with this referral link. You will need to make a TFSA account through Wealthsimple Trade. Do not make an account on Wealthsimple Invest (which is a managed account) or Wealthsimple Crypto (ironic, I know). And make sure you make a TFSA on Wealthsimple Trade and not just a personal account if you want to avoid taxes.

OK, so we’ve got our TFSA ready and we want to buy crypto. Well, you can’t hold crypto directly in your TFSA, but you can hold an ETF that tracks the price of a crypto asset. These ETFs deduct a fee, usually around 0.5%. That’s much less than you would likely pay in taxes if you bought the tokens directly, so it’s a good deal.

Here are some Canadian crypto ETFs, their associated tokens, and fees:

I would recommend choosing the ETFs with the lowest fees. And I’d also recommend ETH over BTC because Ethereum is simply a more versatile technology than Bitcoin. They’re both fine, though, and they tend to have correlated returns.

You may have noticed that these ETFs only include the two largest cryptocurrencies, Bitcoin (BTC) and Ether (ETH). Companies need regulator approval to launch new ETFs and they can’t get approval for every low-cap token out there. If you want to invest in more than just these two assets, you need to buy crypto through a centralized exchange.

However, if you invest in crypto outside of your TFSA, you will need to track your capital gains and report them on your taxes. I use a service called Koinly to track all my trades and tell me exactly how much of a capital gain I need to report to the government. If that sounds like too much of a nuisance, you can stop reading here and just hold some ETHX.B in your TFSA.

Still here? OK, let’s continue.

Buying crypto through a Centralized Exchange (CEX)

In order to actually own crypto, rather than just owning shares in an ETF that tracks the price of BTC or ETH, you’ll need to trade your Canadian dollars for crypto tokens. For that, you’ll need an account with a Canadian Centralized Exchange (CEX). I recommend Newton, which has no fees per se. When you buy or sell crypto through Newton, there’s a slight spread between the buying and selling price. This spread is how Newton makes money.

If you sign up for Newton through my referral link, we both get $25. Yay!

Newton is a financial institution and it is regulated as such. So to make an account, you’ll have to send them your real name, a picture of your ID, and complete some other steps to confirm your identity. Then you’ll have to wait a few days before you get officially approved and can start trading.

The reason I recommend Newton is (1) because of its low fees, (2) because it gives access to many different tokens, and most importantly, (3) because it allows you to send your tokens to an external wallet. The saying in crypto is, “not your keys, not your crypto.” Sending your tokens to a wallet address that you personally control is the way to not only take personal control of your crypto, but also to gain access to all of the crypto tokens in existence, trade NFTs, invest in Decentralized Finance (DeFi), and experience everything web 3.0 has to offer.

Once your Newton account has been activated, you can deposit Canadian dollars into it with an Interac e-transfer. After the transfer is complete (it can take a couple of hours) you can trade your CAD for any of the tokens on the platform.

Owning crypto on the blockchain

OK, so you’ve made a Newton account, you’ve deposited CAD and exchanged it for ETH. But you want to do more. You want to take control of your ETH, trade some of the tokens that aren’t available on Newton, maybe buy an NFT, or get into DeFi. For that, you’ll need a wallet.

A word of warning: As soon as you go this route, you sign up for a part-time job in cybersecurity. A hacker who gains access to your wallet can take all your crypto, and you can never get it back. If you’re not tech-savvy and willing to sink some time into learning about crypto security, you may want to stop at the previous step and just hold crypto in your Newton account.

Still here? OK, let’s dive into wallets.

A crypto wallet is a device or piece of software that holds two things: a public key and a private key. Your public key is a series of letters and numbers that everyone can see. It can be used to encrypt data, including and especially crypto tokens. Your private key is a different series of letters and numbers that can be used to decrypt any data encrypted with your public key. When we talk about “sending” crypto from one wallet to another, what we’re actually doing is decrypting it with the current owner’s private key and encrypting it with the recipient’s public key. The ability to decrypt is what grants property rights on a blockchain.

There are two types of wallets: hot wallets, i.e. software wallets, that exist on a device connected to the internet, and cold wallets, i.e. hardware wallets, that exist on a separate device not connected to the internet. Hot wallets are less secure than cold wallets, so you basically never want to use them if you’re going to be holding any substantial amount of money in crypto.

The two main brands of hardware wallets are Trezor and Ledger. You can’t go wrong with either. I initially bought a Trezor, but eventually also bought a Ledger when I wanted to trade on the Polkadot network, which Trezor doesn’t currently support. I use both frequently. Buy one of them, but beware of tampering. Your safest bet is to buy from their official websites, or from their official stores on Amazon.

Whichever device you end up buying, follow its instructions to set up your wallet. In the course of doing this, the device will generate a 12- or 24-word seed phrase. This sequence of words can be used to recover your public and private keys in the event that you lose your device. Anyone with these words can steal all your crypto.

I want to warn you now about protecting your seed phrase. There are viruses out there that do nothing except spread from device to device looking for word sequences and reporting them back to the hackers who made the virus. If you type your seed phrase into a computer with internet access, or save it to your Dropbox, or send it in a text message, you will very likely lose all of your crypto. No one who isn’t a scammer will ever ask for your seed phrase. Write it down, or better yet, engrave it onto stone tablets, and keep it somewhere safe. If you want your family to be able to recover your funds in the event of your death, arrange for them to get your seed phrase somehow in your will.

Once your wallet has been set up, you can send crypto to it. On Newton, you can do this by clicking Withdraw > Crypto to Wallet, then selecting the type and amount, and pasting in your public key. When you confirm the withdrawal it becomes irreversible. If even one letter is wrong in your key, your funds will be gone forever. I recommend starting by sending a small amount and confirming that it was transferred successfully before sending larger amounts.

Doing more on Ethereum and other chains

Bitcoin was the first cryptocurrency. It has a limited number of functions: send, receive, mine, and that’s about it. Ethereum, the second-largest cryptocurrency, is much more. Ethereum has smart contracts: immutable pieces of code deployed to the blockchain that users can activate. It also has Decentralized Apps, or DApps, which combine a smart contract with a web interface to make it easy to use the contract.

In order to interface with these DApps, you’ll want to install a browser extension called Metamask. Metamask is two things: a hot wallet and an interface for connecting to DApps. I do not recommend using a hot wallet created with Metamask, because hot wallets are less secure than cold wallets. Instead, you’ll want to connect your hardware wallet to Metamask using these instructions.

Do not enter your seed phrase into Metamask. This will turn your cold wallet into a hot wallet, defeating the purpose of a hardware wallet.

If you’ve made it this far, congratulations! You’re now connected to the world of crypto. You can buy or sell NFTs on Opensea, trade tokens or contribute to a liquidity pool on Uniswap, or do all kinds of other things.