How to Buy Crypto in Your TFSA

By: Alex Dabek

Last Updated: Jun 2021

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If you want to legally avoid taxes on your cryptocurrency investments in Canada, you have the option to buy and invest crypto in your TFSA.

There are multiple approaches you can take, however, there are also some downsides and limitations you need to be aware of. In this post, I'll show you what your options are and the pros and cons of tax-free crypto in Canada.

Don't want to read? Watch my video below:


Can You Buy Cryptocurrency in a TFSA?

Unfortunately, you cannot hold Bitcoin or cryptocurrencies in your TFSA directly. This means you can't sign up on a crypto exchange, start buying altcoins and put that in your TFSA. However, Canada has approved multiple Bitcoin ETFs and Ethereum ETFs which you can buy in your TFSA to get exposure to the price. You can also get exposure through crypto related stocks such as Coinbase and many more.

Crypto's You CAN'T Put in Your TFSA

You can only open a TFSA through a stock brokerage. This means you cannot buy digital currencies on a crypto exchange and put that in your TFSA. Since there are over 10,237 cryptocurrencies on CoinMarketCap, 99% of coins cannot be put in your TFSA.

Crypto's You CAN Put in Your TFSA

At the time of this writing, there are three main ways you can buy crypto in your TFSA:

  1.  Bitcoin ETF
  2.  Ethereum ETF
  3.  Crypto related stocks

These options are pretty limited compared to the thousands of altcoins out there, but this is what's available for Canadians at this time. Let's explore these three options below.


Option 1: Bitcoin ETFs

The first option to get crypto exposure in your TFSA is via a Bitcoin ETF. At the time of this writing, 5 Bitcoin ETFs have been approved in Canada:

Name

Symbol

Mgmt. Fee

Website

CI Galaxy Bitcoin ETF

TSX: BTCX

0.40%

Evolve Bitcoin ETF

TSX: EBIT

0.75%

Purpose Bitcoin ETF

TSX: BTCC

1.00%

3iQ Coinshares Bitcoin ETF

TSX: BTCQ

1.00%

Ninepoint Bitcoin ETF

TSX: BITC

0.70%

Table last updated on May 23, 2021

Option 2: Ethereum ETFs

The second option to get crypto in your TFSA is via an Ethereum ETF. Currently, there are 4 Ethereum ETFs approved in Canada:

Name

Symbol

Mgmt. Fee

Website

CI Galaxy Ethereum ETF

TSX: ETHX

0.95%

Evolve ETHR ETF

TSX: ETHR

0.75%

Purpose Ether ETF

TSX: ETHH

1.00%

3iQ Coinshares Ether ETF

TSX: ETHQ

1.00%

Table last updated May 23, 2021

Option 3: Crypto Related Stocks

A more indirect way to get Bitcoin and crypto exposure in your TFSA is to buy crypto related stocks. You can research companies with Bitcoin on their balance sheet, public crypto exchanges, public crypto mining companies and more.

Name

Symbol

Info

Website

Microstrategy

NASDAQ: MSTR

Holds bitcoin

Tesla

NASDAQ: TSLA

Holds bitcoin

Coinbase

NASDAQ: COIN

Crypto exchange

Voyager Digital

CNSX: VYGR

Crypto exchange

Square

NYSE: SQ

Crypto exchange

PayPal

NASDAQ: PYPL

Crypto exchange

Hut 8 Mining

TSX: HUT

Mining company

Riot Blockchain

NASDAQ: RIOT

Mining company

Hive Blockchain

CVE: HIVE

Blockchain

Table last updated May 23, 2021

If you want to explore more crypto related stocks, BitcoinTreasuries.org tracks all publicly traded companies that hold Bitcoin on their balance sheet. This list is constantly growing as Bitcoin adoption continues.


Pros & Cons of Crypto in Your TFSA

  • Tax-free gains - If you believe crypto will grow a lot, this could save you a lot of money in the future versus buying directly on a crypto exchange and paying capital gains one day. This is the biggest factor to consider
  • Convenient - If you already have a TFSA it's convenient and you don't have to sign up for a crypto exchange and figure out how to store your crypto
  • Easier for beginners - A TFSA is easy for the same reasons above and crypto can be overwhelming when first getting started
  • Can't buy 99% of altcoins - There are 1000's of altcoins out there but if you want crypto in your TFSA, you are limited to mostly just Bitcoin, Ethereum and crypto related stocks
  • Management fees (ETFs) - Bitcoin and Ethereum ETF fees range from 0.40%-1.00% right now
  • You don't own the crypto - Someone is buying and storing crypto on your behalf and you can't self-custody it. Since crypto is meant to be decentralized, this defeats the fundamental purpose of having it. You just have exposure to the price
  • You can't move the crypto - Since you don't own the crypto, you can't withdrawal it, send it to different wallets, earn interest on it, stake it, trade it for other altcoins, take loans out against it or do anything with it. It's stuck in your brokerage account until you sell it

More Info

Can Crypto Be Held in a RRSP?

It would be the same as buying crypto in your TFSA. You cannot buy crypto directly in your RRSP, but you can buy Bitcoin ETFs, Ethereum ETFs or crypto related stocks to get exposure to the price.

Do You Pay Tax on Crypto in Canada?

If you buy Bitcoin ETFs or Ethereum ETFs in a TFSA, capital gains are not taxable. However, if you buy crypto directly, such as through a crypto exchange, you are required to pay taxes according to the CRA's crypto tax guide

Is Wealthsimple Crypto a TFSA?

According to Wealthsimple's website, Wealthsimple Crypto is a personal and non-registered account so it is not a TFSA. If you want exposure to crypto in your TFSA, your options are a Bitcoin ETF, Ethereum ETF or crypto related stocks.


Final Thoughts

Canada already has many crypto ETFs which is really good relative to other countries. However, you still can't hold 99% of altcoins in your TFSA. If you want crypto in your TFSA, your three main options are buying a Bitcoin ETF, Ethereum ETF or crypto related stock. 

The main pros and cons you have to balance are the tax free gains and the fact you do not own the crypto directly. There is no one size fits all approach and maybe you will like to do a mix of both. It depends on your investment strategy but hopefully this post helped you understand what you need to know about buying crypto in your TFSA.

Thanks for reading!

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