We’ve all seen the mouth-watering Bitcoin charts. Numbers don’t lie — in 2013, the BTC exchange rate was something below $200, only to hit $61,000 eight years after.
However, real-life stories are what make us realize that no other asset in the modern economy has seen such tremendous growth. For example, the one with Javed Khan, who bought some bitcoins in 2018 without a particular business plan — he just found crypto a simpler payment method compared to banks. The guy had totally forgotten about this humble investment until 2020 when he cashed out the coins and treated himself with a brand new Bently.
While some will immediately start calculating the fortune he accidentally made, most of us will stumble at cash out. Is it possible to convert a Bently-worth amount of virtual coins into CAD, USD, or EUR? It surely is possible. Yet, it can be rather challenging to make a favourable cash conversion since there are a few external factors involved in the process: the cashing-out channel, local tax regulations, and withdrawal limits.
For that reason, we’ll walk you through all virtual places where you can sell your bitcoins in exchange for hard-cold cash across Canada. Before we start, let’s focus on the factors that affect the profitability of your transaction.
Factors to Consider When Cashing Out Bitcoin
Bitcoin spends its “lifetime” on the blockchain — a decentralized public ledger that operates as an independent infrastructure with its own feature set and pricing schedule. At the same time, the largest marketplace for trading Bitcoin is regulated companies that comply with the legal framework of the country of registration and have their internal payment policies.
That’s the first lesson you should learn before making a Bitcoin investment, regardless of whether you’re planning to buy, sell, or trade crypto. Certainly, you can find a number of trading platforms that stick to the blockchain principles by providing a trustless and credential-free trading environment. However, when fiat currency becomes part of the crypto game, get ready for the mainstream rules.
There are multiple types of crypto services to help you execute a cash-out transaction (explained in the next section). At this point, we’ll focus on centralized crypto exchanges (CEXs) as the most common method for cashing out Bitcoin.
To maintain a highly regulated setup and prevent illegal business activities, CEXs lay down strict withdrawal rules. The withdrawal restrictions are usually set as a daily limit, which makes it nearly impossible to cash out large amounts through a one-off withdrawal.
On some exchanges, the withdrawal limit grows together with the level of verification. This means that large-scale cash withdrawals require a more detailed checkup of your personal and financial background. On the other hand, there are a few exchanges where you can get a permit for cashing out above-the-limit amounts only through personal approval by the exchange team. All in all, regulated marketplaces are designed to handle small withdrawals.
Local Tax Regulation
Bitcoin and other altcoins were envisioned to serve as a peer-to-peer method for financial communication outside the reach of central banks and regulatory financial institutions. However, due to huge revenue, law enforcement and public revenue agencies attentively monitor the cash generated on crypto trading platforms.
Hence, your Bitcoin gains are considered a taxable event but not across all legislations around the world. Despite the global efforts for regulating the status of crypto, it’s fascinating to what extent governments can differ in treating cryptocurrencies. For example, the Cayman Islands is a tax haven for whale crypto investors — their revenue system doesn’t impose any tax on digital assets. Other crypto-tax-friendly countries include Germany, Malta, Malaysia, and El Salvador.
On the other hand, Canada has been pretty energetic in placing crypto under the tax-revenue system. It was the first country that acknowledged the existence of digital currency when the government included crypto traders and companies in the Proceeds of Crime and Terrorist Financing Act (PCA) in 2014. After this, all crypto-related companies had to register with the Financial Transactions and Reports Analysis Center of Canada (FINTRAC) as a Money Service Business(MSB).
As for taxes, the CRA divides crypto profits into two taxable categories: Capital Gain Tax and Income Tax. Selling your Bitcoin in exchange for CAD is subject to Capital Gain Tax — the profit (if any) of your cashing-out deal will be taxed at the rate of Provincial and Federal Income Tax but on half of the amount of the realized profit. So, if you bought a Bitcoin before its heydeys for $300 and have recently sold it at the rate of $40,000, CRA will consider you’ve made a $37,000 capital gain and tax you accordingly.
Local Bank Policies
If you use a regulated exchange to cash out your Bitcoin holdings, you first have to sell the coins for cash and then withdraw the cash using your bank account. This means the attitude of your bank towards cryptocurrency will play a crucial role in the cashing out process.
In general terms, banks used to be markedly hostile to all crypto-related transactions. This mood arose from the unregulated status of crypto and their close association with illegal activities. Thus, it wasn’t unusual for the bank to freeze your large-scale transaction with crypto origin as a measure of caution or require further checkups to justify the origin of your income.
While some banks are still reluctant about crypto transactions, the majority of the banks in Canada allow account holders to purchase or sell Bitcoin using their accounts. Some crypto exchanges will even enable you to link your exchange account directly with your bank account and thus, save you some deposit times and costs.
For the most part, you need to double-check the crypto-policy of your bank before initiating a cash withdrawal.
Popular Ways to Cash Out Bitcoin
As we’ve pointed out in this article, crypto exchanges are the most widely accepted method for cashing out Bitcoin and other popular altcoins, such as Ethereum (ETH), Litecoin (LTC), Bitcoin Cash (BCH), Dogecoin (DOGE), etc, due to the level of protection they provide in executing the process. Yet, you can also consider a few other ways to withdraw cash, especially when selling large amounts of Bitcoin, and here’s why.
CEXs come with different designs and formats, but when it comes to fiat sales, all entry-level exchanges follow the same pattern:
- CEXs have simplified the buy-and-sell process by providing intuitive platforms and easy navigation so that even absolute beginners can make a fiat-to-crypto or crypto-to-fiat transaction with ease.
- CEXs work under established AML/CFT (anti-money laundering / combating the financing of terrorism) policies and require KYC verification for all newly-registered users.
Depending on the exchange trading model, you can either deposit your BTC and find an acceptable offer on the BTC/CAD market or sell your bitcoins to the exchange itself. Regardless of the approach, when you sell Bitcoin on a centralized exchange, you have to consider all factors listed above, but if the withdrawal amount is high, you should focus on withdrawal limits.
Thanks to the regulated landscape, you can find a great choice of both local and international exchanges available in Canada, with different sets of selling limits. We’ve covered the most liquid ones so that you have a better insight into the withdrawal process.
|Withdrawal options in Canada||Interac e-Transfer / bank wire||No option for CAD — only Signet and SWIFT USD withdrawals||Bank transfer||Bank transfer (ACH) / wire transfer||Interac e-Transfer /EFT (POSCONNECT) / wire transfer / SWIFT|
|Daily withdrawal limit||Interac e-Transfer: $10,000 a dayBank wire: $500,000||n/a||$50,000||$10,000||Depending on the verification level. The basic account limit is $9,000.|
|Withdrawal fee||Interac e-Transfer: 1.50%Bank Wire: 1%||Signet: 0%SWIFT: $15||1%||free||Interac e-Transfer: 10 CADEFT(POSCONNECT): 0.25%Wire transfer: freeSWIFT: up to 35 CAD|
OTC (Over-the-Counter) Brokers
Traditional crypto exchanges use an order-based engine to connect buyers and sellers and facilitate trades between them. As such, you can either place an order or accept an already existing one. Since BTC is the most valuable asset in the crypto ecosystem, Bitcoin-containing markets are always busy, but it won’t be easy to find a counterpart for a large selling offer.
Furthermore, the engine may break your order into “chunks,” with each order chunk executed separately under a different market price. Eventually, this can result in a negative outcome for the seller as the BTC price is continuously changing. In economic terms, this negative phenomenon is called slippage.
That’s why crypto exchanges aren’t always the best fit for placing large-scale offers. Fortunately, the crypto market can offer a more personalized service known as an OTC desk, whereby you can sell your bitcoins directly through a third-party broker. Your job is only to find a reliable one — to serve as a personal intermediary ensuring high liquidity, fixed price, and decent transaction fees.
Some OTC desks work as part of well-established crypto exchanges like Bitbuy and Binance to meet the needs of high-profile clients. Certainly, there is a minimum limit at which you can ask for over-the-counter treatment. There are also a few local spots across Canada designed specifically for crypto OTC services, allowing you to meet face-to-face with your OTC broker if that makes you feel more confident.
LocalBitcoins and Other Peer-to-Peer Exchanges
P2P exchanges can also be a handy alternative for cashing out large amounts of Bitcoin. Similar to CEXs, they’re regulated marketplaces but work in a more decentralized manner. Namely, P2P exchanges don’t process buy-and-sell transactions — instead, they serve as a virtual business venture for buyers and sellers to pair with each other.
So, once you find a suitable buyer for your bitcoins, you can both set the terms of payment without the interference of the exchange. This opens room for a larger choice of popular options (PayPal, ApplePay, credit cards, debit cards, SEPA, and many more) and higher limits.
However, for some traders, the P2P approach causes a sense of insecurity due to the lack of centralized backup, even though all P2P exchanges have a built-in escrow service to protect both parties. LocalBitcoins is perhaps the most popular P2P exchange platform for Bitcoin trades, but there are a couple more available options in Canada like Paxful and Bisq.
Bitcoin ATMs or BATMs are a well-established way to buy Bitcoin instantly but do you know that 40% of the active BATMs allow you to sell BTC in exchange for cash?
To find out whether your nearest BATM supports cash withdrawals, look for the “Crypto-> Fiat” label on the official map — fortunately, there are over 400 Bitcoin machines across Canada. All BATMs from the brands Robocoin, General Bytes, and Genesis Coin are designed to perform two-way operations unless the operator deliberately disables this option.
Furthermore, they all require detailed verification on the spot and charge a high commission for the instant service. However, cash distribution varies depending on the model. Some deliver the funds immediately to the machine, while some give a redeem code and let you wait until the Bitcoin transaction is confirmed on the blockchain. Finally, BATMs aren’t tailored for large withdrawals, so if you redeem a large amount, it’s better to divide the order into smaller batches.
A Few Words Before You Go…
The good news is that crypto providers have streamlined cashing out BTC to a retailer-level, which signals that the fiat-to-crypto communication is getting less obscure, with technically sleek transactions and sustainable liquidity. What’s more, thanks to the crypto-adjusted AML/CFT regulations, we can expect maximum security and user-data protection in the withdrawal process.
The challenging part of cashing out BTC is finding a competitive marketplace where you won’t get ripped off in case you need to cash out large amounts. Hopefully, our guide will help you find the best exchange match and, ultimately, sell your bitcoins in the most lucrative way. Finally, remember that large withdrawals can always raise scrutiny regardless of the profit-making asset.