Even though the U.K. cryptocurrency market lags behind other more vibrant markets, investing and trading in the U.K. is a lot less complicated than you might think. This gives you a significant number of options if you want to actively trade cryptocurrencies or buy them for investment and spending purposes.
First, you must have a source for coins and tokens, as well as a personal wallet to withdraw them from that source. The U.K. hosts many cryptocurrency exchanges, cryptocurrency gambling firms and online brokerages that specialize in cryptocurrency transactions.
Also available to U.K. traders are cryptocurrency ATMs, machines where you can easily buy a variety of coins and tokens for cash. Another option involves locally sourcing cryptocurrencies made available through sites such as localbitcoins.com, which publishes bids and offers of buyers and sellers in your area.
U.K. investors, traders and speculators have much to gain from the cryptocurrency market, especially since taxation laws in the U.K. do not require you to pay capital gains taxes on your profits. On the other hand, if you just want to purchase cryptocurrencies as an investment and subsequently sell them at a profit once they appreciate, capital gains taxes must be paid.
Decide whether you want to invest or trade cryptocurrencies to know what approach to take. If you decide to trade them, then you do not have to take possession of them or get a wallet since you will be trading derivatives known as cryptocurrency CFDs. This can be done by opening an online brokerage account with a broker.
Trading cryptocurrency CFDs versus trading the actual coins gives you the advantage of leverage. When you deal directly with a cryptocurrency asset, you have to pay in full for each unit. When you trade CFDs through some online brokerages, you can take advantage of leverage that can be as high as 300:1.
Here’s a step-by-step outline for buying cryptocurrencies in the U.K.
Step 1: Open an Account at a Cryptocurrency Exchange
The most common way to acquire cryptocurrencies is to open an account at a cryptocurrency exchange. The U.K. hosts a number of excellent cryptocurrency exchanges, in addition to cryptocurrency gambling and spread-betting brokers that offer cryptocurrencies for sale, or you can gamble on the movement of a cryptocurrency pair such as GBP/BTC.
A brief selection of popular U.K. crypto exchanges:
BC Bitcoin
U.K.-based BC Bitcoin focuses on fast deposits and withdrawals and provides excellent customer support. Supported cryptocurrencies include Bitcoin (BTC), Ethereum (ETC), Litecoin (LTC), Ripple (XRP) and Monero (XRM).
BC Bitcoin requires a minimum deposit of £500 that can be made through a SEPA credit or bank transfer. Clients must pay a deposit fee of $10, €10 or £10, depending on the currency used to open the account.
CEX.IO
The U.K. based CEX.io exchange offers BTC and other cryptocurrencies that can be purchased with EUR, USD and GBP. You can trade nine forex currency pairs and the company offers leverage of 3:1 and a competitive fee structure.
CEX.io accepts Crypto Capital, Visa and MasterCard credit cards, SEPA credit transfers and bank transfers to fund cryptocurrency purchases. The company charges an instant trade fee of 7% and 3.5% + $0.25 for Visa transactions.
Coinfloor
This U.K.-registered exchange provides users with the option of trading various national currencies against several cryptocurrencies, despite the fact that the U.K. market favors the BTC/GBP currency pair. Other pairs offered by Coinfloor include LTC/GBP, ETC/GBP, XRP/GBP, XBT/GBP, XBT/EUR, XBT/USD, BCH/GBP and ETH/GBP.
While the exchange has a comprehensive fee structure, the minimum GBP deposit for an account at the exchange could be somewhat steep for some traders at £5,000. Deposits can be made with Bitcoin (BTC) and Bitcoin Cash (BTH), as well as through bank transfers in EUR, USD or GBP.
Coindirect
An international peer-to-peer marketplace similar to localbitcoins.com, Coindirect publishes buyers and sellers of different cryptocurrencies and digital assets to users in your area. The webpage lists the buyer or seller along with the price and payment method, which in most cases consists of bank transfers.
To use an ATM for buying bitcoins with cash you must enter a mobile number, then receive a validation code and enter it at the ATM. You then select the cryptocurrency you wish to buy and choose whether you already have a bitcoin wallet. If not, a new paper wallet is generated. You must scan the QR code on your wallet and then insert the cash bills to pay for it.
Step 2: Get a Cryptocurrency Wallet
To retain full control of your cryptocurrencies, you must withdraw them from their source, be it an exchange, peer-to-peer group or ATM, to a personal crypto wallet and then protect your wallet’s private key. The wallet notifies the crypto exchange or another source that you wish to send and receive transactions.
Crypto wallets work sort of like an email account, with two keys: a public key and a private key, which serve as the equivalent of your public email address and private password. You can give out your public key freely to receive gifts and payments. The private key, which must be kept confidential, acts like your wallet’s password. Wallets can be installed on your desktop computer, laptop or tablet, as well as on an Android or iOS smartphone.
Another type of wallet that does not require a download is a web-based wallet. This wallet type gives you access to your cryptocurrencies and other digital assets anywhere you can get an internet connection. For added security, a hardware wallet can be used instead that consists of a peripheral device which plugs into a computer like a USB memory stick.
Once you have acquired a wallet, you should back up your wallet by saving it to a USB drive or on printed paper and then store it in a safe place. This type of “cold storage” has drawbacks, however. You run the risk of losing your USB drive or the paper wallet.
Popular wallets include
Ledger Nano S
Among the most popular hardware wallets, Ledger Nano S supports over 40 different cryptocurrencies including Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP). The wallet was designed around a chip similar to the ones used in credit cards and passports and protects your assets with a PIN code.
Toast
Offered at no cost, this cross-platform and open-source Ripple (XRP)-specific wallet works on Windows, Mac and Linux desktop computers. The mobile version is available for iOS and Android devices. Due to its open-source nature, New Zealand-based StarStone Limited distributes Toast free of charge.
Coinomi
The Coinomi mobile and desktop wallet offers a single platform with more than 500 cryptocurrency wallets and tokens. The wallet provides native support for as many as 125 blockchains plus 382 tokens for a total of 507 digital assets. The advantage of this wallet consists of its ability to exchange cryptocurrencies at no cost.
Coinpayments.net
A merchant specific wallet platform, this wallet consists of an integrated payment gateway that allows you to accept 1,165 supported coins and tokens for payments. The wallet supports more than 230,000 vendors in 182 countries. Coinpayments.net also supports popular shopping carts used by many e-commerce stores such as Opencart, Magento and WooCommerce.
Step 3: Withdraw BTC to your Wallet
After buying your bitcoins on an exchange or another source, you may withdraw the currency to your personal bitcoin or multi-currency wallet with a QR code. Leaving your bitcoins with an exchange can be risky since exchanges can get hacked, and you do not have control of your private keys.
In other words, unless your cryptocurrency is in your personal possession, it will generally be subject to theft by hacking. It makes sense to store your bitcoins in a wallet with your own private key. After you have successfully withdrawn your currency from the exchange, you have successfully purchased cryptocurrency.
Final Thoughts
With bitcoin ATMs, cryptocurrency exchanges and with an active local peer-to-peer market, buying cryptocurrencies in the U.K. is much easier than in many other parts of the world. In addition, many online brokers either have their base in the U.K., or they can easily be accessed by U.K. residents via online trading platforms.
Knowing how you intend to approach the cryptocurrency market — whether as a speculator, gambler or investor — will determine whether your best option will involve opening a brokerage account, placing a wager with a cryptocurrency gambling firm or buying a wallet and opening an account at a crypto exchange.
