Is Wealthsimple Crypto a TFSA? [Quick Explanation]


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Are you a Canadian looking to get started with Wealthsimple Crypto? But you’re not sure if in fact Wealthsimple Crypto is a TFSA or not? 

Or maybe you’re wondering if you can invest in Crypto within your Wealthsimple TFSA. Or maybe you’re just wondering what the heck is going on! Which if that is the case, I really don’t blame you.

The finance industry has an interesting way of making simple things seem complicated.

So what is the difference between Wealthsimple Crypto and a TFSA?

The main difference between Wealthsimple Crypto and a TFSA is that Wealthsimple Crypto is a product and a TFSA is a type of investment account. Due to the fact the CRA doesn’t classify cryptocurrency as a qualified TFSA investment, Canadian’s cannot open a TFSA with Wealthsimple Crypto.

With that being said, there actually is a way where you can buy crypto within a Wealthsimple TFSA by using the Wealthsimple Trade product, but will talk about that more shortly.

For now, allow me to further explain the difference between Wealthsimple Crypto and TFSAs.

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Is Wealthsimple Crypto a TFSA? 

Wealthsimple Crypto is not a TFSA. Wealthsimple Crypto is Wealthsimple’s cryptocurrency product that can only be opened through a non-registered, personal account. 

For example, I have a TFSA open with the Wealthsimple Trade product, but Wealthsimple Trade in it of itself is not a TFSA. I can open many different types of accounts with Wealthsimple Trade (TFSA, RRSP or Personal). 

So that’s the first thing. Wealthsimple Crypto is a product whereas a TFSA is a type of investment account. But because the CRA doesn’t allow Canadians to directly purchase crypto currency within their TFSA, you cannot open a TFSA within your Wealthsimple Crypto account. 

Can You Buy Crypto in a Wealthsimple TFSA?

Not all investment accounts are created equal and Canadians can only make “qualified investments” in their TFSAs – and unfortunately, the CRA does not classify cryptocurrencies as qualified investments. 

Because the CRA doesn’t classify crypto as a qualified investment, Canadians cannot directly hold cryptocurrency in their TFSA.

Most Common Qualified TFSA Investments 

  • Cash
  • Mutual Funds
  • Stocks
  • ETFs
  • Guaranteed Investment Certificates (GICs)
  • Bonds

With that said though, Canadians can buy crypto through ETFs on Wealthsimple’s Trade platform.

A Crypto ETF is a type of investment that mirrors the performance of whatever crypto is associated with the ETF you are buying.

For example, a common bitcoin ETF called 3iQ Coinshares Bitcoin ETF is an ETF that directly reflects the performance of bitcoin. So if you wanted to diversify your TFSA portfolio by including crypto as an asset class, you would have to do so through an ETF like this.

Now the upside to this is that you can invest in an exciting asset like crypto through your TFSA, but the down sign is that you don’t actually own the keys to the crypto you are buying into.

What does that mean though? All that means is that you’ll only be able to use your investment as a storage of value and you won’t be able to use it as a currency to buy whatever it might be. Which for some people, myself included with Bitcoin, is not a big deal.

As an investor in NFTs though, I need to have access to my Ethereum keys as I buy and sell my NFTs with Ethereum (ETH). But for bitcoin, I don’t treat it as much like a currency as I do a storage of value.

Anyways, I know I rambled on there, but the bottom line is that you can’t directly buy crypto through a TFSA with Wealthsimple (or any TFSA issuer). In order to gain exposure into the crypto market within your TFSA, you must purchase crypto ETFs.

To start investing in these crypto ETFs within your TFSA, you’ll first need to open an account. My article here talks about all the reasons I love Wealthsimple Trade and then has a guide on how to sign up. If you’d rather just get started and sign up, you can do so here and you’ll get a free $25 for doing so!

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Can I Buy Crypto Directly with Wealthsimple Crypto? 

At this point, we now know that you can only indirectly buy Crypto within your Wealthsimple TFSA through ETFs.

What about Wealthsimple Crypto though? Well when Wealthsimple first released their Crypto product, you could only buy and sell different coins on their platform. In essence, you could only buy crypto as an investment, but you couldn’t send or receive crypto from other wallets. Which for a lot of people, myself included was a bit of a bummer.

But, like Wealthsimple always does, they continued to improve their product, and as of late 2021 they introduced Crypto wallets. So now, Wealthsimple Crypto users can actually send and receive crypto to and from other crypto wallets.

So if you’re like me and are still somewhat of a beginner in the world of cryptocurrency, but you want to get your feet wet, I’d definitely recommend Wealthsimple Crypto. 

I’ve used Wealthsimple Crypto since 2021 and I love it. It costs nothing to sign up and they have a large selection of crypto assets in which you can invest in – not to mention their sleek, modern and user-friendly interface. 

Can You Transfer Funds from a TFSA to Wealthsimple Crypto?

Okay, so now we know that you can’t directly purchase crypto within a Wealthsimple TFSA, but you can on Wealthsimple Crypto. 

So if you already have a TFSA open with Wealthsimple Trade, but you want to transfer those funds to your Wealthsimple Crypto account, you’ll only be able to transfer cash from your account into your Crypto account. 

But, if you have all your funds invested within your TFSA and you don’t have any cash, that’s okay. You can still transfer funds to your Wealthsimple Crypto account, but you’ll need to first sell off some of your investments into cash before you can transfer the cash to your crypto account.

This process of selling your holdings and receiving the cash in your account can take up to 2 business days.

Related Financial Geek Article: Is Wealthsimple Trade Safe? [What Beginners Should Know]

Conclusion 

And that’s a wrap, folks!

The bottom line is that Wealthsimple Crypto is not a TFSA. And while you can indirectly invest in crypto within your TFSA through crypto ETFs, you cannot directly purchase crypto within a TFSA as cryptocurrencies are not considered to be a qualified TFSA investment by the CRA.

I hope this article provided you with some clarity on all things TFSA and Wealthsimple Crypto related.

I know both TFSAs and crypto can be confusing subjects in their own right, but added together, they can create quite the headache. If you had any other questions about anything discussed throughout this article, please feel free to contact me here.

Geek, out.

Noel

Noel is the founder and main contributor for his blog - Noel's passion for personal finance has helped him amass over 600k readers to his Financial Geek blog.

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