How and where to buy bitcoin in the UK

As well as being a new system of money, bitcoin is also a new technology and so, above all, I urge you to practise using the technology as much as possible. Buy some bitcoins. Get a wallet from your App store. Get a friend to do the same and practice sending each other small amounts of money. (A wallet is where you store your bitcoins – it’s a bit like an email address.)

I also urge you to research as much as you can: read about it, listen to podcasts and so on. Explore all the different storage methods. It really won’t take more than an hour or two to get the basics; and perhaps a few days before you are really on top of “cold storage” wallets and keys and so on.

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Buying bitcoin in the UK: be prepared for a bit of admin

The most problematic side of bitcoin, its Achilles’ heel, is the point of transfer between “fiat” (the pound, euro or dollar in your pocket) and bitcoin. Crypto is an alternative financial universe and, once you are in it, you may never come back. “Come for the gains, stay for the revolution,” is the saying.

Generally, the more you want to buy, the more paperwork you have to fill in. I’ve also found that in many cases it’s easier to set up an account on your smartphone than it is on your computer.

Keys.casa, which is a user-friendly and secure wallet, blockchain.info and others all enable you to buy bitcoins via their platform, but the most liquid (and thus cheaper in terms of commission) tend to be the exchanges. There are so many of these now, but the best ones for UK investors are probably any of Gemini, Kraken, Bitfinex, CEX.Io, Bitstamp, SFOX, Crypto.com, Poloniex, Bittrex and eToro.

They all have their pros and cons, but the net result is much of a muchness. Opening an account is a bit tiresome. There’s lots of paperwork. Make sure you set up two-factor authentication and so on.

It’s quite easy to keep your coins on most exchanges, and some offer cold storage which is a convenient solution. But be aware that exchange hacks have happened many times and are a genuine risk. Purists will recommend that you get your coins off exchanges. That said security is much better than it was.

Once you’re set up, you’ll experience the delights of sending money to your exchange via a bank. You might end up having to make a phone call at this point. So much fraud has taken place that UK banks tend to be very reluctant to allow transfers. So, on the whole, the Financial Conduct Authority (FCA) registered exchanges, such as Gemini, tend to be easier. I had few problems with Gemini, Kraken, and Bitfinex, but, for some reason, HSBC hated Bitstamp, which is frustrating as it has lower commission rates.

Most exchanges offer crypto-trading facilities and often, by the way, you’ll pay a much lower rate of commission if you use these (and leave limit orders under the market), rather than purchase off the front page. Gemini’s commissions off the front page are eye-watering, whereas inside its trading app they are much lower.

Easier options for small amounts include Bittylicious and LocalBitcoins, or even bitcoin ATMs. Revolut makes it easy, but you can’t then move your bitcoins elsewhere. You can only sell back to Revolut, which is somewhat besides the point. Plus its commission and spreads are not the cheapest.

Buying bitcoin in the UK: where to store your bitcoin

As I say, you can keep your bitcoins at an exchange – some offer cold storage, similar to the way that bullion dealers often offer gold storage. But longer term, you might want to take charge of your bitcoins yourself. If the exchange goes out of business or gets hacked, you’ll be in trouble.

Other long-term storage options include electrum plus a multisig (multi-signature) hardware wallet. A slightly more user-friendly option is bitcoin storage specialist keys.casa. This will all start making sense once you start playing around with the tech.

The FCA recently banned the sale of crypto-derivatives to retail investors, which means that getting exposure to crypto via traditional markets has become very difficult. So my advice is to go down the rabbit hole, and buy and hold actual bitcoin as it was meant to be bought, and hold.

If you’d still prefer some sort of listed option, then you could buy Microstrategy (Nasdaq: MSTR), which has become something of a proxy for bitcoin, and there is London-listed bitcoin miner Argo Blockchain (LSE: ARB). Perhaps easiest of all is the Vaneck Vectors Digital Assets ETF (LSE:DAGB), through which you are gaining exposure to a basket of all the listed bitcoin companies. It’s not the same as owning bitcoin, but it’s a start.