Why people trade Bitcoin OTC or in person

OTC and in-person trades are used by a wide range of participants: individuals who prefer cash, collectors buying without KYC, investors seeking large blocks, and businesses doing private sales. Benefits include immediate settlement, potential lower fees, and direct negotiation. The downsides include physical safety risk, fraud risk, and regulatory obligations for businesses. Understanding those trade-offs helps you plan a safe trade.

Key legal and regulatory checkpoints for Canadian trades

Reporting and thresholds

In Canada, entities that receive virtual currency in amounts equivalent to C$10,000 or more in a single transaction must report the transfer to FINTRAC as a large virtual currency transaction. There is also a 24-hour rule that covers multiple receipts aggregating to C$10,000 where those transactions are related by sender or beneficiary. If you operate as a crypto business, these reporting rules will be part of your compliance obligations. citeturn0search0

MSB registration and AML compliance

Operating as a dealer in virtual currency or providing custodial/exchange services generally triggers the requirement to register as a money services business with FINTRAC and maintain an AML compliance program. If you are doing occasional private sales as an individual this does not automatically make you an MSB, but repeated or commercial activity can. If you are unsure whether your activity counts as business, seek legal advice and consider registering proactively. citeturn0search4

Tax obligations

Canadian tax rules treat crypto disposals as either capital transactions or business income depending on facts and frequency. You must keep accurate records of acquisition cost, proceeds, dates, and fees to report capital gains or business income on your tax return. The Canada Revenue Agency recommends preserving records for every crypto acquisition and disposition and provides guidance on reporting capital gains and allowable losses. If you believe you were scammed, CRA guidance explains how to treat losses in some circumstances. Keep meticulous records for any OTC trade. citeturn0search1

Safety-first checklist for in-person Bitcoin trades

Whether you are the buyer or the seller, follow a consistent safety routine every time to reduce fraud and physical risk. Below are practical, high-impact steps.

• Meet in a public, well-lit location such as a bank lobby or a busy café during business hours. Avoid isolated spots.
• Bring a witness or trade with a friend nearby. A second person both deters bad actors and helps verify details.
• Verify identity when appropriate if you are dealing in large amounts. Ask to see government ID and record the name and document type in your receipt. For small personal trades you may prefer privacy but document the essentials.
• Use small test transfers first before moving the full amount. Send a nominal on-chain amount and confirm receipt before finalizing payment.
• Prefer on-chain confirmation with transaction ID and block confirmations for larger trades. For small OTC trades, one confirmation may be acceptable depending on risk tolerance.
• Never accept an Interac e-Transfer as final proof without confirming the bank deposit. Interac e-Transfers can be irreversible once accepted, and fraudsters often spoof notifications. When using Interac, follow Interac security advice and only accept transfers you have independently verified. citeturn1search0
• Record the transaction with a simple receipt listing buyer, seller, fiat amount, Bitcoin amount, receiving address, transaction hash, date, time, and witness name.
• Consider recording a short video of the steps without recording sensitive passphrases. Video can be invaluable evidence in case of disputes.

Practical payment methods and their trade-offs

Common payment options include cash, Interac e-Transfer, bank drafts, and escrow services. Each has benefits and trade-offs:

• Cash - immediate and private but carries personal safety risks. Do not count cash openly in a street setting. Prefer a bank branch or ATM vestibule and do not travel alone with large sums.
• Interac e-Transfer - convenient for many Canadians but treat notifications with suspicion until the recipient confirms funds are deposited. Fraudsters commonly fake Interac prompts and social-engineer recipients. Follow Interac guidance and enable Autodeposit when appropriate. citeturn1search0
• Bank-to-bank or bank draft - slower but traceable. For high-value trades, meeting at a bank where the buyer deposits the funds in front of the seller is a common safe option.
• Escrow - trusted third-party escrow reduces counterparty risk. Escrow can be multisig-based for technical users or custodial through reputable services. Businesses offering escrow services may be regulated and may require KYC.

A step-by-step workflow for a secure in-person Bitcoin trade

Below is a practical workflow both buyer and seller can follow. Adjust confirmations by trade size and risk tolerance.

1. Pre-meeting agreement - agree on amount, price, payment method, meeting place, and identification requirements. Decide how many on-chain confirmations are needed for settlement based on amount.
2. Bring documentation - both parties should bring ID, a printed or digital receipt template, and a way to capture the transaction hash. A pen and a phone with enough battery is essential.
3. Set up address and test transfer - the buyer or seller (depending on direction) generates a receiving address on a hardware wallet or trusted mobile wallet. For the buyer receiving Bitcoin, provide a watch-only wallet to the seller to confirm the address. Perform a small test transfer to confirm everything works.
4. Execute payment - complete the fiat payment using the agreed method. If using bank deposit, do it at the branch in front of the counterparty. If using Interac, confirm the deposit directly using the banking app and avoid relying solely on email notifications. citeturn1search0
5. Broadcast the Bitcoin transaction - once payment is verified, the seller broadcasts the on-chain transaction to the agreed receiving address and shares the transaction ID. Both parties should check the txid on a public block explorer for propagation and confirmation.
6. Confirm and record - after the agreed confirmation threshold, record the txid, block height or number of confirmations, and fiat settlement details on the receipt. Both parties sign and keep a copy.
7. Post-trade hygiene - the buyer should move funds off the receiving address to their long-term wallet with proper self-custody precautions. The seller should keep records for tax reporting. If anything seems suspicious, pause and escalate to a safer option such as a bank-mediated settlement or an escrow service.

Technical tips to reduce fraud risk

• Use hardware wallets for receiving significant sums. Generate the receiving address on the hardware device and verify the address on the device screen to avoid supply-chain or malware attacks.
• Prefer watch-only verification to show a receiving address without exposing private keys. This avoids having to reveal seed data or connect your signing device to an unknown phone or laptop.
• Require transaction broadcast proofs such as the raw transaction or a txid that both parties can confirm in a block explorer. Do not accept screenshots alone as proof of broadcast.
• Test small first - always perform a small test transfer to the receiving address before committing to the full amount.
• Be careful with message signing - message signing can prove ownership of an address, but not all wallets support it and some users may find the process confusing. Use it only if both parties are comfortable and understand the security implications.

Dealing with suspected scams or disputes

If you suspect fraud, stop negotiating, and walk away. Report incidents to local police and the Canadian Anti-Fraud Centre. The RCMP regularly publishes warnings and advises caution with unsolicited investment opportunities and social-media-driven schemes. Keeping thorough records and evidence such as IDs, receipts, transaction IDs, and timestamps increases the chance of recovery or successful investigation. citeturn1search4

Recordkeeping best practices for buyers and sellers

Good records simplify tax filing and provide protection in disputes. At a minimum keep:

• Date and time of trade
• Buyer and seller names and contact information
• Payment method and bank reference or Interac ID if used
• Bitcoin address and transaction ID
• Agreed price and fees
• Witness name and any ID documentation used

When to choose an escrow or professional OTC desk

For large sums, unfamiliar counterparties, or when you want institutional-level safeguards, use an established OTC desk or a regulated escrow service. These services add fees but eliminate many personal risks. Note that regulated services will perform KYC and may be subject to FINTRAC reporting, so factor compliance into your privacy expectations. If you act as an escrow or broker yourself, be aware registration and reporting could apply. citeturn0search4turn0search0

Final checklist before a trade

• Agree on price, payment, location, and confirmations in writing
• Bring ID, witness, and a receipt template
• Perform a small test transfer
• Verify on-chain broadcast and confirmations before handing over large sums
• Record everything and move coins to your long-term wallet after the trade