What is OTC and why use it?

OTC stands for over-the-counter. An OTC desk matches buyers and sellers directly, often handling larger blocks of Bitcoin than typical exchange order books. Benefits include price negotiation, reduced slippage, same-day settlement in many cases, and the option to settle directly to self-custody wallets or fiat bank accounts. For Canadian users, regulated domestic OTC desks provide an extra layer of compliance and banking relationships that can smooth large transfers.

Regulatory and reporting basics you must know

Canada treats businesses that exchange or transfer virtual currency as reporting entities under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. If you interact with a registered virtual currency service provider, they are required to file large virtual currency transaction reports when they receive crypto worth C$10,000 or more in a single transaction, or multiple transactions within a 24 hour window that meet the threshold. That 24 hour rule affects how desks view split settlements and will influence how they structure a large trade. If you are a buyer or seller, anticipate your counterparty making required filings on transactions at or above that threshold. citeturn0search1turn0search3

Enforcement has been active. Regulators have fined firms for failing to report suspicious activity and large transactions, so dealing with a registered and compliant OTC desk reduces legal risk for both sides. Recent enforcement actions underline the importance of using regulated desks and following KYC and documentation requests. citeturn0news12turn0news13

Find the right counterparty: banked, registered, and reputable

For large trades in Canada, prefer OTC desks that are either Canadian-headquartered or explicitly serve Canadian customers and maintain banking relationships. Many Canadian platforms now offer OTC services with deposit and withdrawal rails for CAD and USD. Examples of Canadian desks advertise same-day fiat funding and KYC-based onboarding for trades above specific minimums. Using a regulated provider simplifies settlement and reduces the chance your bank will block wires or freeze funds. citeturn0search4

What to check before onboarding

• Is the provider registered as a money services business with FINTRAC or otherwise regulated in Canada?
• Does the desk publish clear minimums, fees, and settlement rails for CAD and USD?
• Can they settle directly to self-custody wallets, or do they require holding on exchange?
• Do they support multisig or neutral escrow for peer-to-peer trades?
• What is their record on large transactions and references from other institutional clients?

KYC, identity, and documentation: what desks will ask for

Expect robust KYC. For trades that move large amounts of fiat or crypto, desks will request government ID, proof of address, proof of source of funds, and sometimes entity documents for corporate accounts. For CAD settlements they will also ask for bank statements and details about the receiving account. Provide clean, transparent documentation and plan for a few business days of verification during onboarding.

From a tax perspective, keep meticulous records of ACB, proceeds, fees, transaction dates, and counterparties. The Canada Revenue Agency requires individuals and businesses to report crypto disposals as either capital gains or business income, depending on activity. Keeping accurate records at the time of trade avoids headaches during tax season. citeturn0search2

Settlement options and security patterns

OTC settlement typically happens one of three ways:

• Fiat settlement via bank wire - buyer wires CAD or USD to the seller or desk, and crypto is released when funds clear.
• Crypto settlement to self-custody - seller sends crypto directly to the buyer's hardware wallet or multisig address once payment is confirmed.
• Escrow or multisig escrow - a neutral third party or multisig arrangement holds crypto until fiat confirmation, reducing counterparty risk.

Best practice for large trades is to minimize custodial exposure. If you intend to keep coins off-exchange, request direct settlement to a hardware wallet or a pre-agreed multisig address. If the desk offers non-custodial multisig escrow, confirm the exact signing policy and how disputes are resolved before sending funds. For bank wires, confirm beneficiary details with your bank and the desk to avoid misrouting. Also, expect the desk to require confirmation of receipt of funds before releasing crypto. If you must use an exchange as an intermediary, consider the added risk and confirm the exchange's regulatory status and proof of reserves practices where available.

Banking, wire timing, and Interac e-transfer considerations

Banks monitor large or unusual transfers and may request explanations for wire or Interac e-transfer activity. For very large trades, wire transfers are more common than Interac e-transfers because of limits and traceability. If you plan to use Interac for smaller legs of a trade, check your daily and 24 hour limits with your bank, and be prepared to show account statements that match the KYC information you provided to the OTC desk. Keep in mind that for reporting purposes, desks must treat any virtual currency receipts equal to or above C$10,000 as reportable transactions. citeturn0search1

Pro tip: inform your bank in advance if you expect significant inbound or outbound wires. Provide your bank with the name of the OTC desk and the expected amounts so routine fraud controls do not delay settlement.

Fees, pricing, and negotiation

OTC desks usually quote an all-in price including spread and fees. For high-volume trades you can often negotiate better spreads. Ask whether quoted prices include banking fees, commission, and conversion rates if you are moving between CAD and USD. Request a firm quote with an expiry window, and confirm the exact amount of crypto or fiat to be sent once the trade is agreed. For institutional-grade OTC services, quotes are commonly locked for short windows, often 10 to 30 minutes, to reduce market risk between quote and execution.

Tax consequences and record keeping

Large OTC trades are taxable events in Canada when they are disposals. The CRA requires individuals and businesses to report crypto disposals as capital gains or business income depending on facts and circumstances such as trading frequency and intent. Keep a permanent, detailed ledger of the trade: timestamps, wallet addresses, counterparty name, ACB, proceeds, fees, and bank receipts. These records support tax reporting and any future audits. citeturn0search2

If you are uncertain whether an activity is business or capital, consult a qualified tax professional experienced in crypto. This guide is educational and not a substitute for professional tax or legal advice.

Red flags and scams: protect yourself

Large trades attract bad actors. Watch for these red flags:

• Unsolicited OTC offers over social media or chat with pressure to move fast.
• Counterparties who refuse documented KYC or insist on unconventional settlement channels.
• Requests to send crypto to an unknown custodial wallet before clear confirmation of fiat settlement.
• Escrow proposals that lack verifiable multisig addresses or neutral third-party attestations.

Always confirm identities through multiple channels and perform a small test trade before committing a large amount.

A practical step-by-step OTC checklist for Canadians

1. Choose a regulated, banked OTC desk with Canada experience and register an account.
2. Complete KYC and provide proof of source of funds and bank statements as requested.
3. Request a written all-in quote and expiry window. Negotiate where possible for better spreads.
4. Decide settlement path: bank wire, direct-to-hardware-wallet, or multisig escrow. Confirm address format and on-chain checks for crypto settlement.
5. Inform your bank of anticipated wires and provide trade counterparty details to reduce holds.
6. Execute a small test trade if possible to confirm operational flow and settlement timing.
7. On the trade date, complete fiat transfer as agreed and wait for the desk to confirm receipt before releasing crypto or signing for release.
8. Securely record all transaction details for tax and audit purposes and keep a copy of the desk's receipt or trade blotter.

Where to get help and when to consult professionals

If you are moving significant wealth, involve advisors familiar with crypto, banking, and Canadian tax law. Ask the OTC desk for references or institutional counterparty contacts. For estate planning, corporate structuring, or cross-border considerations, a lawyer or accountant with crypto experience will help you avoid costly mistakes. For compliance questions about reporting thresholds and registered entities, consult FINTRAC guidance and the CRA documentation referenced in this guide. citeturn0search1turn0search2