Why OTC or P2P Trading?

OTC and peer‑to‑peer trading are used for several reasons: reduced fees for large amounts, access when exchanges impose limits or KYC delays, or because buyers/sellers want more privacy. In Canada, OTC desks and P2P platforms coexist with regulated exchanges such as Bitbuy or Coinsquare, and many Canadians use a mix of methods depending on size, urgency, and trust.

Regulatory Context: What Canadians Should Know

Canada requires certain businesses in the crypto space to comply with FINTRAC rules, including registration, KYC, and reporting suspicious transactions. For private individuals trading OTC or P2P, the main takeaways are:

• Keep clear records of trades for tax reporting. Crypto disposal events are taxable in Canada and must be reported with supporting documentation.
• Be aware that large cash transactions or suspicious patterns can draw regulatory scrutiny. Businesses facilitating trades have reporting obligations.
• Financial institutions sometimes restrict or flag accounts used for crypto payments; understand your banks policy before transacting.

Choosing a Counterparty or Platform

Your safety begins with who you trade with. Options include local classifieds, P2P features on exchanges, dedicated OTC desks, and online marketplaces. Use these selection criteria:

• Reputation and feedback: Look for verified reviews, multi‑year presence, and a history of successful trades.
• Verified identity: Prefer counterparties that provide ID verification or on‑platform KYC — this reduces scam risk.
• Escrow availability: Platforms offering escrow or multisig reduce counterparty risk.
• Volume & limits: Ensure the platform or desk handles your trade size without excessive slippage or delays.
• Support and dispute resolution: Check responsiveness and clear policies for disputes or chargebacks.

Payment Methods: Risks and Best Practices

Common payment methods for Canadian OTC trades include Interac e‑Transfer, bank wire, cash, and third‑party payment providers. Each has tradeoffs:

Interac e‑Transfer

Quick and convenient, but reversible in some cases and commonly abused by scammers. Banks may freeze accounts tied to suspicious crypto activity. Best practices:

• Avoid trades where seller demands payment first without escrow. Use escrow or release Bitcoin after confirmed and irreversible payment.
• Verify the receiving bank account name matches the seller and ask for a photo of government ID only when comfortable and the platform permits it.
• Prefer Interac e‑Transfer deposits to a business account or an account with a clear identity trail for larger amounts.

Bank Wire

Wires are typically irrevocable once settled, making them safer for sellers. For buyers, wires are less private and may require bank involvement. Confirm beneficiary details and use escrow where possible.

Cash (In‑Person)

Cash removes bank reversal risk but introduces personal safety concerns and potential legal issues at scale. For in‑person cash trades, follow strict safety protocols (see the meeting safety section).

Third‑Party Payment Apps

These can be convenient but may be reversible and have dispute mechanisms that favor buyers. Treat these like e‑Transfers: prefer escrow and verify counterparty identity.

Escrow and Multisig: Reducing Counterparty Risk

Escrow is the single most important safety feature for OTC trades. Options include platform‑managed escrow, independent escrow agents, or multisig arrangements where Bitcoin is locked until conditions are met.

• Platform escrow: Trusted platforms hold Bitcoin until funds are confirmed. This is simplest for beginners.
• Third‑party escrow agents: Independent agents can be used, but assess reputation carefully.
• Multisig escrow: A three‑key multisig (buyer, seller, neutral third party) is an advanced, trust‑minimized option. It avoids single‑point custody and can be audited on‑chain.

If escrow is not available, require irrevocable payment methods (e.g., settled wire) and never send payment before you control the Bitcoin.

Meeting in Person: Safety Checklist

If you meet a counterparty in person for a cash trade, prioritize personal safety and operational diligence:

• Meet in a public, well‑lit area with cameras, such as a bank lobby or a busy coffee shop. Avoid isolated locations and late‑night meetings.
• Bring a friend or let someone know your meeting details. Share a check‑in time and location.
• Count cash discreetly in public and confirm denominations before finalizing. Consider small denomination verification tools.
• Execute the Bitcoin transfer to your hardware wallet or receive to a fresh address you control while at the meeting. Verify on‑chain confirmation if possible, or at minimum wait for one confirmation for larger trades.

Immediate Self‑Custody: Transfer and Verify

Always take custody of Bitcoin immediately. A simple self‑custody routine minimizes risk:

1. Use a hardware wallet for receipt. Prefer well‑known models with secure elements.
2. Generate a new receiving address on the hardware wallet. Do not reuse addresses used previously by the seller or exchange.
3. Ask the seller to broadcast the transaction to your address and provide the transaction ID (txid).
4. Verify the txid on a block explorer and confirm it appears as sent to your address. Wait for at least 1 confirmation for small amounts and more for larger trades.
5. After confirmations, move coins to a secure long‑term address if needed (multisig vault, cold storage, or split backup).

If the seller insists on sending Bitcoin to their wallet while asking for off‑chain payment first, do not proceed unless escrow is used. That pattern is a classic scam.

Record‑Keeping and Tax Basics

Keep detailed records of OTC trades: date, counterparty identity, amounts, payment method, txid, and any communications. In Canada, you must report disposals of cryptocurrency for tax purposes. Good records save time and help during audits or inquiries.

Common Scams and How to Spot Them

Be alert for these frequent schemes:

• Payment reversal: Fraudsters trick buyers into sending funds via reversible methods, then cancel payments after receiving Bitcoin.
• Fake escrow: Scammers create phony escrow pages or impersonate platform staff. Always confirm escrow through the platform interface and do not accept off‑platform links.
• Impersonation: Fraudsters copy names and profiles of reputable traders. Verify recent trade history and ask for an ID check on the platform.
• Chargeback attacks: Using payment rails that support chargebacks to reclaim funds after receiving Bitcoin. Favor irrevocable payment methods for sellers.

Practical OTC Trade Checklist (Printable)

• Confirm counterparty reputation and identity. Use platform verification where available.
• Prefer platform escrow or multisig. If unavailable, require wire transfers that have settled.
• Use a hardware wallet. Generate a fresh receiving address in front of the seller.
• Verify the txid and wait for confirmations appropriate to trade size (1 for
• Document the trade: txid, amount, payment proof, counterparty details, and screenshots of conversation.
• Move coins to longer‑term cold storage or multisig after the trade.
• If meeting in person, follow the meeting safety checklist and avoid sharing unnecessary personal info.

Sample Message Templates

Use these short templates when communicating with counterparties on P2P platforms:

Hello, Id like to buy C$X worth of BTC. I prefer platform escrow or a settled bank wire. I will receive to a hardware wallet address I generate at the time of the trade. Can you share recent trade references and your full platform username?

For in‑person: Im available at [public location] at [time]. I will bring ID and a witness. I will generate a fresh receiving address on my hardware wallet during the meeting and will confirm the txid on my phone before we finish.

When to Walk Away

Trust your instincts. Walk away if:

• The counterparty refuses escrow or any neutral mechanism for the trade.
• They pressure you to send payment before you control the Bitcoin.
• They provide inconsistent information, fake screenshots, or ask for unusual personal data.
• Payment method is reversible and the seller will not accept an irrevocable settlement method.