How To Invest In Cryptocurrency From The UK
March 04, 20183 minutes
It’s rather cheap to get Bitcoin or Ether when you buy it with dollars or euros as these are the currencies that Coinbase, Bitfinex, Kraken and many other exchanges have pairings with. But what to do if you have GBP?
Update 25/03/2018: Coinbase partnered with Barclays, which would allow purchasing cryptocurrency without converting from GBP in the near future. Read more here.
LocalBitcoins and Bittylicious are expensive
The first result you get when you google ‘buy Bitcoin in UK’, will most likely be one of the services that I like to refer to as ‘Gummtree for crypto’ (or Craigslist for US folks). Generally, these are peer to peer services that directly connect people who want to sell crypto with those who want to buy, whilst providing some degree of insurance.
This may sound like a good idea - you buy cryptocurrency directly from a person like through eBay right? Well it may be an easy way to get your first coins, but a really expensive one. Over the last few years these services have done a terrific job at marketing and SEO job to earn people’s trust and gain media coverage. They’re targeting beginners who are willing to pay a premium in exchange for the peace of mind.
I’ve noticed that at peak times the price differences between these platforms and large exchanges can be up to 15%. To illustrate what I mean, at the moment of writing this article the price of Bitcoin is $11,166.90, which roughly translates to around £8087.85. However, if you would buy Bitcoin through Bittylicious you’d spend a whooping £8,443.83!
This may sound counter productive as you’d expect to pay less by not having to convert euros or dollars and dealing with the person directly. However, the reality is the exact opposite.
Cutting costs with SEPA payments
In practice it’s actually cheaper to convert your GBP into euros or dollars and buy crypto directly from an exchange using your UK based bank. All major UK banks such as HSBC, Lloyds, TSB, Barclays, etc. offer Single Euro Payments Area (SEPA) payments. This means that sending money to one of the SEPA-enabled euro bank accounts shouldn’t cost any more than a regular, local transfer plus the fee for GBP to EUR exchange. Most exchanges such as Kraken and Coinbase have a bank account with a SEPA-enabled European bank therefore you can send the money straight in GBP. The interesting thing is that even with an exchange fee as large as 3%, you’d still end up paying less than buying through Bittylicious in this case (£8330 vs £8,443).
Using Trasfergo or Transferwise
A better approach is to not convert the pounds at all. Services such as Transfergo and Transferwise have gained lots of media attention recently for their innovative approach to sending money abroad. Basically, they operate bank accounts in multiple countries and currencies. For example let’s say that you want to send money from a UK account to someone in Germany. Instead of transferring money to a German bank and incurring large exchange fees you would transfer it to one of the Transfergo/Transferwise accounts in the UK. They would register the transfer and in return send the equivalent amount (minus the fees) to your recipient from their German bank account. Whilst the exchange rate they give is not 100% fee-less, transferring this way can be as much as 10x cheaper. Therefore, if you have a euro-based bank account in another country you could simply send your pounds to using one of these services with a minimum fee.
What if you don’t have a euro bank account
In that case the choices are bit more limited. For example Transferwise blocks transfers to cryptocurrency exchanges, however you still might be able to deposit your GBP’s to a cryptocurrency exchange through Transfergo.
In general, I tend to avoid LocalBitcoins and other similar services due to high service charges. If you’re lucky and have a euro bank account I recommend using Transfergo or Transferwise (you can compare both to see which gives you a better rate). Alternatively, I believe that it can be easier (and cheaper) to simply do a SEPA transfer from a UK bank which offers the lowest exchange fees (Lloyds and Halifax are among the cheapest ones at the moment) and buy cryptocurrency directly from a reputable exchange.