Ireland's Guide To Cryptocurrency Investment: Getting Started

Investing in cryptocurrency in Ireland is simple, accessible, and fast. According to a 2023 survey, 8% of Irish adults aged 18+ own some form of cryptocurrency, with that number rising to 16% for 18 to 34-year-olds. There are several ways to buy cryptocurrencies in Ireland, including through cryptocurrency exchanges, automated teller machines (ATMs), and online trading platforms. It is important to remember that investing in cryptocurrency is a high-risk venture and individuals should be prepared to lose all their money.

Choosing a cryptocurrency exchange or broker

When choosing a cryptocurrency exchange or broker, there are several factors to consider. Here are some key points to help you make an informed decision:

• Regulation and Security: Ensure that the exchange is regulated in Ireland by the Central Bank of Ireland (CBI). This provides protection for your funds in the event of any issues with the exchange. Look for exchanges that store customer funds in segregated accounts and utilise cold storage for added security.
• Fees: Compare the trading fees, deposit and withdrawal fees, and currency conversion fees charged by different exchanges. Some platforms, like Skilling, charge a maker and taker fee for cryptocurrency trades, while others may have higher fees for certain payment methods.
• Payment Methods: Consider which payment methods the exchange accepts. Most exchanges support bank transfers and debit/credit cards, but if you want to use alternative methods like PayPal or e-wallets, check beforehand if the exchange accepts them.
• Cryptocurrency Options: Different exchanges offer varying numbers of cryptocurrencies. If you're interested in specific coins beyond Bitcoin, check that the exchange supports them. Some platforms offer a vast selection, while others may have a more limited range.
• User Experience: Evaluate the user interface and ease of use. Consider your trading needs and whether the platform provides the necessary tools and charts for your strategy. Also, look for educational resources and demo accounts, especially if you're a beginner.
• Account Verification: Be prepared to complete the Know Your Customer (KYC) process, which includes providing a photo ID and verifying your identity. Check the specific requirements and process for each exchange, as this can vary.
• Wallet Options: Consider whether you want an exchange that provides a built-in wallet or if you prefer to use your own personal hardware wallet for added security.
• Customer Support: Assess the exchange's customer support channels and responsiveness. Look for live chat, email, or other convenient ways to reach customer support. Also, check third-party reviews to gauge the overall satisfaction and experience of other users.
• Reputation and Safety: Research the reputation and safety record of the exchange. Have there been any reported hacks or security breaches? How well-capitalised and safe is the platform? Consider choosing an exchange that has been around for a while and has a good track record.

Some popular cryptocurrency exchanges and brokers in Ireland include Skilling, Coinbase, Binance, Kraken, Bitpanda, and eToro. Compare their features, fees, and security measures to make an informed decision based on your specific needs and preferences. Remember that investing in cryptocurrencies carries a high risk, and you should only invest what you can afford to lose.

Payment methods and fees

When it comes to investing in cryptocurrency in Ireland, there are several payment methods available. The most common way is to use a credit or debit card to make a deposit. Many platforms also accept bank transfers, SEPA transfers, or other online payment services such as PayPal, NETELLER, or Skrill.

It is important to consider the fees associated with each payment method. For example, eToro, a popular trading platform and crypto exchange, charges a 1% fee on all crypto trades and an additional spread fee. They also charge a 0.5% currency conversion fee for converting from Euros to US Dollars, which is the only currency they trade crypto in. Similarly, Coinbase, the world's largest Bitcoin broker, may track how and where you spend your Bitcoins, and their advanced trader platform has a confusing user interface.

To avoid conversion fees on eToro, you can use the eToro Money App or alternative banking services such as N26 or Revolut. Revolut is a highly rated app that allows users to buy, hold, and sell several different cryptocurrencies. However, it is important to note that standard Revolut accounts do not allow users to move crypto out of their Revolut account, and the exchange rate for cryptocurrencies is higher than on eToro, at 2.5% for standard users and 1.5% for Premium and Metal users.

Another option for investing in cryptocurrency is through crypto trackers, such as Exchange-Traded Notes (ETNs). These allow you to invest indirectly in cryptocurrencies without having to worry about wallets or security. Degiro is a platform that offers crypto trackers, and their fees are the same as buying any other ETF: €2 per trade plus a €1 handling fee.

Risks and volatility

Investing in cryptocurrencies like Bitcoin, Ethereum, Litecoin, and Ripple (XRP) is a risky and volatile endeavour. Crypto is a high-risk, high-return investment asset class. Volatility refers to the deviation in the price of an asset, and crypto prices can be extremely volatile, with huge fluctuations in valuation. This volatility is driven by several factors, including supply and demand, investor actions, media hype, government regulations, and the actions of industry influencers.

One of the main reasons for the volatility of cryptocurrencies is that, unlike fiat currencies, they are not backed by tangible assets or regulated by governments. Their value is based on speculation and is therefore highly sensitive to slight changes in investors' expectations or perceptions. The actions of large investors, known as "whales", can also significantly impact the market. For example, if whales were to suddenly sell their holdings, it could cause a rapid downward spiral in prices as other investors panic.

The media also plays a significant role in crypto volatility. News and media outlets often present unverified information and predictions from "experts", which can influence investor concerns and lead to price fluctuations. Additionally, the actions and opinions of industry moguls and influencers can have a substantial impact on crypto prices. For instance, Elon Musk's tweets about Bitcoin have been known to affect its value.

Another factor contributing to crypto volatility is government regulations. For example, China's government and central bank announced in 2021 that all cryptocurrency transactions were illegal, causing a drop in Bitcoin's price. Similarly, rumours about potential regulations or changes in tax policies can also impact crypto prices.

It is worth noting that the crypto market is still relatively new and in its infancy compared to traditional financial markets. This means that it may still be going through a price discovery phase, and prices could continue to change as investors, users, and governments navigate the initial growing pains and concerns.

Overall, investing in cryptocurrencies is a risky proposition due to the high volatility of these assets. Those considering investing in crypto should be prepared for a bumpy ride and only invest what they are willing to lose.

Wallets and security

When investing in cryptocurrency, it is important to understand the security risks and how to protect your investment. Here are some detailed tips on wallets and security to help keep your cryptocurrency safe:

• Use a Reputable Wallet Provider: Choose a cryptocurrency wallet from a reputable company with a proven track record. Look for wallets developed by companies with a strong focus on security.
• Cold Storage Wallets: Consider using a cold storage wallet, which is not connected to the internet. These wallets, such as those offered by Trezor and Ledger, provide an extra layer of security as they are almost impossible to hack.
• Don't Put All Your Eggs in One Basket: Avoid storing all your cryptocurrency in a single wallet. Distribute your savings across multiple wallets so that if one is compromised, you don't lose everything.
• Backup Your Wallet: Regularly back up your entire wallet and store the backups in multiple secure locations. That way, if your device is lost or stolen, you can recover your wallet and funds.
• Encrypt Your Backups: Always encrypt online backups to protect them from theft. Any backup stored online is vulnerable to malicious attacks, so encryption is essential.
• Use Strong Passwords: Create strong, unique passwords for your wallets and devices. Avoid using easily guessable passwords that contain only letters or recognisable words. Aim for a password with a mix of letters, numbers, and punctuation marks that is at least 16 characters long.
• Two-Factor Authentication: Enable two-factor authentication (2FA) wherever possible. This adds an extra layer of security, requiring a code as well as your password to access your wallet or account.
• Be Wary of Public Wi-Fi: Avoid using public Wi-Fi networks when accessing your cryptocurrency wallets or exchange accounts. Hackers can target devices connected to these networks.
• Keep Software Up to Date: Regularly update your wallet software and any other applications on your computer or mobile device. Updates often include security patches that can help protect against known vulnerabilities.
• Beware of Phishing Scams: Be cautious of phishing scams designed to trick you into revealing your private keys or other sensitive information. Only visit trusted websites, double-check the authenticity of applications you download, and never click on suspicious links or enter your private key on an unfamiliar site.
• Double-Check Transaction Details: Always triple-check the recipient's address before sending any cryptocurrency payment. Malicious programs can interfere with "copy and paste" actions, resulting in you accidentally pasting the wrong address.
• Avoid Storing Large Amounts on Exchanges: While some exchanges are considered safe, it is generally not advisable to store a large portion of your cryptocurrency on them. Remember that if an exchange is hacked, your funds may be at risk.
• Keep Your Holdings Private: Refrain from disclosing your cryptocurrency holdings to others. The less information you share, the less likely you are to become a target for theft or attacks.

Tax implications

The Revenue Commissioners in Ireland consider cryptocurrency to be a type of asset, like property or shares, and therefore subject to taxation. The tax you pay depends on the transaction, but it could include Capital Gains Tax, Income Tax, and Capital Acquisitions Tax.

Capital Gains Tax

You must pay Capital Gains Tax in Ireland when you make a gain or profit from disposing of an asset, including cryptocurrency. This includes selling crypto for euros, swapping or exchanging one crypto for another, spending crypto on goods and services, and gifting crypto (excluding to a spouse or civil partner in most cases). The Capital Gains Tax rate in Ireland is a flat rate of 33%. However, there is a tax-free allowance, and each year, the first €1,270 of your capital gains are exempt from this tax.

Income Tax

Certain transactions involving cryptocurrency will be subject to Income Tax. This includes getting paid in crypto and crypto mining (if you are not mining as a business). The amount of Income Tax you pay depends on your total earnings for the year and your personal circumstances. There are two Income Tax rates in Ireland: 20% and 40%.

Capital Acquisitions Tax

Capital Acquisitions Tax may apply when you receive cryptocurrency as a gift or inheritance. If the value of the crypto received is above a certain threshold, you will be liable to pay a flat rate of 33% Capital Acquisitions Tax. The threshold varies depending on the relationship between the giver and the recipient.

It is important to note that buying crypto with euros and transferring crypto between your own wallets are generally tax-free transactions in Ireland.

To stay compliant, it is essential to keep detailed records of your cryptocurrency transactions, including dates, asset descriptions, sales proceeds, and costs of acquisition. Additionally, you must meet specific tax deadlines and properly file your crypto taxes.

Frequently asked questions