Buying bitcoin is a great investment and acts as an excellent payment method. But what do you do if you are new to the bitcoin scene? Knowing where to start can be confusing and down right scary.
A snapshot of Rhode Island Market:
- Buying and Selling bitcoin is legal in Rhode Island
- Some cryptocurrency exchanges have obtained Rhode Island approved money licenses
- Some cryptocurrency exchanges do NOT have an approved license but continue to accept residents.
In this article, we explain the best bitcoin exchanges to use, how to sign up and get started, how to choose an exchange that is right for you, the money transmitter and tax laws, and storing with wallets.
Top 5 Rhode Island Bitcoin Exchanges
Overview of Rhode Island Bitcoin Exchanges
If you intend to buy bitcoin on a cryptocurrency exchange, below is a summary of the steps you should follow:
- To start off, you need to decide your bitcoin strategy. Do you intend to buy and hold? Do you want to trade frequently? Would you like to diversify?
- Your strategy will assist you with determine what type of exchange is most suitable for you. There are several factors which you should consider, to align with your strategy.
- Choose an exchange, you will need to sign up and create an account.
- After verification and activated, choose a payment method to make a deposit.
- Exchange deposit for bitcoin.
- Store your bitcoin on a wallet.
To select a cryptocurrency exchange, you will need to consider the following:
🔒 Safety and Security
Safety and security is important for user and exchange
During the early years of bitcoin, cryptocurrency exchanges were making headlines for being hacked, operating as scams and/or falsifying liquidity. But things have change dramatically, and exchanges are now meant to be licensed and regulated. In Rhode Island, it is not necessary to be licensed to accept users, but some have exchanges have obtained a license anyways, which is a very good thing. It demonstrates that those exchanges who have acquired a Rhode Island license are serious about being law abiding.
Exchanges have also improved their technology to be more secure. Strengthening infrastructure, putting in place better procedures, but also offering users functionality to protect user access and authorized transaction limits.
No exchange, however, can protect against a user’s carelessness of revealing passwords or losing keys. Nor can the State prevent users from mistakenly signing up to scams.
Weigh up safety and security. Though it has improved, it should still be at the forefront of consideration.
📞 Customer Support
Prompt, Accessible and Professional
You will find that Customer Suppport will be needed more times than you would think. Some users will need support going through the KYC process, some will need it to trade, and others will just have general questions about the platform.
Customer support needs to be accessible, whether it be through Live Chat, email or a hot line. It also needs to be prompt and accurate. Some customer support is AI driven. Useless if you have a specific question or need help urgently.
Customer Support is also supported with Self Help Centers – information portals with guides, procedures and rules. These self help centers are meant to be useful, easy to read and comprehensive. The low trading fee exchanges tend to push their Customer Support towards Self Help Centers. It’s one way of saving costs in an effort to allow for low trading fees.
💳 Payment Methods
Make sure your Payment Method is available
Many of the top exchanges will offer the common US payments – ACH, wire transfers. Some will accept debit cards but with limits. Credit cards are much harder to come by, because many financial institutions will not facilitate it (even though it is lawful). Finally, there are very few that will also accept PayPal, Skill and Neteller.
The no frills exchanges may only accept one or two types of payment methods. This doesn’t necessarily mean that the exchange is bad, as long as you are willing to use the payment methods that they offer then there are no issues.
Payment methods are often sought by users for first and foremost Credit Cards. They want to use loyalty points on their cards to access greater rewards. The second most sought after payment methods, are the cheapest ones. Some payment methods will incurr a fee by the exchange which is passed onto the user. Each exchange will have a different fee for their payment methods that they offer.
🪙 Cryptocurrency Selection
Spread your investment
There are two aspects to cryptocurrency selection that should be considered. First, is the diversification benefit that can be obtain by buy several cryptocurrencies outside of bitcoin. Diversification is a common strategy among investors to spread their risk. This reduces volaility.
Secondly, some top exchanges have their own native coin. For example Binance and Crypto.com. With these exchanges, you will be rewarded with native coin, which could go up in value. The more users who join these exchanges, the more liquidity with the native coin.
These benefits should not be overlooked when considering an exchange.
🏷 Coupons and Discounts
Refer a friend and Claim Discounts
Based on their common purpose, coupons and promotions are intended to create a win-win situation by attracting more and more clients to start trading with them. For a good cryptocurrency exchange, these offers work as a marketing tool where they can reach maximum number of people and expect to get at least 50% responses within no time. traders are rest assured of getting discounts or reductions in transaction fees.
💰 Fees
Trading, Deposit and Withdrawal
Fees can be incurred as trading fees, on deposits or withdrawals. They can also be hidden in spreads, deliberately widened so that the exchange can take a cut.
Fees are very hard to compare from exchange to exchange, because there is no standardized fee calculation. For trading fees, the most common method of calculation is a tiered approach based on volume and dollar amount. The tiers may be complex or simple and can have conditions.
Deposit and withdrawal fees can differ based on the method. Different methods may require merchant providers to facilitiate, whom in turn charge a fee, and the exchange may then impose their own administration fee.
Beware that some exchanges will purport to have “zero” exchange fees. This is not possible. The exchanges with zero fees, have wider spreads when buying and selling bitcoin. The wider spreads (which are worse for users) encapsulate a cut for the exchange. This is how the exchange earns an income on the exchange.
The total and absolute fee that a user will incur is therefore difficult to ascertain. But the most popular low trading fee exchanges are FTX.US, Binance.US and Coinbase Pro. These exchanges have fees starting as low as 0.4%.
⚙️ Platform Reliability
Limited downtime, glitch free
The vast majority of exchanges are built on reliable platforms that are easy to use, interface well and don’t crash. But, as part of the licensing, they are required to continually improve their system controls, reliability and IT infrastructure. Occassionally, they will need to shut down their platform for maintenance which includes fixing bugs, upgrading software, adding new features. At most, a shut down will not last more than a day, and will occur outside of normal working hours.
For the vast majority of buyers of bitcoin who are long term traders, platform reliability is an important attribute but not as important as others that we have mentioned.
📈 Liquidity
More buyers and sellers equals more liquidity
Without good liquidity it is hard to be able to sell, liquidate the earnings (or losses). It is important to have liquidity, if not then it could become a problem. Liquidity comes and goes. This is the same for any tradeable asset, like stocks. Trading in stock volumes increase and decrease seasonal and also broadly in alignment with how well the economy is performing.
A low volume exchange has risks that are two fold. One, you will need to bide your time in order to sell for the right price. Low volumes will make this difficult, and especially if you urgently need to sell this could cause you to lose some of your profits. Secondly, a low volume exchange is prone to market maniuplation. The larger holders of the coin, could possible move the market, but it more than likely causes volume voliatity on the exchange.
Without good liquidity it is hard to be able to sell, liquidate the earnings (or losses). It is important to have liquidity, if not then it could become a problem. Liquidity comes and goes. This is the same for any tradeable asset, like stocks. Trading in stock volumes increase and decrease seasonal and also broadly in alignment with how well the economy is performing.
Setting Up an Account
To buy bitcoin from an exchange, you will need to set up an account. The process varies slightly between each of the exchange platforms, but ultimately you will need to go through a KYC (Know-Your-Client) process.
A KYC process is a mandatory requirement by all licensed exchanges in Rhode Island. They need to perform this verification, to prevent money laundering and to meet AML (Anti-Money Laundering) international regulations.
The KYC will normally ask for your person details, proof of identity in the form of utility bills, drivers license or passport and social security number. Some exchanges may ask for more information.
Once your KYC has been processed your account will be activated. Now send whatever amount of money into it that matches how much fiat currency you’re willing to spend on bitcoin.
Send your US dollars through a payment method such as a bank transfer and then sit back and wait until it arrives in your exchange wallet — which could take several days depending on how busy they are.
Rhode Island Bitcoin Exchange Reviews
Rhode Island has numerous exchanges available. We review the most popular cryptocurrency exchanges in alphabetical order.
Binance.US
Binance.US is one of the most popular exchanges in Rhode Island. Unfortunately, it hasn’t obtained a formal Rhode Island Money Transmitter license, (which isn’t necessary, but would have been nice to have to offer that greater level of assurance). Nevertheless, Binance.US accepts Rhode Island residents, with its attractive low fees and quick service.
But let’s not forget that some exchanges will get you back by offseting low trading fees with wide spreads. Binance.US doesn’t do this. They continue to be one of the most competitive for narrow spreads which is fantastic. Liquidity is probably the highest, so you will not find any better exchange for a quick bitcoin buy.
Another reason that Binance.US is popular is its native coin BNB. Users are rewarded with BNB for using the exchange, and BNB itself can also be traded. Creating an extraordinarily worthwhile investment.
Lastly, personal accounts can be established and verified within an hour. A no hassles quick start for the buyer who is in a hurry.
In summary, Binance.US is a trustworthy exchange to use to buy bitcoin. The pro’s certainly outweigh the con’s and certainly exceeds in comparison to other exchanges.
- Money Transmitter License: Supported but not RI Licensed
- Cryptocurrencies: 64
- Mobile App: iOS and Android
- Fees: 0.1% – 0.5%
- Payment Methods: Debit Card, ACH, Wire Transfer
BlockFi
** Update: Feb 2022 – BlockFi has been issued a $100m infringement penalty by the SEC and various State regulatory bodies. As a result, we do NOT recommend using BlockFi.
Not many users have heard of BlockFi as an exchange, but they may know of it as a deposit/lender of bitcoin. Offering a good interest rate, for those who don’t want their bitcoin just sitting on their wallet being idle. On the flip side, you can borrow bitcoins from BlockFi, if you want to leverage or need it for business transactions.
It have recently launched an exchange to compliment their deposit and lending facility. The exchange is still in its infancy, only accepting ACH transactions and fees are “zero” which means they are embedded in the spread. Lack of transparency of fees is concerning, with many user prefering low trading fee and narrow spread exchanges.
BlockFi may turn out to have a great exchange. But for the time being perhaps give this one a miss.
- Lender License: 20214155LL
- Payment Methods: ACH
- Mobile App: iOS and Android
- Fees: embedded in the spread
- Only supports crypto pairs
CEX.IO
Valued at $43 billion, over 4 million customers, CEX.IO is a UK based worldwide exchange. Supporting over 100 cryptocurrencies, it most certainly is the best exchange to use to diversify quickly and with convenience. Its platform is advanced, and is suited for the experienced trader, while fees are reasonable.
For beginners the platform maybe confusing at first – lots of products, features and reporting that can be used. The platform is most definitly secure and safe, with regulations to be met in the UK, as well as US FinCen. CEX.IO is only a handful of licensed exchanges in Rhode Island, which give it an advantage of compliance over other exchanges.
- Money Transmitter License: 20203907CT
- Cryptocurrencies: 100+
- Mobile App: iOS and Android
- Fees: 0.15% – 0.25% + deposit and withdrawal fees
- Payment Methods: Debit Card, Credit Card, ACH, Wire Transfer
Coinbase Pro
Coinbase Pro is a great exchange that many in Rhode Island are using. Coinbase is the only cryptocurrency exchange to hold two licenses! One as a Money Transmitter and another for Sales Check. If this doesn’t provide you with enough assurance that Coinbase is on the right side of the law, then you might as well stop buying bitcoin.
In addition to the safety and security that licensing provides, users also like the low trading fees and the reliable platform hosting a good selection of supported cryptocurrencies. The downside is that the fee structure is quite complex. So just be cautious when choosing your payment method and trading volume if you are concerned about fees.
Also note, that there are two platforms. Coinbase and Coinbase Pro. The latter is the cheaper platform is suitable for a trader seeking to buy and sell bitcoin regularly. The Coinbase (generic) platform is the basic version which charges more for instant bitcoin buys.
- Money Transmitter License: 20153173MT
- Sales Check License: 20163238SC
- Cryptocurrencies: 96
- Mobile App: iOS and Android
- Fees: 0.5% – 4.5%
- Payment Methods: Debit Card, Credit Card, ACH, Wire Transfer
Coinmama
For beginners, you can’t go past Coinmama – intuitive, simple and well thought out user experience. Buying bitcoin on Coinmama could not be any easier. It’s fees aren’t the lowest around, but it excels with customer support. At just under 100 supported cryptocurrencies, you can easily divest your digital assets and spread your risk.
The exchange is reliable and offer both Android and iOS mobile apps.
Choose Coinmama if you want a no fuss quick buy bitcoin exchange.
- Money Transmitter License: N/A
- Cryptocurrencies: 96
- Mobile App: iOS and Android
- Fees: 0.5% – 4.5%
- Payment Methods: Debit Card, Credit Card, ACH, Wire Transfer
Crypto.com (CDC)
Crypto.com is splashing out with marketing to become the biggest exchange in Rhode Island. Joining forces with the well known basketball player Lebron James and the movie star Matt Damon, you will definitely see lots of promos. Crypto.com is now also the name of the LA sport stadium that used to be called the Staples Center.
Looking beyond its marketing campaign, Crypto.com is an exchange that offers many perks, and excellent trading experience. One of the perks is being rewarded with the native coin CRO. The more you use Crypto.com the more CRO you can earn.
CRO can also be traded, just like any other cryptocurrency. Hence, there is a lot of upside with trading on Crypto.com.
Crypto.com offers a fantastic debit card made of metal. It is widely accepted, but undoubtedly heavy. To be honest, it is very gimmicky, and could be a good talking point at a party, but it still is just a debit card, i.e. the functionality is the same as any other.
The app is sturdy, robust and mostly glitch free. If there are any issues, users have found by simply uninstalling and reinstalling the app, it begins to work smoothly again. Trading fees are among the lowest, though spreads are just ok. As Crypto.com grows, we expect to see better spreads.
- Money Transmitter License: Not available
- Cryptocurrencies: 96
- Mobile App: iOS and Android
- Fees: 0.5% – 4.5%
- Payment Methods: Debit Card, Credit Card, ACH, Wire Transfer
eToro
eToro comes across as professional, sharp and powerful. But at the end of the day, when an exchange purports that they have “zero” trading fees, and takes a cut through the widening of spreads, let’s just say transparency is lacking.
There is no question, that eToro has an excellent platform. Their history of trading in foreign currency and extending it to cryptocurrency allows eToro to have one of the best platforms. Smooth, seamless, mostly glitch free, the system is easy to use even for the beginner. The support cryptocurrencies is limited, at only under thirty.
We like eToro for their exchange capabilities, the trading features that can allow you to implement strategic bitcon buy and sells, but we dislike its lack of transparency in fees and no licensing.
- Money Transmitter License: Not licensed
- Cryptocurrencies: 27
- Mobile App: iOS and Android
- Fees: zero (but huge spreads making eToro more expensive than Binance.US and Coinbase).
- Payment Methods: Wire, ACH, PayPal, e-wallets
FTX.US
FTX.US is competing strongly against Crypto.com in terms of marketing. Partnering several NBA, NFL and MLB teams, it’s biggest drawcard is having Tom Brady as a shareholder and brand ambassador.
Strikingly, FTX.US is the lowest trading fee exchange (without any hidden cuts in the spread). This is certainly attracting many customers to its platform. Unfortunately, the support currencies is a little light at only 20.
Nevertheless, FTX.US is one of the best buy bitcoin exchanges available for Rhode Island.
- Money Transmitter License: 20224304CT
- Cryptocurrencies: 20
- Mobile App: iOS and Android
- Fees: 0.4% – 5.0%
- Payment Methods: Wire, ACH, PayPal, e-wallets
Kraken
Belongs in the top exchanges for Rhode Island, Kraken has been around since the early days of Bitcoin. Famously begun to provide an alernatively to Mt. Gox (which infamously made headline for millions of stolen bitcoins), Kraken has never been “publicly” hacked.
Similar to Coinbase, there is a basic platform and an advance user platform Kraken Pro.
The platform has many users, hence liquidity is not a problem, and fees are reasonable.
Nexo.io
Nexo is a Euro based deposit and lending platform which has branched out to being an exchange. It has followed the same path of BlockFi (with the only difference that BlockFi is USA based).
In knowing that Nexo is offshore based, users may want to choose BlockFi for that extra piece of mind.
Certainly the deposit and lending business of bitcoin has made a healthy return for many in the industry. How Nexo.io can make ground in the exchange area remains to be seen with an overcrowded market in the US.
- Fees – Zero
Bitcoin ATMs
With the help of Bitcoin ATM, it’s quite easy for potential investors to buy bitcoins whenever they have enough funds available. They make the process so quick and easy that traders used to wonder whether things have been done properly or not. It is worth mentioning that Bitcoin ATMs charge between 5% to 10% fees against providing privacy, security and convenience of keeping personal and other details in private. This fee is literally worth the features traders will be getting.
LocalBitcoins – Peer to Peer Exchanges
Known for providing an escrow service, this cryptocurrency platform enables clients to find the right buyers for their Bitcoins. Although advertisement is a good option to go with, many have not received the required level of responses. The thing that makes LocalBitcoins different from others is the in-person meeting, which is facilitated and secured by LocalBitcoins have turned out to the fastest platform to acquire Bitcoins within a few minutes.
Rhode Island Cryptocurrency Tax Ruling and Rates
Bitcoin and other cryptocurrencies is a taxable asset in the eyes of the IRS. Therefore when you buy and sell bitcoin, you will need to calculate how much tax is payable. Tax is dependent on the outcome of realizing capital gains or losses. The tax rates differ between short term and long term, which is defined by one year. Short term realized gains have tax rates that are in alignment with personal income tax rates. While long term realized gains have an average of 20% (but may differ depending on your circumstances).
Be prepared to submit to the IRS details of your trading activity. Most exchanges will provide tax reports which will help with the IRS submission.
Bitcoin and Cryptocurrency Laws
The Rhode Island laws governing the use of cryptocurrency exchange are clearly interpreted in a guidance issued by the Rhode Island Department of Business Regulation.
The guidance outlines that any Cryptocurrency Exchange that faciliates the buying and selling of bitcoin, whether it be centralized, decentralized or peer to peer, must obtain a Currency Transmission License. The Currency Transmission License is as per R.I. Gen. Laws § 19-14-1(4)(ii).
The guidance issued explicitly refers to “crypto-currency exchange platforms and/ or peer-to-peer exchangers”
We reference the below R.I. Statutes which outlines the obligation of having a Currency Transmission License.
http://webserver.rilin.state.ri.us/Statutes/TITLE19/19-14.3/INDEX.HTM
http://webserver.rilin.state.ri.us/Statutes/TITLE19/19-14/INDEX.HTM
Guidance has also been given by the Department regarding the licensing for bitcoin ATMs and kiosks. Surprisingly, their interpretation is that an ATM is partaking on one side of a two sided transaction, and is not faciltating with another party (as per a cryptocurrency exchange). Therefore in reference to § 19-14-1(4)(ii) a license is not required, unless the ATM links directly to a cryptocurrency exchange.
Bitcoin and Cryptocurrency Wallets
Some exchanges also offer wallets. It’s not necessary for a good exchange to offer a wallet to their clients, though it can be a nice to have for new investors. However, be aware that online wallets offered by exchanges are normally hot wallets. That is, these wallets are connected permanently to the internet. This can be quite risky to use a wallet that is controlled by the exchange and not by yourself.
Hence it’s not necessarily a good thing if an exchange offers a wallet, but it’s a nice to have, if you are looking for an exchange with their own wallet.
- Online Wallets: Every crypto-exchange has their own wallet where traders can store their coins or cryptocurrencies for as long as they want. However, there are two types of these wallets that traders have to decide about which wallet they want to use for their trading.
- Rhode Island Hot Wallets: Since the inception of bitcoins and other cryptocurrencies, wallets have been transformed and divided into two forms- desktop and online. Digital wallets are free and can hold any cryptocurrency that traders want. They enable them to get easy access to their cryptocurrencies via mobile devices. They are perfect for beginners who want something easy to start with.
- Rhode Island Cold Wallets: These specifically designed devices work as physical cryptocurrency storage that allow traders to bring their cryptos with them, no matter where they are going. Though, the only considerable thing is their expensive nature with limitations of storing certain cryptocurrencies for future use.
Minimum Legal Age
Federal law governs the minimum legal age for residents of Rhode Island to buy and sell bitcoin. The minimum legal age is 18 years old, to sign up, create and account and buy bitcoin on a cryptocurrency exchange.
Summary
In Rhode Island you will find various ways to buy bitcoin. The most common is via cryptocurrency exchanges. The vast majority of cryptocurrency exchanges are licensed by the State of Rhode Island Department of Business Regulation. A cryptocurrency exchange that you select to buy bitcoin should fit your investment strategy. A good balance of fees, safety and security, platform reliability, liquidity, supported cryptocurrencies and payment methods is often sought after.In addition to buying on a cryptocurrency exchange, bitcoin can be bought at ATMs, through the exchange of goods and services or mining.
After purchasing bitcoin, a wallet is needed to store it. The keys to the wallet are vital in keeping safe. There are different types of wallets, each with their pro’s and con’s that should be considered.
Finally, when using bitcoin there are tax implications. The IRS treats using bitcoin the same as foreign currency. If you profit from bitcoin, you may need to pay taxes.
How to Lodge a Cryptocurrency Customer Complaint
If you have any customer complaints with cryptocurrency exchanges in Rhode Island, you should contact them first to resolve any issues.
If unresolved after attempting to discuss with the exchange, contact the State Banking Division.
State of Rhode Island Department of Business Regulation – Banking Division
1511 Pontiac Avenue
Cranston, RI 02920
https://dbr.ri.gov/divisions/banking/complaint.php
