South Dakota has licensed cryptocurrency exchanges that provides a legal way to buy and sell bitcoin for its residents. There are also unlicensed cryptocurrency exchanges, which may operate via third parties, or are peer to peer exchanges. Residents can transact on these, but be aware they are unlicensed, hence customer complaints may not be able to be resolved in the most efficient manner.
A snapshot of South Dakota Cryptocurrency Market:
- It is legal for residents of South Dakota to trade in cryptocurrencies
- Investors and traders must be at least 18 years old
- Onshore cryptocurrency exchanges must abide by the South Dakota Monetary Transmission Act.
- Offshore cryptocurrency exchanges are also available, but may pose significant higher risk of scam, hacks, dishonest and untrustworthy activity.
In this article we explain which bitcoin exchanges to use and to avoid, the legislation, and other important tips and tricks to guide you with investing in cryptocurrencies.
If you intend to trade and invest in Bitcoin and Cryptocurrencies in SD, then we highly recommend the following:
Top 5 South Dakota Bitcoin Exchanges
Overview of South Dakota Bitcoin Exchanges
Choosing a South Dakota bitcoin exchange requires assessing various attributes. These attributes are common among all exchanges, but their importance to you may differ to someone. Your bitcoin strategy, maybe to buy and hold. Or it may be to trade often. A strategy will determine which exchange is best for you to use.
The most common attribute considered are fees. Fees have an impact to your bottomline, and therefore it makes sense to rank this at the top of considerations. This should be balanced with Customer Support which mostly correlates with KYC requirements. KYC can be a lengthy process, if there is inadequate customer support. Other attritbutes such as security, liquidity, payment options is also important in deciding which exchange to use.
We outline the attributes and discus further their importance.
💰 Fees
Fees are the first attribute that many buyers of bitcoin consider. Some exchanges have a complex fee structures that can be quite confusing. Others, which in our opinion, declare that they charge zero fees is misleading. While prima facie that may be true, they deliberately widen the trading spreads and take their earnings through them. There is no exchange that has true zero fees, they must earning an income some how.
Low fees are often sought after by bitcoin buyers, because it clearly impacts the bottom line. The percentage earnings from bitcoin appreciating is offset by the trading fees (which are also a percentage). Therefore a trader that signs up to a low fee exchange will have better returns that a high one, irrespective of any other attributes.
🔒 Safety and Security
Global and local exchanges have insurance to protect their customers against the event of a hack. In the past, exchanges have lost millions of dollars of bitcoin, because hackers have been able to infiltrate the platform and steal from hot wallets. Nowadays, platform security has improved with South Dakota and Federal legislation enforcing strict IT controls. Even though tremendous improvements have been made to platform security, insurance adds that extra layer of protection to the exchange.
However, insurance does not protect the individual customer. This is where security for the individual should be considered when selecting an exchange. Examples of individual user security includes 2FA (2 Factor Authentication), white listing approved IP addresses and limits to withdrawals. Individual security is paramount because if any issues arise, the responsibility of loss falls with the individual and not with the exchange.
Safety and security is paramount for individual protection.
📞 Customer Support
New bitcoin buyers in South Dakota may be surprised to read how important Customer Support is. Shouldn’t it be easy to open an account and start buying bitcoin? Well, yes and no, because it depends if you are opening a personal account vs business account, and the features of the exchange platform.
Firstly, KYC can be an onerous process. KYC is a mandatory requirement that all exchanges must perform in every State. This involves asking new customers to provide sufficient document to identify who they are, their sources of income and ultimate beneficiary of any gains and losses of trading. For personal accounts, KYC is relatively easy. Hence most exchanges would prefer to accept personal accounts, because the overhead is low. For business accounts, the KYC process can be complicated, slow and laborious. Exchanges do NOT want to provide an excessive amount of Customer Support for business accounts, because it hurts their profits. Unfortunately, for buyers of bitcoin who want to open a business account for a company, trust, partnership or any complex structure, you will need to find an exchange that can support you and often it is at an exchange with higher trading fees.
Secondly, an exchange rich in features for sophisticated investing, maybe confusing to use. Customer Support will be needed to assist with platform issues, how to use, or even just general trading questions.
The quality of Customer Support should be balance directly against the fees.
💳 Payment Methods
The most common method of deposting and withdrawing is though wire transfers and ACH. Credit cards such as VISA and Mastercard can also be used, but with limits. There are a few exchanges which extend payment methods to e-wallet transfers which includes PayPal, ApplePay and Google Pay.
When selecting an exchange, you may want to consider the payment options of an exchange. Though some may be limited, you can easily transfer your funds to enable an accepted payment methods. Just beaware, that different payment methods will incur different fees and each will have different processing times.
🪙 Bitcoin and Supported Cryptocurrencies
Bitcoin has proven to be reliable and effective as a method of payment. Due to bitcoin being the most popular digital currency, it is regarded as the safest investment. This however does not mean that you should put all your money into bitcoin. Diversification is a common strategy by investors to spread risk. Spreading risk across several cryptocurrencies, in theory, removes the dependency on bitcoin. Accordingly, choosing an exchange that supports other cryptocurrencies besides bitcoin is important.
🏷 Coupons and Discounts
Based on their common purpose, coupons and discounts 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.
⚙️ Platform Reliability
With any IT software, especially an online bitcoin exchange, there will always be maintenance required to the hardware and upgrades to the software. Sometimes, IT maintenance will place the exchange offline, to allow for these changes to be made. During an offline period, you will not be able to buy or sell bitcoin. Often the downtime period is very short and does not impact customers. Some exchanges however have had their exchange offline for up to a week. These exchanges are generally the smaller ones that are not global and service a small customer base.
📈 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.
South Dakota Bitcoin Exchange Reviews
There are many exchanges to choose from in South Dakota. We have selected the best and most popular exchanges to review, indicating their history, selection of cryptocurrencies and licensing status.
Binance.US
Binance.US is one of the most popular exchanges not only in South Dakota but also in the wider the US. Many see Binance.US as an offshoot of Binance (International), but in fact, the two companies are stand alone. Binance.US however, does utilize the IT platform and experience of Binance, and it clearly shows with their ability to provide a quality service with low trading fees.
The Binance.US platform is one of the best. It is reliable, easy to use and is most suitable for the personal account trader. The KYC process is fast, and will get you up and running in a very short period of time. On the other hand, Business account setups do take longer, and in some cases have extended one month. This is not the norm, but take note that business accounts can be lengthy and will need customer service.
Binance.US supports a good range of cryptocurrencies, including it’s own native coin BNB. Yes, there are some traders that want to diversify from bitcoin with some exotic coins that may not be available, but that is the minority. Overall, you will find a healthy range of cryptocurrencies that you can diversify your exposure into.
The Binance.US platform is downloadable on a mobile app – Android or iOS, but its functionality is not as powerful as the desktop version. Still it is effective to trade when on the move.
Binance.US is a good choice for beginners or personal account holders. It’s fast, intutive, highly liquid with narrow spreads. You will get the most bang for your buck on this platform.
- Money Transmitter License: MT.2199
- Cryptocurrencies: 64
- Mobile App: iOS and Android
- Fees: 0.1% – 0.5%
- Payment Methods: Debit Card, ACH, Wire Transfer
BlockFi
** Update 2022 Feb – BlockFi has been issued a SEC penalty that totals approximately $100m. According to the SEC, BlockFi has been issuing and accepting customers for an unapproved financial products i.e. interest earning bitcoin deposits. As a result, we do NOT recommend buying bitcoin at BlockFi.
BlockFi is not as well known as other exchanges. Its core business is lending bitcoin through the acceptance of deposits (much like a bank). Its trading platform as an exchange is still maturing and can only accept one payment method. Fees are included in the spread, which makes it difficult to determine the actual fee to customers.
If you just want to get started with buying bitcoin, then perhaps give BlockFi a miss. But if you want to borrow and lend bitcoin, BlockFi is a good choice.
- Money Transmitter License: Not licensed
- Payment Methods: ACH
- Mobile App: iOS and Android
- Fees: embedded in the spread
CEX.IO
With over 4 millions customers reaching over 20 countries, CEX.IO is a big exchange that both new starters and experienced buyers of bitcoin are attracted to. Excellent customer support, with reasonable trading fees and high liquidity. CEX.IO supports over 100 cryptocurrencies, which ranks as one of the highest.
The layout and design is intuitive, but probably best for the sophisticated investor with many options. That doesn’t mean that as a beginner it’s not good, it’s just that you may find it overcrowded. CEX.IO has been in the market for over a decade, developing a reputatin of being safe and secure.
Choose CEX.IO if you are an experienced trader.
- Money Transmitter License: MT.2171
- 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
Coinbase is a well known all rounder bitcoin exchange. It is competitive with low trading fees, although it can be difficult to determine due to it’s complex fee structure. Being listed on the NASDAQ, you can be assured that Coinbase is safe and secure to use. Part of the personal security that it offers to customers is the ability to whitelist IP addresses and put limits and timeframes on withdrawals. At nearly 100 support currencies, Coinbase ranks higher than Binance.US. Lastly, Coinbase is a highly liquid exchange with narrow spreads. Completing a buy and sell order of bitcoin is fast and efficient.
- Money Transmitter License: MT.2100
- Cryptocurrencies: 96
- Mobile App: iOS and Android
- Fees: 0.5% – 4.5%
- Payment Methods: Debit Card, Credit Card, ACH, Wire Transfer
Coinmama
We like Coinmama for its simple and easy to use layout. Very intuitive for beginners, hence the need for Customer Support isn’t as important as other exchanges. In addition to bitcoin, there are other coins that you can select. Trading is confined to simple outright buy and sell, there is no margin lending, stop losses and other hyrbids to consider.
The platform is stable, but only Android is downable for mobile apps. Coinmama does not hold a Kentucky license per se, but trades through a third party provider.
- 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)
One exchange that is shaking up the market in South Dakota is Crypto.com. Employing the services of Matt Damon and LeBron James, the marketing budget is huge. Crypto.com has also purchased the naming rights of what was previously known as the Staples Center, L.A.’s stadium.
Pushing for a flashy image, Crypto.com provides customers with a card that is metal. That’s right, a heavy metallic card that is shiny and bright to buy things with bitcoin. It’s not often said, but customers are drawn to pulling out their metal card rather than the boring plastic credit and debit cards.
Pretentious? Maybe. But behind the glamour Crypto.com does offer a fantastic service. The trading fees are very low, comparable to Binance.US, FTX.US and Coinbase. It’s mobile app is strong and reliable in both iOS and Android versions.
Lastly, as with Binance.US, there is a Crypto.com native coin (CRO), which can be earned when trading on the platform.
- 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
eToro
Forex exchange was and still is remains the key business for eToro. However it is looking to branch out into the cryptocurrency market. It’s a natural progression because the functionality is exactly the same. With eToro’s history of trading in currency, the platform has developed into a leading, reliable, user friendly exchange.
eToro says that its trading fees are zero. Which is true. But the catch is that their spreads are wide. So wide that eToro ranks as one of the most expensive platforms to buy bitcoin with.
Getting started with eToro is very fast and simple. The customer support is fantastic, but is limited to only 27 cryptocurrencies to trade with.
- Money Transmitter License: MT.2159
- 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 a cryptocurrency exchange and a NFT trading platform. Alongside Crypto.com, FTX.US is splashing out a big marketing campaign to capture the US market, including South Dakota. Huge partnerships have been established with several colleges and professional sport teams. As a brand ambassador, FTX.US has employed the services of Tom Brady (who is also a significant shareholder of FTX.US).
The FTX.US layout is very sharp, and intuitive to use. But it supports a limited number of cryptocurrencies at only 20. Nevertheless, bitcoin is available and the trading fees are extremely low (in some cases even cheaper than Binance.US).
FTX.US is fast capturing a great market share in the US, increasing its liquidity for its customers and also providing narrower spreads. FTX.US is a great exchange to use if you just want to buy and hold bitcoin.
- Money Transmitter License: MT. 1957771
- Cryptocurrencies: 20
- Mobile App: iOS and Android
- Fees: 0.4% – 5.0%
- Payment Methods: Wire, ACH, PayPal, e-wallets
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
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.
South Dakota Cryptocurrency Tax Ruling and Rates
In the state of South Dakota, bitcoin buyers must pay tax on any realized capital gains to the IRS. Any realized capital losses can be carried forward to the next tax year, but this depends on the overall tax assessment of the individual.
The IRS requires buyers of bitcoin to be able to support their trading with form 1099 submmissions. Many of the top bitcoin exchanges have reports that can be downloaded and used for tax lodgements. Some exchanges even have reports that can interface with tax software.
Calculating tax on bitcoin can be extremely complicated. We highly recommend seeing a tax professional when calculating tax in South Dakota.
Bitcoin Cryptocurrency Laws and Legislation
South Dakota is a pro-crypto state implementing a licensing regime for exchanges that want to operate in South Dakota. The law references the Money Transmission Act which outlines two key definitions – Monetary Value and Money Transmission.
https://sdlegislature.gov/Statutes/Codified_Laws/2071927
“Monetary value,” any medium of exchange, whether or not redeemable in money;
“Money transmission,” engagement in the business of the sale or issuance of payment instruments or stored value or of receiving money or monetary value for transmission to a location within or outside the United States by any means, including wire, facsimile, or electronic transfer;
The definitions are interpreted with the intent of virtual currencies holding monetary value and that they facilitate the transmission of value. As a result, cryptocurrency exchanges must be regulated by the South Dakota Department of Labor and Regulation.
Money Transmission License
In order to obtain a Money Transmission License, the rules are outlined here: https://sdlegislature.gov/Rules/Administrative/7159
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.
- South Dakota 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.
- South Dakota 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
Considering the regulations from the law, a trader should be at least 18 years old to be a part of any of the cryptocurrency exchange
Summary
- South Dakota has a wide selection of bitcoin exchanges to choose from. The best exchanges will depend on your investment strategy. To sign up and create an account at an exchange you will need to complete KYC details and make a deposit.
- In addition to exchanges, you can buy bitcoin at ATMs. ATMs are convenient but charge a higher fee than an exchange.
- There are other ways of acquiring bitcoin. Mining is very popular, and also the receiving bitcoin for the exchange for goods and services.
- Realized capital gains are taxable in the eyes of the IRS. The tax rate is dependents on whether it is short or long term.
- The application of sales tax has yet to be determined, hence currently there is no sales tax.
- Legally, South Dakota residents must be at least 18 years old to buy and sell but coin at an exchange.
How to Lodge a Cryptocurrency Customer Complaint
If you have any complaints with trading with cryptocurrency in South Dakota, please initially attempt to resolve the matter directly with the provide
If the complaint remains unresolved, contact the South Dakota Department of Labor & Regulation – Division of Banking.
South Dakota Division of Banking
1601 N. Harrison Avenue, Suite 1
Pierre, SD 57501
Phone: 605.773.3421
Fax: 866.326.7504
https://dlr.sd.gov/banking/consumers/consumer_complaint_reference_list.aspx
Bordering States
North Dakota | Nebraska | Minnesota | Wyoming | Montana | Iowa
