British banks have been quick to shut down accounts used by UK-based Bitcoin exchanges, while PayPal bans customers who sell the virtual currency. Unless you want to spend hours browsing forums or paying money to a stranger, what follows is the most straightforward and reliable way to buy Bitcoin with sterling.
1. Open an account with a Bitcoin exchange.
Bitcoin exchanges work in the same way as any currency exchange. You deposit funds in your own currency and then use this money buy Bitcoin at the going exchange rate.
I’d recommend using Slovenia-based Bitstamp, who are in the process of relocating to Britain. Click here, register and then log in.
2. State how much you money want to deposit
Log into your Bitstamp account, click ‘deposit’ and then select ‘EU Bank (SEPA)’. Then enter how much money you’d like to deposit in Euros and click ‘deposit’ at the bottom.
3. Note down the deposit details
Bitstamp are now expecting a bank deposit from you. This page lays out the bank details, while the randomly generated number in red lets them direct your deposit to your account when it arrives.
4. Sign up to a cash transfer service
Bitstamp are expecting a Euro-denominated deposit from you in the form of European bank transfer. But UK banks are notorious for charging fees to use this service and offering their customers terrible exchange rates.
Instead, use a new cash transfer service such as Currency Fair. Follow the instructions and sign up for an individual account. You’ll then have to verify your identity - just take a photo of your driving licence or equivalent ID on your phone and upload it to Currency Fair. It usually takes a few hours for the verification to be completed.
In the meantime, add details of your UK bank account under ‘Manage Bank Accounts’.
5. Deposit sterling with the cash transfer service
We’re aiming to transfer €100 to Bitstamp, so log into the Currency Fair dashboard deposit a little bit more than the going exchange rate (eg £90).
Log into your UK online banking account and set up Currency Fair as a new payee using the bank account details shown on the right of this picture. Then transfer the £90.
6. Transfer the money to the Bitcoin exchange
Once Currency Fair have received your sterling deposit, click ‘Transfer Funds Out’. Click ‘Add a beneficiary’ and fill in Bitstamp’s bank details from Step 3. The currency should be Euro.
Include your personal reference number from Step 3 in the ‘Additional Settlement Information’ box.
Then fill out details of how much money you’d like to send to send to Bitstamp, taking into account Currency Fair’s flat €3 transfer fee. (It doesn’t matter if it’s not exactly the amount we told Bitstamp we’d send them way back in Step 2.)
Enter your PIN, press next and confirm the transaction.
7. Wait for the money to arrive at the Bitcoin exchange
It could take anything up to 48 hours for your Euros to reach Bitstamp. Hold tight. Then you’ll get an email like this one, confirming that your Euros have now become US dollars (the main Bitcoin buying currency) and are sitting in your account.
8. Buy some Bitcoin
Log into Bitstamp, check the existing exchange rate and hit ‘Buy Bitcoins’. A few clicks later and you’ll have some cryptocurrency held in your account.
9. Optional: Transfer your Bitcoin elsewhere
Bitcoin is like cash and if your Bitstamp account is hacked then the money is gone forever and they’re under no obligation to refund you. So don’t hold it in an online wallet. Instead download the lightweight client MultiBit and withdraw your Bitcoin to your desktop.
When logged into Bitstamp click ‘Withdrawal’ and choose ‘Bitcoin’ on the left. Then enter the wallet details of the desired recipient for your Bitcoin: either yourself or someone else. This comes in the form of string of apparently random characters.