How you decide to buy or sell bitcoins in the UK will probably depend on the amount of money involved. The best price is normally achieved by going through an exchange. The larger exchanges, like Bitstamp and Bitfinex, will have more liquidity for larger orders, but arbitrage bots tend to even out the price between all the exchanges, so, as long as you are patient, it’s probably best to choose an exchange for ease of use, security and reputation.
The UK banking system has been very unfriendly towards Bitcoin companies. As a result, no Bitcoin exchange has been able to secure a UK bank account for any significant length of time. This means funding and withdrawing GBP from your account is going to require an international money transfer, along with the associated costs.
Coinfloor is a London based exchange which allows you to buy and sell in GBP. Their bank account is in Estonia, so a wire transfer or SEPA payment is still required, but you will avoid the currency exchange costs. Bitstamp accounts are in USD, but if you use the wire transfer option, rather than a SEPA payment, they will convert your GBP at very competitive rates. Be careful with SEPA payments as, although they are intended to reduce money transfer costs within the EU, they will often result in an extra currency conversion, from pounds to euros, and not always at the best exchange rate.
It is worth noting that Bitcoin exchanges are not regulated in any meaningful way. The reputable exchanges will be registered as Money Service Businesses, but this is regulation designed to prevent money laundering, rather than to protect users funds. Exchanges are not required to keep any particular level of capital, and have no auditing obligations beyond that of any other company. All exchanges claim to maintain 100% reserves to cover customer deposits, but in the event of the exchange being hacked, or dishonest owners, these reserves could disappear very quickly.
If you don’t want to use an exchange, maybe because you don’t want to trust them, or you don’t want to share your identity documents, or the amounts you are buying or selling are too small to justify the international banking costs, then you can find a local trader or use a Bitcoin ATM.
LocalBitcoins.com is a website dedicated to matching buyers and sellers of Bitcoin. Many use their personal bank accounts to accept payments, staying under the bank’s radar. Most will set their prices at a percentage above or below (depending on whether buying or selling) a major exchange, so you will be paying a premium for the service. LocalBitcoins.com provides an escrow service to help make sure you receive your bitcoins.
If you do decide to sell your bitcoins this way, be careful accepting money from strangers into your bank account. You will probably want to confirm the buyers identity, as a buyer using a hacked bank account to make payment is likely to cost you dearly. Your bank will freeze your account without warning, put you under investigation and ultimately refund the money to the victim. Remember, there is no way to reverse the Bitcoin transaction under any circumstances. Also, if your bank realises you are trading bitcoins they are very likely to close your account.
To avoid such problems you may decide to only deal in cash. You are likely to meet a diverse group of people, there is no such thing as a typical Bitcoin person. It is not as scary as it might first appear. Use some common sense, if something doesn’t feel right then do not continue. If someone starts talking about any illegal activity then you are advised not to complete the trade. You don’t want to be accused of assisting someone with their crime!
Other effective ways to buy bitcoins are through websites such as Bittylicious.com and BitBargain.co.uk. Both these sites allow you to buy from third parties (Bittylicious will even let you pay by credit card) but in a tightly controlled way. The sellers are vetted in advance and guaranteed to be online, so your purchase should be processed very quickly.
BitBargain let’s you choose your seller based on price and reputation, while Bittylicious hides the seller, simply matching you with the most appropriate seller for your trade. Bitcoins UK have tested both services in the past and found both to be efficient and effective ways to buy Bitcoin, although found they are slightly more expensive than the alternatives.