As cryptocurrencies such as Bitcoin, Ethereum, and Litecoin gain widespread appeal, fintech businesses provide investors with various options to manage, spend, and earn on their cryptocurrencies.
However, while crypto banking products have the potential for large profits (up to 14.5 percent or more, depending on the platform), they frequently lack the basic safety nets of traditional banking. The more you study, the more equipped you will be to determine if this new breed of banking benefits exceed the hazards.
Crypto banking refers to digital exchanges or fintech organizations that allow you to purchase, sell, store, and manage your cryptocurrency through a digital wallet. These services are intended to emulate the user experience of traditional or online banks, reducing the need for you to ever contact with cryptocurrencies firsthand.
After that, what you can do with your cryptocurrency is determined on the platform. Many allow you to make payments using crypto debit cards and earn more significant returns than you would at your local bank. Some exchanges enable you to use your cryptocurrency as collateral for loans.
And all-in-one crypto platforms, such as Blockfi, will allow you to purchase, sell, and earn cryptocurrency through products such as crypto-backed loans, trading accounts, and savings accounts.
What Is Crypto Banking?
Let’s begin with the “crypto” portion. Cryptocurrency, or Crypto, is a digital form of money backed by computer code rather than a central monetary institution like the Federal Reserve. There are about 9,000 different cryptocurrencies. Only a few have widespread popularity, such as Bitcoin and Ethereum.
The phrase “crypto banking” is very new and can refer to various services. Investing is the most common way for individuals to connect with cryptocurrencies. This can include digital trading currency on a trading platform.
On the other hand, traditional banking is concerned with managing currency and credit at a bank, such as through checking and savings accounts.
The management of digital money at a financial technology corporation or a financial services provider is referred to as crypto banking.
These financial services might include maintaining a balance, making payments with a crypto debit card, and even collecting interest using one or more cryptocurrencies. At least one bank has incorporated cryptocurrency into its offerings.
In the video below by Real Vision Finance, Abra CEO Bill Barhydt joins Raoul Pal and they discuss crypto banking and how it’s going to be like in the future. Check it out and learn more about crypto banking.
Crypto banking is a new and rapidly developing idea. Here’s a deeper look at some of its most essential features.
How To Get Started With Crypto Banking?
To handle cryptocurrency, you must first purchase it. And you’ll need a crypto wallet to store proof of your digital assets. Many organizations that allow you to acquire cryptocurrency can also store it on your behalf in their free cryptocurrency wallets.
Buying crypto can be simple if you use a crypto exchange like Coinbase or a financial technology company like PayPal: you can pay in US dollars and receive the same value in the digital currency of your choice.
Then you may examine your balance in the same way as you would a bank or investment account balance. You may transfer and receive Crypto from others depending on the firm.
Choose where you purchase cryptocurrency with caution. Some companies, such as PayPal and SoFi, do not allow you to withdraw cryptocurrency from their platforms, so you must sell to use the funds elsewhere.
Crypto holders who want to utilize several platforms or bitcoin ATMs for in-person transactions should look into crypto wallets that allow storage on software stored on their computer or portable device. Such wallets let you conduct transactions without a corporation’s requirement to confirm them.
Similarly, suppose you want to start crypto banking but don’t yet have any cryptocurrency. In that case, you can quickly sign up for an account at a cryptocurrency-friendly bank or one of several decentralized finance apps, also known as DeFi apps, and then purchase Bitcoin and other currencies from their crypto marketplace.
Decentralized finance apps are those in which financial items are offered on decentralized blockchain networks, eliminating the need for an intermediary such as a brokerage or a bank.
Many applications act as both a buying and selling platform and a hot wallet where you may keep your bitcoin holdings.
Where Can You Buy Crypto From?
Square and PayPal, two peer-to-peer payment systems, allow clients to purchase, trade, and keep cryptocurrencies alongside any balances held in US dollars. Revolut and SoFi, both banking technology companies, have comparable offers.
PayPal also allows you to pay for online purchases with a crypto balance, which you sell back to PayPal at the checkout.
Because these companies have established relationships with mainstream banking services, they may be good places to start if you want to learn more about cryptocurrency. However, keep an eye out for transaction fees and limits.
Square’s Cash App, for example, only accepts bitcoin purchases, whereas PayPal and others accept three or more cryptocurrencies.
From Where Can I Get Bitcoin Rewards?
There are countless services on the Internet where you may earn free Bitcoins by completing various chores such as viewing advertisements, playing games, and so on. You will, however, only receive a tiny percentage of the Bitcoin.
Free Bitcoins can be helpful if the price of Bitcoin continues to climb over time, allowing you to profit from it. Furthermore, the quantity of Bitcoin you will receive is always random and changes regularly.
Here are several legal ways to obtain free Bitcoins without mining.
You may also make money by studying Bitcoin on websites such as Coinbase. This website provides a variety of crypto-related courses and videos. All you have to do is answer the quiz questions or do certain particular chores. You will be awarded a tiny percentage of a specific cryptocurrency due to this.
To do so, though, you must first register on the Coinbase website. It is one of the top Free Cryptocurrency Sign-Up Offers. After you validate your ID, you will receive a $5 bitcoin incentive.
Arbitrage is the most secure technique to profit from bitcoin trading. It allows you to purchase a specific item at a predetermined price. Then you may instantly sell it at a better price somewhere else. To locate such possibilities for Bitcoin arbitrage, you must evaluate the price discrepancies across exchanges, the speed of fiat money transfers, and access limitations.
As a result, many traders employ trading bots to automate the process. A bot may trade 24 hours a day, seven days a week, using the rules and methods you establish. The most recommended Crypto Trading Bot is Cryptohopper.
You may also earn free Bitcoin by performing your ordinary online shopping using shopping reward sites. You’ll need to install a browser extension for that. When you check out different things, you will get cashback in the form of a fractional amount of Bitcoin.
Lolli, for example, provides you free Bitcoin when you spend at over 1000 popular businesses. All you have to do is download this app and start earning money.
Is Crypto Banking Safe?
As a result of blockchain technology, Bitcoin and other crypto transactions may be more secure than other forms of digital transactions, such as online banking, money transfers via digital wallets, or peer-to-peer payment systems.
However, it is crucial to note that all of these services employ cutting-edge encryption technology to safeguard your cash digitally. Furthermore, most banks provide fraud protection, which means that if your account is hacked, the bank will reimburse you for any lost cash up to a specified amount, which varies by institution.
The technology used to safeguard cryptocurrency investments is also effective. Indeed, it is so secure that some people who invested in Bitcoin years ago have forgotten their password and have not reset it.
That would not happen if you had a traditional bank account or a peer-to-peer payment service, both of which include strategies for resetting your online banking password so you can access your money.
Although your crypto investment is probably “secure,” that doesn’t guarantee it’s “safe.” Market volatility and a lack of federal insurance and regulation make cryptocurrencies riskier than storing cash in a bank account.
Your money is FDIC-insured in a bank account up to $250,000 per depositor, per account type, and bank. That is, if you have $100,000 in your checking account, $50,000 in your savings account, and $100,000 in your CD, all inside the same FDIC-insured bank, your monies are all secured by the Federal Deposit Insurance Corporation.
You will not lose your money if your bank goes out of business. On the other hand, if something goes wrong with the corporation keeping your cryptocurrency, you might lose your entire investment.
Cryptocurrency, like stocks and other assets, fluctuates drastically. When you keep cash in a bank, the value of your money fluctuates slightly due to inflation or deflation. That is the monetary value of the dollar. However, it is quite improbable that you would lose — or make — substantial sums of money quickly.
What’s The Future Of Crypto Banking?
As traditional banks recognize their customers’ need for more excellent crypto capabilities in banking, we should expect drastic developments in the financial sector in the following years. Decentralized networks may not have an immediate impact on banks’ long-term sustainability, despite their potential to undermine Bitcoin and its peers.
In terms of fiat currency, the price in fiat terms is so volatile that receiving money or obtaining a mortgage using them would be extremely risky. Here are two forecasts for the future of cryptocurrency banking.
Fintechs and Banks Collaborate on Innovation
If banks are to stay relevant and competitive in the future of digital currencies, they must collaborate with fintechs. Major institutions, such as Chase, are already contemplating the potential of recognizing Bitcoin as a genuine asset class. As more investors enter the crypto market, banks may gain more significant traffic and revenue.
Banking Blockchain Adoption
There are several applications for blockchain technology in banking; therefore, it’s only a matter of time until banks begin to employ the public ledger in certain areas. Trade finance, for example, frequently requires transactional coordination. Implementing blockchain technology can minimize fraud and boost transparency in various transactions.
Wrap Up
In finance, there is always some level of risk involved. However, crypto banking and blockchain technology offer the prospect of a future built on transparent crypto banking that is accessible to everyone in the world.