What’s a Crypto Bank, and How Does It Work?

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Bitcoin launched in 2009. While most people don't realize it, the moment that bitcoin hit the internet, a financial revolution was born.

Bitcoin, and the thousands of cryptocurrencies that have since come after it, are creating a new financial system. And this system of money doesn't involve banks as middlemen, facilitating transactions and getting rich off their customers while paying near 0% interest.

Crypto is often referred to as an opportunity to go bankless. To replace your need for the baking system. And while it's possible, most people instead look to combine crypto and banking in the form of a crypto bank. 

That way, they get the best of both worlds. They get the convenience of using a bank for daily transactions, and the benefit of investing in a currency that supports their financial goals and prioritizes decentralization.

So what is crypto banking, and how do these two work together? Keep reading below to find out. 

How to Buy Crypto

To buy, sell, and use cryptocurrency, you don't necessarily need a bank account. But having a bank account makes it easier to buy crypto for low or no fees.

For example, using an online cryptocurrency exchange is much cheaper when you link your bank account. If you transfer funds from your bank to the crypto exchange, you can buy crypto without excess fees.

But buying crypto with a debit card will incur heavier fees.

You can also avoid those transfer fees by purchasing crypto directly using cause. By using Byte Federal crypto ATMs, you can trade cash for bitcoin, Ethereum, and other cryptocurrencies without the use of a bank account at all.

For people that prefer not to patronize traditional financial firms, this is the best option. 

How to Store Crypto

To invest in and store crypto for the long term, you don't need a bank account either. Most people use a dedicated crypto wallet.

In theory, it functions like a bank account. But it's actually very different. Your wallet doesn't require any personal information to open, unlike a bank account.

No name, email address, personal address, etc. You can set up a software wallet on your smartphone or computer. Or you can purchase a physical hardware wallet. In either case, it doesn't need any personal information to store your funds.

So no traditional banking services are needed to help you invest in crypto long-term.

Do You Even Need a Bank Account?

Many crypto enthusiasts claim that it's possible to manage your entire financial life without the use of traditional banking services. Or at the very least, you would hardly need to depend on a bank.

Is it true? With crypto, you can turn fiat currency into cryptocurrency.

That crypto can be sent to anyone, in any part of the world, fast and cheaply. That crypto can be used in Defi applications to earn interest. You can even take out crypto-backed loans to finance various purchases.

Certain cryptocurrencies, like bitcoin, LiteCoin, and Bitcoin Cash, can be used for everyday purchases at physical or online retailers. 

While you can do so much with crypto, you still can't do it all. Making a car or mortgage payment, for example, will likely require a bank account. 

So most crypto investors believe that a blend of banking services and crypto accessibility is the happy middle ground. And bonus points if these two can be combined into one.

But does that exist? To a certain extent, yes. 

What Is a Crypto Bank?

The term "crypto bank" is a confusing one. There's not a proper definition, nor is there a bank that simply accepts and distributes bitcoin alongside traditional financial products.

Why? Banks don't like crypto. They see it as a direct threat to their monopoly over the financial system.

But crypto is here to stay, that's clear. And people want to be able to buy and use bitcoin alongside their traditional financial products, like checking accounts and mortgages.

So what do people mean when they talk about bitcoin banking? Here are a few examples of the use of blockchain in banking.

Buying Crypto With Trad-Fi Providers

There are certain financial providers that you likely already use that allow you to purchase crypto within their platform. This makes it simple for those who are interested in crypto to start accumulating some.

Paypal allows its users to buy crypto using funds in their Paypal account. Cash App also lets users buy crypto. 

With these providers, they don't have to go through the complicated process of setting up a new account on a cryptocurrency exchange. It's a decent service that exposes new users to crypto.

But it's limited. You can't actually withdraw your crypto or send it outside of their platform.

What does that mean? It means you don't actually own that crypto. Paypal and Cash App own that crypto. If you can't control it, it's now actually yours. 

Plus, these services provide very little exposure to crypto. Typically, they offer bitcoin, and maybe one or two other cryptocurrencies. Oh, and they also charge hefty fees for buying and selling. 

Earning Crypto Rewards With Credit Cards

Another trad-fi product with a crypto twist. We're starting to see banks offer credit and debit cards that pay users rewards in crypto rather than cashback or airline miles.

This can be a great way to accumulate crypto passively while using a product you are already dependent on; a plastic debit card. 

Depending on the card issuer, you may or may not be able to withdraw that crypto. Your only option is to hold or sell. 

Still, it's a great option for piling up that crypto. Many people spend between $2,000 and $5,000 on debit and credit cards monthly. That can mean a few hundred bucks in crypto rewards each month. 

Crypto Interest Accounts

There are a handful of companies that offer crypto interest accounts. These are similar to savings accounts offered by a bank.

But banks typically pay you as close to 0% interest as possible, since they care so much about you. After all, they have executives to buy yachts for, right? They like to keep as much money as possible.

But companies like BlockFi and Celsius offer accounts where you can earn upwards of 10% APR or more on your crypto holdings. How do they do this?

They borrow money from you and pay you interest. They are then able to lend that money out to other users for a higher interest rate.

It's the same thing that traditional banks do, but they actually pay users who store their funds with them. 

Companies like BlockFi are centralized companies that offer this service. Interest rates are a bit lower, and fees are a bit higher. But the process is safer.

There are also decentralized finance apps that offer the same service. But you stand to make even more interest and pay less in fees. But since it's decentralized, it's a bit riskier. 

Nonetheless, earning interest on your savings and investments is far better than not earning anything. 

Crypto Banks Accounts

Yes, there are some bank accounts that allow you to store cash in a checking account, and crypto in your crypto account. So which banks accept bitcoin?

The company OnJuno, for example, offers a one-stop-shop for your baking and crypto investing needs. You get to manage both from the same dashboard.

Since both of your accounts are in one place, converting crypto to cash, and vice versa is fast and easy. And the funds are available instantly. 

What sets this company apart from many others is that you can receive your paycheck in crypto if you want to. And it can be your whole paycheck or just a portion of your paycheck.

When it hits your account, this is done automatically, making it easier than ever to start stacking those coins. 

They also let you spend crypto using a debit card. So instead of spending cash, you can spend on daily purchases from your crypto account. And you earn crypto rewards for each transaction. 

Another benefit is that they do the tax reporting for you. Crypto is subject to the same taxes as traditional investments. But it can be much harder to calculate. But OnJuno offers automatic tax reports to make filing simple.

Benefits of Crypto Banking Services

When traditional financial institutions integrate bitcoin and cryptocurrency into their product mix, it usually isn't perfect. But it's still important that these companies offer products like this. Why?

Because the crypto-native world and Defi (decentralized finance) in general aren't user-friendly. It's a tough ecosystem to navigate and it has a high learning curve.

You can make a lot more money in Defi, and you can maximize your crypto holdings. But the user experience isn't ready for the masses. Right now, you have to be a tech-nerd to use these crypto-based applications, though that is going to change soon.

The benefit of crypto integration within traditional financial products allows the broader population to gain exposure to crypto. It's very user-friendly and easy for more and more people to accumulate crypto.

And even if they're paying high fees and can't actually control their crypto, they are becoming crypto investors.

As more and more of the population gets into crypto, things are going to change. The tide will turn. And eventually crypto, after going mainstream, will become the standard. 

More people buying crypto drives the demand, and prices of crypto, up. And it will result in crypto-related products becoming the norm in society. 

Banks Using Blockchain Technology

There are other instances of blockchain technology in use by traditional banking services. For example, Wells Fargo and HSBC have implemented blockchain technology to help with their cross-border payment processes.

Sending money to other nations can be a time-consuming, costly process in the traditional financial realm. That's one of the main problems that cryptocurrency was created to solve. 

But it's not just the use of crypto. The use of blockchains, as open, distributed ledgers can be used by banks and other types of companies to revolutionize their internal processes. 

The content of these two banking powerhouses using blockchain technology doesn't actually involve cryptocurrency. It's just the technology creating a ledger shared by both banks, to make settlement between the two much more efficient. 

However, it's an exciting example of what blockchain technology can do to revolutionize traditional companies, particularly financial providers. 

Becoming Your Own Bank

Yes, you can use these traditional financial services to access crypto assets, and even manage your crypto assets alongside your cash. But with a little knowledge and the right tools, you can become your own bank, too.

That's what crypto is all about. Not necessarily connecting with the traditional banking system, but replacing it if you so desire. 

When your funds, whether it's crypto or cash, are locked up in an account owned by a bank, they control it, not you. They have every right to censor your transactions if they don't like what they see.

And they can block you from sending money to certain people or companies. As your bank, they have the freedom to control your money, not you.

The idea of going bankless is the idea of self-sovereignty. It's empowering the individual to achieve financial freedom amid a financial system that currently benefits the few. 

Here's why you should value becoming your own crypto bank, by opening a self-custodial wallet, rather than entrusting all of your funds with a bank.

Send Money Anywhere

When you truly own your crypto, you can send it anywhere. You can send it to any person who has a crypto wallet around the world, in just a few seconds or minutes.

When your crypto is in a bank account, you cannot send it anywhere. 

Escape Inflation

Buying crypto allows users to beat inflation. This is especially important in countries like Turkey where hyperinflation destroys money by the minute. 

Being able to buy, hold, and send cryptocurrency at will is crucial to preserving your hard-earned capital. 

Grow Your Wealth

When you control your crypto assets, you can decide where they go and how much interest they make. By using decentralized finance applications, you can hold your crypto of choice and earn reasonable interest on it, benefiting from both appreciation and yield.

This provides both the rich and poor with the same access to wealth-building activities. 

Become a Crypto Expert

So does a crypto bank exist? There are currently many variations of a crypto bank, some of which are great, others of which aren't.

In any case, they make it easy for new people to get into cryptocurrency for the first time. And this is important for the wider crypto community.

But when you want to take control of your finances, you need to move beyond traditional banking providers and hold your funds yourself.

Looking for more information like this? Visit our blog now to keep reading. 


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