How to convert cryptocurrency to cash
Cryptocurrency, the blockchain-based digital currency that has captured the interest of investors and financial service firms alike, has a challenging problem. It can be hard to spend this currency like you would regular money. But there are new services on the horizon that could help people use bitcoin and other digital coins in more mainstream ways for their day-to-day finances.
Here's a look at how to use these banking-style services for cryptocurrency, as well as their bene.
Before these debit cards were available, you could spend your cryptocurrency only at retailers that chose to accept it directly or sell it in exchange for dollars. Now, financial technology firms are partnering with chartered banks and/or debit card issuers to offer these cards, using their partner's logistical and regulatory framework to automatically sell your cryptocurrency behind the scenes, converting it into dollars, and allowing retailers to accept it. This means that your digital funds are accepted wherever many regular debit cards are.
BARRIERS OF CRYPTOCURRENCY BANKING
Perhaps the biggest barrier to lending and spending cryptocurrency is how volatile it is. It's the same barrier to investing in it: To hold cryptocurrency, you have to accept that ``if your coin falls, you could lose a lot of money,'' says Francisco Alvarez-Evangelista, a research associate at the Aite-Novarica Group, a financial services analysis firm.
Many banks rely on the stable value of the currency to lend, borrow or earn interest on money, but it's not possible, at this time, to do those things with cryptocurrency in a way that's as stable or safe as with traditional currency.
And to spend your digital coin, you have to accept the risk that its value could go up after you spend it since your transactions are based on the real-world value of your coin as it exists at that moment. For example, if the value of your cryptocurrency doubled after you bought a $5 sandwich, that means it effectively costs you $10. But the value could also go down, making previous purchases a good deal.
Another barrier to consider is that regulators are still evaluating cryptocurrency fintech. The U.S. Securities and Exchange Commission recently announced that it was going to potentially sue Coinbase, one of the most well-known exchange firms, for offering a new lending product, and Coinbase has since canceled the product launch.
Consumers should also know that using a cryptocurrency debit card is considered taxable since the cardholder is technically selling cryptocurrency as they make transactions with their debit card.
HOW TO TRY CRYPTOCURRENCY BANKING
To start using these kinds of banking services, you must first purchase cryptocurrencies, such as bitcoin, litecoin, ether, or any other currency that you would like to invest in. Several apps have made it easier to purchase and sell cryptocurrency, even in small amounts, and store it in a digital wallet.
If you want to spend your balance easily, you'll need to open an account with a firm that offers cryptocurrency debit cards and uses the kind of digital currency you own.
Coinbase, for one, has a special debit card that lets customers spend any Coinbase assets they own and earn cryptocurrency rewards, but there's currently a waitlist for new customers. BitPay, another firm, offers a prepaid Mastercard debit card that customers can use to spend their digital currency. There are others, but it's not a widespread bank offering.
In the future, cryptocurrency could have the potential to be a source of peer-to-peer loans, where individuals can quickly and securely process loans to each other. It's a huge area of untapped potential but for right now, the world of cryptocurrency banking is limited to a small pool of players with some very new products and services.