Cryptocurrency has enjoyed a boom during the Covid-19 pandemic, with digital transformation increasing across the world. Is there growth still available in the cryptocurrency market? Absolutely. In fact, the global blockchain market is predicted to grow from a value of $4 million in 2020 to a massive $39.7 billion by 2025. This equals a CAGR surge of 67.3% during this time.
If you’re new to the cryptocurrency game, you might be wondering how well it integrates with traditional banking. Are you able to open a cryptocurrency bank account? Or purchase Bitcoin using a credit card?
This guide will explore the crossovers between standard banking and the cryptocurrency market, so you’ll have a clear idea of what is possible, as well as what is sensible for your finances.
We also provide a crypto banks list for you to consider if you’re interested in opening an account.
Are American banks comfortable with cryptocurrency?
The impact of cryptocurrency on banks is a complex topic as cryptocurrency is still a relatively new financial medium, which only arrived on the scene in 2009.
Although the adoption of Bitcoin and other popular cryptocurrencies is now widespread, banks have understandably viewed them as being quite volatile and therefore risky.
The anonymity and decentralization of cryptocurrency have also presented security and compliance concerns which banks are nervous of.
But as retailers, eCommerce sites, and private investors have all jumped on the crypto bandwagon, banks have had to accept that digital currencies aren’t going to be disappearing any time soon.
As consumers demand a seamless transition between legacy and digital finances, banks are finding ways to enhance their current product offerings to incorporate cryptocurrencies.
Do crypto friendly banks exist?
Yes, definitely. Although recent research suggests that 69.2% of the American credit card market are currently refusing to accept Bitcoin, the swing over to those banks who are incorporating cryptocurrencies is growing.
One of the major holdups is the refusal of some banks to allow consumers to purchase altcoin by using their credit cards. And there’s a very good reason for this.
Credit card purchases of cryptocurrency are risky for both banks and consumers due to the volatility of the market.
As the value of Bitcoin and other cryptocurrencies soars and dips so frequently, there is no guarantee that the value of the digital currency will satisfy the repayment requirement of the debt.
Essentially, you could be maxing out your credit on a currency that could be worthless within a short period.
One way that banks get around this risk, is to charge a large transaction fee per cash advance. For example, some credit card networks are charging cash advance fees on Bitcoin purchases of up to 23.99%.
These are on top of the rates charged by the cryptocurrency exchange themselves for carrying out the transaction.
However, although there are certainly barriers to overcome when merging crypto and legacy finances, there are others who are bucking the trend.
Those financial institutions that can see the positive future of cryptocurrencies are already combining digital currencies with their online banking portals.
How to choose a Bitcoin bank account
Any search on Google for a cryptocurrency bank account will come up with dozens of options which can be quite confusing if you’re new to using digital currencies.
So, how do you know what you’re looking for?
Consider a digital currency bank account that offers some of these key features:
An absolute essential in the cryptocurrency world. Always choose a bank that has a positive history of trading in digital currencies without any significant hacking or security incidents.
You’ll want the reassurance of knowing that your investment is protected, but also that any difficulties you encounter can be fixed by an experienced customer service team.
Always choose a bank with an interface that is easy to use. It should be simple to seamlessly view your crypto portfolio and makes transfers to your fiat accounts as needed.
A reputable crypto bank will take custodianship of the customer’s crypto assets, meaning that they are responsible for any payments, even those that are hacked or deemed irreversible.
This is an essential feature if you need to guarantee the protection of your assets.
- Fee structure
Transaction fees when trading between crypto and fiat currencies can typically be quite high.
So, when you’re choosing a cryptocurrency bank account, you’ll naturally want to review the different fees available across a shortlist of options.
It’s worth remembering though that crypto-friendly banks with higher fees tend to also offer a higher level of service.
So, if you’re choosing a bank based solely on the low fees, be 100% sure that you’re comfortable with what you’re going to receive for your money.
- Type of cryptocurrencies
All crypto-friendly banks will be integrated to some extent with Bitcoin, but if you have other cryptocurrencies in your portfolio, or if you are planning to add them in the future, then you should bear this in mind.
If you’re interested in a niche type of altcoin, then you may need to conduct more extensive research than if you’re an Ethereum investor for example.
If you love the convenience that comes with digital banking apps, then you’ll want the same level of technology available for your cryptocurrency banking.
The ability to see all of your legacy and crypto funds on a single screen is incredibly useful.
Check out whether your crypto-bank of choice offers user-friendly Android or iOS apps depending on your preference.
- International availability
The regulations surrounding cryptocurrency vary from country to country, as different nations adjust to the nuances of digital currency.
If you’re choosing a cryptocurrency bank in the States but also have dealings in a different country, then make sure you will be able to access your funds wherever you’re based.
- Loyalty system
As with other banking services, some crypto-friendly banks have loyalty and reward schemes in place to retain customers.
You might be able to achieve rewards or points by using a debit card associated with your Bitcoin bank account or gain incentives for referring new customers.
How do crypto savings work?
There are some astonishing differences between how legacy and digital currency bank accounts allow you to save your cash.
- Earning interest
In strictly crypto-based savings, compound interest isn’t offered, unlike traditional savings accounts for fiat currencies.
Whilst your initial deposit will still grow in value, the interest on that growth doesn’t compound, meaning that you will usually have to either spend or trade to make real gains.
- Key access
Ownership of cryptocurrency can become quite blurred when you store your altcoin in a crypto savings account.
Unlike keeping your currency in a digital wallet, crypto savings accounts require you to hand over your keys which are lent out to other people.
The borrower will pay you interest on this crypto, but there is a risk that if the bank folds, then you’ll lose your entire crypto bank coin fund.
In traditional banks, Americans receive up to $250,000 worth of FDIC insurance as standard.
But such federal insurance isn’t currently offered on crypto-savings, and you can potentially lose money with this type of arrangement.
Which banks accept cryptocurrency?
The willingness of banks to accept altcoin changes regularly. If you’re wondering what banks accept cryptocurrency, then consider some of the following:
- Chime Bank – doesn’t allow Bitcoin purchases on Visa debit card. But does allow you to use platforms such as Paxful for escrow, so you can move money directly.
- Wirex allows you to open a digital currency bank account that combines your fiat and crypto money in a single location. Customers can fund their accounts using bank transfers, debit or credit cards, and crypto, whilst currency exchange is offered too. Wirex supports all major cryptocurrencies including Bitcoin, Ethereum, and Litecoin.
- Ally Bank is one of the most popular and user-friendly Bitcoin banks in the industry. As an online bank, you can link your account with Coinbase and buy your altcoin as required.
- Revolut – this fintech company that offers banking services, allows you to exchange cryptocurrencies including Bitcoin, Ethereum, Litecoin, Ripple, and Bitcoin Cash back into fiat currencies. There are no hidden fees and transactions are very quick.
- Simple Bank – this collaborates with most digital currency exchanges, allowing users to carry out buying and selling transactions for Bitcoin as required. Some of the most popular cryptocurrencies including Bitcoin, Ethereum, Ripple, Litecoin, and others are supported here.
- Fidor is a German digital bank with a strong relationship with Kraken. Essentially, this means that customers with accounts at both can use Fidor to buy cryptocurrencies at Kraken. Equally, you can trade in your crypto balance from Kraken into fiat currencies to be deposited in your Fidor legacy bank account.
- LHV Bank – this European crypto bank uses its own in-house crypto teams. The bank’s Coinbase partnership allows customers to make easy Bitcoin purchases via the new Cuber Wallet app which provides fiat and digital currency support.
Ready to open a cryptocurrency bank account?
Now that you’re familiar with how Bitcoin bank accounts can combine with traditional banking, it’s time to do some research into the right cryptocurrency banks for your needs. If you’re entirely new to cryptocurrency, then you’ll need to decide which types of altcoin you’d like to invest in and then make a decision about where you’d like to keep your digital currency.For more top personal finance tips, check out The Finances Hub’s blog articles today.