According to Bloomberg News, cryptocurrency, which is one of the most popular blockchain-based digital currency has become one of the most sought-after currencies among individual and corporate investors alike. However, one hiccup about this currency is that you will not be able to use the money as you would do your regular cash. It is indeed a challenge. But more and more new services are being introduced and are in the pipeline that would help people use bitcoin and the other digital currencies like any other currency that is spent daily and for meeting day-to-day financial obligations.
Bloomberg News states a few ways in which the cryptocurrencies can be used in the “banking style services”.
What are the Benefits of Cryptocurrency Banking?
As of now, the main benefit of banking with cryptocurrency is the cryptocurrency debit card. It will allow you to make use of these digital coins like any other currency with which you can make purchases every day and even withdraw cash instead of using it just as an investment.
Before the debit cards were available in the market, you could spend the cryptocurrency at retailers that are ready to accept them or even sell them directly in exchange for dollars.
Of late, financial technology companies have partnered with debit card issuers or chartered banks so that they can offer these cards to consumers.
In this kind of arrangement, Bloomberg News reports that the debit card issuers or the chartered banks make use of the logistical and regulatory framework so that the cryptocurrency can be automatically sold off, thereby changing them into dollars and allowing retailers to accept the same. This implies that your digital currency will be accepted wherever there is use and acceptance of regular debit cards.
Drawbacks or Barriers of Cryptocurrency Banking
One of the biggest barriers of cryptocurrency is lending and spending the cryptocurrency given the fact how volatile it is. This is the same barrier that prevents investing in it. If you are interested in holding the cryptocurrency, you must be prepared mentally that if the coin falls, you could lose a lot of money.
Many banks depend on the currency’s stable value so that they could lend, borrow or earn interest on the money, but this is not possible, at the moment to perform those operations as you would have done with any other traditional currency.
While spending this currency, you must also be prepared to accept the fact that the value of it could escalate after you have spent it since the transactions will be based on the real value of the coin that it has at that moment.
The second barrier to banking with cryptocurrency is that the cryptocurrency fintech is still being evaluated by the regulators. Bloomberg News reports that the US Securities and Exchange Commission of late declared that it would be suing Coinbase, which is one of the best-known exchange firms for offering to customers a new lending product. Coinbase has, however, canceled the launch of the product thereafter.
Consumers must be aware that using the cryptocurrency debit card is taxable by the Internal Revenue Service since the owner of the debit card is selling technically while making transactions with the debit card. Few card issuers generate the 1099 forms automatically for their clients to make use of while filing taxes. But it is still the responsibility of the consumer to keep track of the tax liability.
Trying Cryptocurrency Banking
If you want to start using cryptocurrency banking services, you must buy cryptocurrencies like bitcoin, Litecoin, ether, or any other currency that you plan to invest in. You can use PayPal, Coinbase, and Cash App companies that have apps that can help you to buy and sell cryptocurrencies. You can buy them in smaller amounts and park them in a digital wallet.
If you are interested in spending the balance with ease, you must open an account with a company that offers cryptocurrency debit cards. Coinbase for instance has a special debit card that allows customers to spend any asset from Coinbase that they own and earn rewards. However, there is a list of new customers that are on the waitlist.
Similarly, BitPay is another service provider and offers prepaid Mastercard debit cards that can be used by customers for their digital currency.
Bloomberg News reports that in the future cryptocurrency could be used for processing peer-to-peer loans, as per CB Insights. There is a huge potential in this field that has still not been tapped into. The world of cryptocurrency is limited to only a few and there are few new products and services in the pipeline.