The rise of cryptocurrency and its new-age blockchain-based mechanism had captured the interest of traders, investors, and financial institutions alike. However, the virtual medium takes way the ease of spending the currency just as people like to spend cash or currency notes. In recent times, new services and platforms have been introduced to help people manage bitcoin and other such digital coins in day-to-day finances. Here’s what you need to know about cryptocurrency banking and its benefits:
What is cryptocurrency banking?
Bitcoin – the world’s largest and most popular cryptocurrency by market cap, is held in virtual wallets with unique keys. Bitcoin and other digital coins are equivalent of cash, but in electronic form. The virtual currency is not held in physical form. Digital currency is decentralised by a ledger system called blockchain, which means that it is not controlled by a bank or central authority.
Cryptocurrency banking is sometimes considered an inaccurate term, as the digital coins are not regulated by a central authority. Exchange companies and firms that offer services of managing digital currency, are not technically banks. Cryptocurrency banking mostly just allows people to hold their funds in a digital wallet or spend it like they would spend traditional money. People can manage their cryptocurrency balances on exchange platforms.
What are the benefits of cryptocurrency banking?
The main benefit of cryptocurrency banking is that exchange platform allows consumers to use the digital coin balance just like any other currency to make day-to-day withdrawals and purchases, just like cash, instead of keeping it as an investment. Crypto debit cards – commonly known as bitcoin debit cards, which are issued by cryptocurrency exchange platforms, operate like prepaid debit cards.
These can be loaded with cryptocurrency to make online and in-store purchases from merchants that do not accept the digital currency. Cryptocurrency exchanges usually require individuals to create an account and/or digital wallet in order to apply for a crypto card. Some platforms also require users to validate their identity using the Know Your Customer (KYC) verification process.