The accessibility and ease of purchasing digital assetsAsset An economic resource with value that an individual or organization owns, controls, or expects future benefits from. Examples of assets: gold, stocks, cryptocurrencies, etc. have expanded to include traditional financial institutions. Banks and financial institutions, once skeptical of cryptocurrencies, are now embracing them as a legitimate assetAsset An economic resource with value that an individual or organization owns, controls, or expects future benefits from. Examples of assets: gold, stocks, cryptocurrencies, etc. class. This paradigm shift opens up new avenues for individuals seeking to enter the crypto market through familiar and regulated channels. In this comprehensive guide, we will explore the step-by-step process of buying cryptocurrencies using banks and financial institutions, delving into the advantages, considerations, and key factors to ensure a seamless experience.
Role of banks and financial Institutions
Historically, traditional banks and financial institutions have been cautious about integrating cryptocurrencies into their services due to concerns related to volatility, regulatory uncertainties, and security risks. However, as the crypto market matures and regulatory frameworks become clearer, many institutions are adapting to the changing financial landscape. Banks and financial institutions can now act as intermediaries, facilitating the onboarding of individuals into the cryptocurrency space. Some institutions directly offer cryptocurrency tradingTrading Trading is a speculative activity of buying and selling financial assets aimed at profit. services, while others collaborate with cryptocurrency exchanges to provide a gateway for their customers. However, while some banks are cautiously exploring the cryptocurrency space, others are more hesitant to embrace it. This is due to a number of factors, including the volatility of the cryptocurrency market, the lack of regulatory clarity, and the potential for fraud. Here are some examples of banks offering cryptocurrency trading services or exchanges to provide a gateway for their customers from various parts of the world:
- Revolut (2018): Revolut is a global digital banking platform that allows its customers to buy, sell, and hold cryptocurrencies directly through their Revolut app. They support a variety of cryptocurrencies, including Bitcoin, Ethereum, Litecoin, and Bitcoin Cash. Revolut also offers a crypto-back Mastercard, which allows users to spend their cryptocurrency at merchants worldwide.
- Wirex (2018): Wirex is another global digital banking platform that provides cryptocurrency services. Wirex users can buy, sell, and hold over 120 cryptocurrencies, including Bitcoin, Ethereum, and Litecoin. They also offer a crypto-back Visa debit card that allows users to spend their cryptocurrency at millions of merchants worldwide.
- Fidelity Digital Assets (2018): Fidelity Digital Assets, a subsidiary of Fidelity Investments, started offering cryptocurrency custodyCustody Managing your wallet by knowing your private key. services in 2018. The platform primarily caters to institutional clients.
- DBS Bank, Singapore (2020): DBS Bank launched a digital exchange in December 2020, providing tokenization services for assets like stocks and bonds. This initiative aimed at facilitating digital asset transactionsTransaction Exchange of value, property, or data between two parties..
- Standard Chartered, United Kingdom( 2020) Standard Chartered announced a partnership with Northern Trust in 2020 to launch a cryptocurrency custodian service. This service targeted institutional investors seeking secure storage for digital assets.
- Juno (2022): Juno is a neobank based in Switzerland that offers a suite of banking and cryptocurrency services. Juno users can buy, sell, and hold over 50 cryptocurrencies, including Bitcoin, Ethereum, and Litecoin. They also offer a crypto-back Visa debit card and the ability to earn interest on their cryptocurrency holdings.
- Ally Bank (2023): Ally Bank is an American online bank that recently partnered with the cryptocurrency exchange Coinbase to provide a gateway for Ally Bank customers to buy, sell, and hold cryptocurrency. The partnership allows Ally Bank customers to fund their Coinbase accounts directly from their Ally Bank accounts.
Advantages of using banks and financial institutions
Regulatory Compliance:
- Transactions facilitated through banks and financial institutions are often subject to rigorous regulatory standards. This compliance adds an extra layer of security and transparency to cryptocurrency transactions.
Familiarity and Trust: - Many individuals feel more comfortable engaging in financial transactions through institutions they already trust. Using banks to buy cryptocurrencies may appeal to those seeking a sense of familiarity and established reliability.
Simplified Onboarding: - Banks streamline the onboarding process for cryptocurrency purchases. Existing customers can leverage their familiar banking interfaces to seamlessly integrate crypto transactions into their financial activities.
Integrated Services: - Some banks and financial institutions offer integrated services that go beyond simple trading. This may include portfolioPortfolio A collection of investments and holdings like stocks, bonds, mutual funds, commodities, crypto, cash, and cash equivalents. tracking, market analysis, and even cryptocurrency custody services for added convenience.
Steps to buy cryptocurrencies using banks and financial institutions
If you want to buy cryptocurrencies using banks and financial institutions, follow these steps:
- Select a crypto-friendly institution: begin by identifying a bank or financial institution that supports cryptocurrency transactions. Research their offerings, security measures, fees, and regulatory compliance to make an informed choice.
- Open an account or use existing accounts: if you don’t already have an account with the chosen institution, open one. For existing customers, check if the bank offers cryptocurrency services and whether you need to activate them.
- Complete identity verification: due to regulatory requirements, banks often require customers to complete identity verification processes. This may involve submitting documents such as a government-issued ID or proof of address.
- Enable cryptocurrency services: depending on the institution, you may need to enable cryptocurrency services explicitly. This step ensures that your account is authorized for cryptocurrency transactions.
- Link bank account: link your bank account to the cryptocurrency services offered by the institution. This step allows you to deposit funds into your crypto account directly from your bank.
- Deposit funds: deposit the desired amount of funds into your linked account. Ensure that you are aware of any fees associated with deposits and transactions.
- Navigate the trading interface: access the cryptocurrency trading interface provided by the bank or financial institution. Familiarize yourself with the layout and tools available for making informed investment decisions.
- Select cryptocurrency and place order: choose the cryptocurrency you want to buy and specify the amount. Utilize the trading tools to set limit orders or market orders based on your preferences. Review and confirm the transactionTransaction Exchange of value, property, or data between two parties..
- Securely store your cryptocurrencies: after the purchase, consider transferring your cryptocurrencies to a secure wallet for added safety. Some institutions offer integrated wallets, while others recommend external wallets for long-term storage.
Considerations and risks
- Transaction fees: be aware of transaction fees associated with buying cryptocurrencies through banks and financial institutions. Fees may vary, and understanding the cost structure is crucial for managing your investment expenses.
- Regulatory changes: stay informed about regulatory changes that may impact cryptocurrency transactions through banks. Regulations can evolve, and awareness ensures compliance with any new requirements.
- Security measures: prioritize institutions with robust security measures, including two-factor authentication (2FA) and encryption. Security is paramount in the cryptocurrency space, and safeguarding your assets is crucial.
- Wallet options: understand the wallet options provided by the institution. While integrated wallets offer convenience, external wallets may provide an added layer of security, especially for long-term holdings.
Final thoughts
As you can see, buying cryptocurrencies through banks and financial institutions represents a significant shift in the accessibility and acceptance of digital assets. This approach combines the familiarity of traditional financial services with the innovation of the cryptocurrency market. By following the steps outlined in this guide and considering the associated advantages and risks, you can confidently navigate the process of purchasing cryptocurrencies through banks and financial institutions.
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