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How to Cash Out Bitcoin & Other Cryptocurrencies to Fiat

bitcoin social trading

During the last couple of years, the popularity of Bitcoin and other Cryptocurrencies has increased considerably, given the large trading volume, capital invested, public interest, and of course supply and demand laws.

With Bitcoin seeing all time highs of over $19,000 USD during the bull market top in 2017, the nature of the crypto market changed. New users might be looking for ways to bridge the gap between cryptos and fiat currency, and see how the interchange between the two systems works.

There are multiple ways to go about doing this. People may worry about cashing out large sums of money and want to make sure everything is safe and secure, and that is a good idea.

Therefore, in this article, we will cover three of the main methods that you can use to withdraw your bitcoin into Fiat currency (or your local cash). These have been generally referred to as the safest and least-costly methods of exchanging your digital currencies into your government-issued currency.

How to Cash out Cryptocurrency

What is Fiat ?

Before we go on, we just wanted to clear up exactly what we mean when we say “Fiat” or “Fiat Currency”. Fiat is currency which is issued by a government but which is not backed by a physical commodity.

The value of fiat money is derived from the relationship between supply and demand rather than the value of the material that the money is made of. Historically, most currencies were based on physical commodities such as gold or silver, but fiat money is based solely on the faith and credit of the economy.

Definition via Investopedia:

Fiat is seen as risky because it suffers from inflation, when a government decided to “print” more of a Fiat currency, the value of everyone’s money goes down as a result. This is the exact opposite of what Cryptocurrencies aimed to solve.

The Central Banking Apparatus

Most people assume that their money represents something of value. In fact, modern fiat currency is debt and nothing more. Instead of being backed by some form of valuable good, the modern financial system rests on an awe inspiring amount of debt.

The fiat currency is simply a representation of that debt. If all the debt in the world was paid off, there would be no money.

Isn’t that weird?

Globally fiat currency that is issued by government licensed central banks is the backbone of our financial system. Initially, cryptos like Bitcoin sought to supplant fiat currency, and replace it with a decentralized system that disempowered the central banking apparatus.

The goal of slashing debt-based money from the global economy will be difficult to accomplish, as most people want to be paid in fiat currency. As a result of this situation, crypto traders have to interact with a system that has been antagonistic to decentralized assets.

Closing the Gaps

Until 2017 the established financial system didn’t take cryptos seriously. That all changed when Bitcoin led the cryptocurrency space on a wild bull run that brought the price of BTC close to $20,000. Major banks cut off their customers’ credit lines when dealing with crypto exchanges, and nations like China banned cryptos outright.

The central banks noticed how much money was flowing into decentralized assets, and perhaps they became afraid of the long-term consequences of that dynamic.

There were also issues surrounding Know-Your-Customer (KYC) regulations. Most crypto exchanges didn’t have the level of customer oversight needed to interact with other financial institutions. Pretty much any banking entity has to keep extensive records about their customers, and in the crypto world, this simply wasn’t standard practice.

Over the last year KYC regulations have become more important for crypto exchanges. Any exchange that wants to convert cryptos for cash has to pay by the same rules as other financial entities, and keep extensive documentation of their customers’ identity and activities.

Coinbase

Cryptocurrency exchanges are the most popular method of exchanging BTC & other currencies into Fiat at this time. While most impose certain limitations on how much you can exchange without a verification, they represent a great choice for those who are just starting out and not withdrawing large amounts. The process is fairly simple, even for novice users.

Once you have created an account, you will have to link it with either a debit/credit card, or a bank account. Afterwards, simply deposit how much BTC you’d like to exchange from your address, choose the currency of choice, and click on exchange. The process can take anywhere between a few minutes to a couple of days, depending on the exchange that you have picked and your bank/card provider.

Coinbase is one of the easiest and safest exchanges to withdraw your cryptocurrencies from, read our review to find out more.

Most exchanges offer affordable fees, yet there are certain disadvantages associated with them as well. The main one is that you cannot get instant access to the funds that you have exchanged. Therefore, if you are in need of money urgently, chances are that you may have to wait a couple of business days before the bank processes the amount and credits it into your account.

Coinbase Website

Once the amount has been exchanged and delivered to the user accounts, bitcoin owners can simply withdraw via an ATM with the use of their cards, or directly from the bank teller.

We mentioned Coinbase above for a reason. It has been one of the most proactive exchanges in the world and has achieved a high degree of integration with the US banking system. While Coinbase will accept users from more than 30 different countries, if you want to convert crypto to cash, you will need to be a fully registered US client with a bank account in the USA.

As long as you have all the necessary credentials and verification, cashing out with Coinbase is a breeze!

Coinbase will support conversion from Bitcoin, Ethereum, Litecoin, and Bitcoin Cash to US dollars. All you have to do is connect a US bank account to your Coinbase account, and then order the transfer. For the moment, Hawaii, Wyoming, and Minnesota don’t allow you to receive transfers from Coinbase, as there are local laws that prohibit them

Gemini

Gemini was the first licensed exchange in the world, so it is no surprise that they offer their clients the ability to cash out cryptos for fiat currency. Unlike Coinbase, Gemini only supports Bitcoin and Ethereum, but you can trade most tokens for BTC or ETH.

The exchange only offers cash withdrawals for US customers, and only supports US bank accounts. On the plus side, Gemini will allow you to use ACH and wire transfers, with ACH transfers taking up to 4 days, and wire transfers being settled in a day once they are approved.

Gemini Exchange Review

One thing to remember is that Gemini only supports fiat conversions and transfers for personal accounts. If you have a joint bank account that you are using for your transaction, it is a good idea to make sure that whoever is on your bank account is also listed on your Gemini account information.

Past making sure that your bank account information matches your Gemini account, swapping cryptos for fiat with Gemini just takes a few clicks.

Bitstamp

Bitstamp is based in Luxembourg, and has become a go-to exchange for crypto investors with deep pockets. The company does offer crypto to fiat currency transactions for its clients, but the amount of information it requires is higher than US exchanges like Coinbase and Gemini.

On the flip side, Bitstamp will work with people from outside of the US, which is a benefit for crypto holders who can’s access the US banking system. The exchange will swap Bitcoin, Ethereum, Litecoin, Ripple and Bitcoin Cash for fiat, and will wire the cash to a US account for its US customers.

Bitstamp Review

bitFlyer

bitFlyer is an international crypto exchange that services clients in Asia, the USA and EU. It does an enormous daily trading volume, and has been the largest trading hub for Bitcoin at times. Like most major exchanges, it will allow you to swap your crypto for fiat, and deliver it to your bank account via wire transfer.

Like any of the other crypto exchanges on this list, you will need to have a valid bank account, and go through an ID verification process before you withdraw any fiat currency from bitFlyer. The exchange is based in Japan, and offers fiat currency withdrawal services to people outside of the USA as well.

Try Local Services

You might be surprised to find out how many people around you may be interested in swapping their cash for your cryptos. Especially in urban areas, there are many people who would like to pick up Bitcoin without jumping through all the KYC hoops that exist on reputable exchanges.

Most local crypto exchange services offer some amount of protection for both the buyer and seller, which makes them preferable to doing a cash deal in a fast food joint. Make sure you understand all the nuances of the platforms below, and how you can get paid if you use them. Some charge fees for their services, so be aware of the total transaction cost before you do business.

LocalBitcoins.com

Services like LocalBitcoins.com strive to create a P2P marketplace, where those who are interested in either purchasing or selling digital currencies, can do so from other people. Most services like these are escrow-based and offer transparent fees, therefore trust issues are basically non-existent.

LocalBitcoins.com serves as an intermediary between the buyer and the seller. Both parts of the arrangement can choose how they’d like to meet and how they would like to transfer the funds in question. From personal meetings where cash and digital currencies are exchanged, to gift cards, Western Union and other methods, anything is possible.

Search for Sellers

Read our LocalBitcoins review here.

Paxful

Paxful has the bold go of being a ‘universal money exchanger’. To that end, the platform offers users more than 300 different options for Bitcoin exchanges, including fiat currencies. Like many emerging crypto platforms, Paxful offers a basic user experience. Be sure to check out how it works before you decide to use it, and read some reviews.

Paxful uses Bitcoin as its base currency, but some traders also offer Bitcoin Cash, Bitcoin Gold, Litecoin, Ethereum, Monero, Ripple, Dogecoin, Digibyte and Dash on the platform. If you want to sell altcoins on with Paxful you will have to convert them to BTC.

The minimum sale amount is 0.0001 BTC. You can receive payment in just about any currency you like, and there are also a number of payment methods as well. Paxful is an interesting trading platform. It is worth a look if you prefer to stay off the exchanges, or live outside of North America, Western Europe or Asia.

Paxful Review

Read our Paxful Review here.

Bitquick

Bitquick is another P2P trading platform that offers a lot of anonymity to the buyers. This only works because it uses manual payment verification, as well as escrow protection. Unlike the other P2P trading sites on this list, Bitquick only allows trade in BTC on its site. While this is a little bit inconvenient, it is simple enough to swap other cryptos to BTC on numerous exchanges.

The platform is also nice for sellers, as they don’t have to worry about getting ripped off because of the escrow protection that Bitquick uses. Once the sale is finalized, sellers can be paid via bank transfer, or Western Union. Selling on Bitquick is straightforward, and sellers can ask whatever price they like for their BTC.

Perhaps the only downside to the site is that transfers can take a few hours to get approved, because confirmation is actually done manually by a real person. Sort of ironic given the fact that the platform uses ‘quick’ in its name, but it is nice to have real human oversight for every transaction.

Bitcoin prepaid cards

Bitcoin prepaid, or debit cards have been around for a while. Many believe that these are one of the best ways of exchanging your digital currency into cash, given the wide variety of benefits that they offer. Based on this aspect, bitcoin prepaid cards are normal cards, generally issued by Visa or MasterCard which can be funded via BTC or other currencies.

While the process of getting your own card takes a bit longer when compared to bitcoin exchanges, or local exchange services, they offer numerous advantages, such as: the ability to pay at any POS system, cashing out at worldwide ATMs, instant conversion from BTC to fiat such as USD/EUR/GBP and more. Some of the other benefits include low commissions, free delivery, chip and PIN support, transparent fees and more.

It is important to point out that bitcoin prepaid cards are only accepted in certain countries, and if the provider doesn’t accept your country’s native currency, you’ll have to pay a conversion fee from USD/EUR to your national currency.

Most of the times, getting your very own prepaid card requires users to go through a verification process. With this in mind, users will have to submit a government-issued ID alongside with a proof of address. Generally, there are limits to how much you can withdraw/spend, yet these can be lifted after more thorough customer verification, as per Know Your Customer (KYC) policies, meant to avoid illegal financing or money laundering.

Monaco Website

Some popular examples of these types of cards are Monaco and Tenx.

However, in the long run, if you are an avid digital currency owner and user, then prepaid cards may turn out to be the best choice, given the instant withdrawals, the ability to easily top up your account and the fact that you don’t have to wait for days before your BTC is converted in fiat, thus also losing out on positive volatility.

Crypto Loans: You Might Not Need to Cash Out

Since this article was published, there are a number of new companies which will allow you to take out loans and use your cryptocurrency holdings as collateral.

They work like so – you deposit your currency into a smart contract where it will be held and you receive Fiat currency to your bank account and you can pay back the loan as and when you need to. This is a nice new option open to people for two reasons – it avoids a taxable event, you are taking out a loan not selling your currency.

The other benefit is that it hedges you against rises in the price of your cryptos, with Bitcoin and Ethereum predicted to rise to new levels within the next year, you will not miss out on any potential price rises as they still remain your property.

We have looked at the two main companies offering this service – Ethlend and Salt, and we have also made a comparison of the two companies here.

Salt vs Ethlend

Private Banks

If you have a lot of crypto hanging around there are private banks that will help you sell it for fiat. Using a private bank to monetize your crypto probably isn’t an option for most people, as the banks aren’t interested in smaller investors.

On the other hand, if you have a lot of crypto you want to swap for fiat, it is worthwhile to talk to a private bank. Because a private bank will probably have a much higher level of compliance than a crypto exchange, it will be much easier to move your fiat around after you make the trade.

Here is the thing, cryptos came out of nowhere. People who have made serious money with cryptos need to have a paper trail if they want to get their money into the established financial system. Big banks don’t care if you can’t explain exactly where a few thousand dollars came from, but a few million is a totally different story.

Private banks have compliance officers, which is a double edged sword. For larger sellers of crypto into fiat, the fact that you will have an actual bank officer looking over the transaction could be a big help once you start moving the money around. The compliance officer has to make sure that your activities won’t blow back on the bank, or that the money you are receiving wasn’t from illegal activity.

The Legal Side of Crypto Cash

Most countries will require that you have extensive records for any substantial amount of money that you possess. There are good reasons for this, although they may not be convenient for crypto holders. For most of their history (a little over a decade) cryptos were totally unregulated. Now, governments have made an abrupt about-face.

To make matters even more confusing, there has been little guidance for crypto holders from banking and tax authorities on how to handle existing crypto holdings. This situation is even more complex for investors that have been in the crypto market for a long time. There aren’t many ways to create a verifiable paper trail for the early days of BTC, which isn’t ideal for anyone.

The regulations for crypto holdings and taxation will vary from country to country. Pretty much every nation on earth has created some form of crypto taxation scheme, and it is important to figure out what new laws might apply to you.

Paying Your Taxes

If you are new to the world of investing, the idea of capital gains taxes might be new to you. Basically, when you buy an asset and then sell it at a profit, you will have to pay tax on that transaction. Securities like stocks and assets like commodities fall under capital gains taxation schemes in most nations.

The good news is that many countries also allow you to partially deduct trading losses, which would now apply to cryptocurrencies. It is a good idea to talk to a tax professional about the taxes you may need to pay on your crypto trading activities, so that you don’t fall behind on your tax bill.

We have put together a cryptocurrency tax guide to give you an idea of your countries law, it should be noted of course that the best thing is to speak to an accountant in your country which is well versed in crypto taxes as some laws can be vague and you do not want to fall foul of the applicable laws.

In most nations the tax authorities will charge you additional interest and penalties for late taxes, which are well worth avoiding!

Conclusion

Regardless of the withdrawal method that you end up choosing, it is important to carry out your independent research to learn more about the service provider. Do this by reading its terms and conditions, learning more about its fees and reading client reviews. This will help you make a more educated choice, while also keeping your coins, personal information, and cash safe at all times.

From time to time, users may stumble upon companies or individuals advertising services such as ‘Bitcoin to PayPal’, ‘Bitcoin to Cash’ and more. It’s best to conduct exchanges through a certified platform, as this will surely reduce the risk. Last but not least, when exchanging via another service, always use one that offers escrow protection.

Most providers are inexpensive and they act as a great guarantee in case the other person is only after your money and doesn’t intend to carry out a fair trade.

The post How to Cash Out Bitcoin & Other Cryptocurrencies to Fiat appeared first on Blockonomi.

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