How Should You Bank Your Digital Coin
The cryptocurrency craze has taken the world by storm, and the market’s billions worth of digital coins don’t seem to be slowing down anytime soon. Digital currencies like Bitcoin, Ethereum, Ripple, and Litecoin are more than just investments. They’re an alternative to what traditional banks have to offer.
How Does Cryptocurrency Banking Work?
According to the experts at SoFi, “consumers don’t have to report transactions in cryptocurrency on their taxes.” But that doesn’t mean tax evaders will get away with it. A cryptocurrency transaction in which one unit exchanges for another—say, Bitcoin for Ethereum—is treated as a taxable event by most jurisdictions and exchanges. If you buy $10,000 worth of Bitcoin and then trade some of it into Ethereum, you made a $10,000 capital gain.
Converting Your Digital Currency Into Cash
Converting your bitcoin and altcoins into cash can be tricky, but here are a few options: Consider using popular cryptocurrency-to-cash conversion websites such as Coinbase, Changelly, or Bitsquare. Check out your bank’s policies on wire transfers from virtual currency exchanges. If you don’t like any of those options, you could always sell your digital currency for goods and services directly.
How to Buy and Sell Digital Currency
You’ll need a secure wallet or an account with a cryptocurrency exchange to buy and sell cryptocurrency. Exchanges are online marketplaces where you can buy, sell or trade cryptocurrencies using fiat money (dollars, euros, yen). Two of these exchanges — Coinbase and Gemini — will let you use your bank account. A web-based wallet is for you if you want to own digital currency but don’t want anyone else to know about it.
Choosing the Right Place for You
Open a bank account and purchase a fiat currency or other cryptocurrencies. If you’re looking for somewhere that accepts bitcoin as well, pay attention to fees and security. Some banks will also let you trade between cryptos (though often at a pretty hefty fee). Many exchanges use bank transfers; Coinbase is one of them. And some crypto-to-crypto options exist if banks aren’t your thing.
What is Cryptocurrency Insurance?
Keeping track of fluctuating exchange rates and safekeeping keys is a job in itself when you’re trading, investing, or storing large amounts of cryptocurrency. That’s where wallet insurance comes in. The most common type of coverage offered by insurers is asset protection, which can help guard against theft and loss. But some insurers also offer market-specific types of policies.
Securing Your Money
Banks don’t care where your money came from or what you do with it as long as they can earn a little interest, while regulators may care deeply about how you keep your money safe. Segregate funds that you’re keeping in cryptocurrency and store them in a digital wallet on your computer rather than in any accounts associated with exchanges.
This guide should help you open a digital currency bank account and protect your holdings, but it’s not meant to be exhaustive. If you have any questions that are not answered here, leave them in the comments below. Good luck.