When most people think about Bitcoin and traditional banks, they usually see the combination of the two financial systems as a bit of an oxymoron. After all, the removal of the large amount of trust required in banks is mentioned as a key feature of Bitcoin throughout Satoshi Nakamoto’s original white paper on the topic. But now, the worlds of Bitcoin and traditional banking are merging, as more cryptocurrency companies are interested in getting banking licenses and legacy financial institutions are looking at how they can use cryptocurrency to enhance their current offerings for their customers.
The Best Crypto-Friendly Banks
- One of the simplest ways to buy Bitcoin
- Owned by financial stalwart Square
- You can withdraw your Bitcoin to a personal wallet, unlike competing apps
- Really simple sign-up process
- Reliable and trustworthy
- A great one-stop shop for anyone looking to invest in cryptocurrency or stocks
- Easy onboarding procedure requires very little from user
- Fully regulated financial institution in the United States
- Support for BTC, ETH, LTC, BCH, DOGE, ETC, and BSV
- All-in-one app that features banking, stocks and cryptocurrency options
- Wealthsimple Crypto is available to Canadians only
- Wealthsimple is very safe and insured by several regulators
- One of the fastest growing online financial institutions in the world
- Receive $25 when you start trading crypto assets
- Only available in the United States
- Completely custodial platform
- Supports BTC, ETH, LTC, BCH & ETC
The History of Banks Backing Cryptocurrency
While the idea of “crypto friendly banks” may seem odd at first, the reality is we’re still in the very early days of Bitcoin’s development as a new digital-first financial system. In these early times, it’s important for Bitcoin to be integrated into the traditional banking system because people need to be able to move from the old system to the new system (and visa versa) in a seamless manner. After all, not many people are paying for their rent, groceries, and other necessities with cryptocurrency quite yet.
The whole point of Bitcoin was originally to remove trusted third parties, but at the end of the day, people still value convenience and the ability to have all of their assets accessible from one interface. Therefore, we’re now moving into a world of crypto friendly banks for the cryptocurrency enthusiasts around the world. By opting for a forward-looking bank that understands the Bitcoin ecosystem, customers are able to gain access to lower fees for moving back and forth between cryptocurrencies and traditional fiat currencies, a more seamless experience when trading, and a more user-friendly version of the crypto revolution.
What to Look for in a Crypto Friendly Bank
So, what are the key features to look for in a crypto friendly bank? If you don’t know where to start, don’t worry. We’ve got you covered. Here are some of the key offerings to look for when searching for the right bank for all of your cryptocurrency-related activities.
Ease of Use
A key problem area for Bitcoin and cryptocurrencies is still ease of use. This is a new technology that completely changes how people need to think the security of their digital money due to the way in which cryptocurrency payments work, namely that they’re irreversible. The fact that someone can lose their private keys, get hacked, or simply send an irreversible payment to the wrong person has created a lot of issues around ease of use. However, this is much easier for crypto banks to solve, as they usually take custodianship of their customers’ crypto assets. An interface that makes it easy to observe your crypto portfolio and transfer between fiat and crypto balances enables you to remove a lot of stresses associated with how the crypto protocols work at the base layer.
Security is an issue that needs to be taken with the utmost seriousness in the cryptocurrency space. The fact that it’s easy to send an irreversible payment also means it can be much more difficult to fix things when something goes wrong from a security perspective, so the level of security offered by a crypto friendly bank needs to be viewed as priority number one. Look for a bank that has a long track record in the cryptocurrency ecosystem without facing any serious hacking incidents, as these are the institutions that will best protect your crypto holdings.
Reliability is a factor that combines many different features of a crypto friendly banking institution. Security is obviously a key ingredient, as you need to know that hackers will not be able to steal your money. On top of that, you should look into the licenses and registrations obtained by the bank. You do not want to choose a bank that is located in a questionable jurisdiction or has anonymous founders, as these situations often end up with customers becoming the victims of an exit scam.
Fees are a key area of interest when people first get involved in bitcoin or cryptocurrency trading because users do not want to be paying a high fee every time they switch between crypto and fiat. However, it should be remembered that you’re always going to get exactly what you paid for in this industry. There’s nothing wrong with paying low fees, but make sure you aren’t sacrificing other factors, such as security, in exchange for a small break in fee payments. That said, the fees for changing between different assets at crypto friendly banks have become more reasonable over time.
In addition to the base concerns around things like fees and security, crypto bank users should also think about additional, niche features that some crypto banks offer. For example, will you be able to use a debit card backed by bitcoin with your crypto bank of choice? How about interest accounts? Can you earn interest on your crypto holdings? These are some of the additional features you may want to consider being able to access at a crypto bank.
We live in a mobile-first world these days, so the quality of a crypto friendly bank’s Android and iOS apps is going to be an important factor when choosing a crypto financial institution. The main thing you want to look into here is whether all of the features offered by the bank are available via the mobile app.
Another factor to consider when choosing a crypto friendly bank is whether you will be able to earn some interest or rewards on your money by using the bank’s products and services. This could be anything from rewards on a debit card associated with the crypto bank to the ability to earn interest on some bitcoin that the bank is holding for you.
The availability of a particular crypto bank is something that can be difficult to pin down right now, as the regulations around cryptocurrency are still very much in flux in various jurisdictions. For now, it makes sense to keep track of the crypto regulations in your local area and stick to bitcoin banks that are able to operate legally in your country.
Moving to and from Fiat Currencies
We’re still in the early days of the Bitcoin revolution, so you’re still going to need to use traditional fiat currencies from time to time. Whether you’re paying bills with crypto or want to be able to buy coffee with a Bitcoin-powered debit card, make sure to look into how easy it is to move between the new and old financial systems of the world before signing up for a crypto bank account.
Finally, it makes sense to look into which cryptocurrencies are supported by a crypto bank before you make it your main banking platform. Every crypto friendly bank will have some sort of integration with bitcoin; however, you’ll likely need to do a good bit of research if you’re more interested in some of the niche altcoins.
What Makes a Crypto Friendly Bank Different Than a Traditional Bank?
The main thing that separates a crypto friendly bank from the sort of bank account that you may already have is that a crypto friendly bank does not view Bitcoin and other cryptocurrencies in a negative manner. In fact, these forward-looking banks will either be looking to integrate cryptocurrencies directly into their online banking portals or will have already done so. While some banks have actually blocked transactions related to Bitcoin in the past, more banks are now taking a much more open approach to this new technology, integrating cryptocurrencies and traditional bank operations within the same interface.
Frequently Asked Questions
The short answer here is yes in most situations. There are two ways you can transfer bitcoin to your bank account. One is to simply sell your bitcoin for your local fiat currency on an exchange and then send that fiat currency to your local bank account. The other option, which is now becoming more popular, is to simply transfer your bitcoin to a bitcoin-native banking institution.
It should be noted that there are still some banks that will not allow any transactions related to cryptocurrencies.
The answer to this question will depend on the type of bank account you own. With most bank accounts, you still cannot “deposit crypto” into them. However, some crypto friendly banks will allow you to deposit bitcoin and maybe a few other cryptocurrencies. These banks usually offer an option to automatically convert any crypto deposits into the local fiat currency.
No, a legitimate bank will never seize your cryptocurrency. There’s a chance they might not accept it as a deposit but traditional banks are not going to steal your cryptocurrency.
There are a variety of reasons why you might seek out a bank that offers cryptocurrency features but the primary use is facilitating crypto-based transactions.
Some of the newer banks (coined “neobanks”) also offer very favorable rates compared to traditional banks.
Not yet but popular cryptocurrency exchange Kraken secured a bank license in Montana so that may change in the coming years.