5 Steps to Transfer Cryptocurrency to Your Bank Account
If you’re an avid cryptocurrency investor, you may be wondering if it’s possible to transfer your Bitcoin or other cryptocurrencies to your bank account. While it’s not as straightforward as transferring fiat currency, it’s still possible to do so. In this article, we’ll explore the ins and outs of transferring cryptocurrency to your bank account, including what you need to consider before doing so.
The relationship between banks and cryptocurrency is constantly evolving, yet it continues to be an uncomfortable one, with many banks taking a negative view of crypto.
While some banks allow cash deposits from and withdrawals to crypto exchanges, many are blocking payments because they’re acting in the best interests of their customers by protecting them from the volatility in crypto markets and crypto scams.
Some banks are quite ‘friendly’ towards cryptocurrencies and are happy for customers to link their accounts to crypto exchanges to facilitate smooth transfers of fiat currency (ie pounds and dollars) but not crypto itself.
No banks, as yet, allow you to put Bitcoin in your account directly. However, if your bank is in the UK, there is one exception to this rule which I’ll get to later.
So, if you’ve got a stash of crypto languishing on an exchange or stored in a hardware wallet for safekeeping, it begs the question…
How do I transfer my Bitcoin to my bank account?
The short answer is: you can’t. Whether you’re in the UK, the US, or pretty much anywhere else, you won’t be able to put your Bitcoin in your bank account.
You’ll need to liquidate your Bitcoin or other coins on a cryptocurrency exchange by selling them for cash and then transferring the proceeds to your crypto-friendly bank.
You’ll need to pay a transaction fee on the sale to the exchange, but fiat transfers from most crypto exchanges to a linked bank account are free so once your coins have been sold you can move your fiat funds.
It’s worth noting that depending on the amount of cash you’re transferring, the transaction may trigger an alert with your bank.
Make sure that your accounts are watertight and you can explain the source of the crypto and hence the cash being deposited into your account if called to do so. If you’re daunted by the prospect of trading crypto for fiat, some crypto exchanges offer a simplified swapping service where you don’t have to use a complicated trading screen to sell your coins.
Crypto giant Coinbase, for example, offers a quick sell function whereby you transact in a simple pop-up window. You choose the crypto you want to sell, the amount and the fiat currency you wish to receive then click ‘sell’.
The transaction is carried out instantly and the cash will be available in your account ready to transfer to your linked bank.
Considerations Before Transferring Cryptocurrency to Your Bank Account
Before transferring cryptocurrency to your bank account, there are several factors you need to consider:
- Tax implications: Depending on your country’s tax laws, you may be required to pay taxes on your cryptocurrency profits. It’s essential to consult with a tax professional to understand your tax obligations.
- Exchange fees: Cryptocurrency exchanges charge fees for trading and withdrawals. You need to consider these fees before choosing an exchange and selling your cryptocurrency.
- Volatility: Cryptocurrencies are known for their volatility, which means their value can fluctuate rapidly. You need to consider the risks of selling your cryptocurrency at a lower value than you bought it.
- Bank restrictions: Some banks may have restrictions on accepting cryptocurrency-related transactions. It’s essential to check with your bank to understand their policies before transferring cryptocurrency to your bank account.
How do I get Bitcoin from a hardware wallet into my bank account?
This is a slightly more complicated process and will involve extra fees, but the result is the same.
You need to first transfer your Bitcoins or other coins from your cryptocurrency hardware – or software – wallet to a cryptocurrency exchange where you hold a verified account and have a linked bank account.
To do this, you’ll have to pay a fee and wait for the necessary confirmations before the coins arrive in your exchange account. As before, you’ll then need to sell your coins on the exchange for fiat cash using the correct currency pair (or quick exchange function if your platform offers this), for which you’ll pay a small trading fee.
Once the transaction is settled and you have your cash in your crypto exchange account, you can then transfer it over to your bank account. It’s a more fiddly process and costs more, but it’s a small price to pay for the security offered by keeping your coins safe on a hardware wallet and safe from hackers.
How do I get altcoins into my bank account?
If you hold more obscure coins, you may not be able to sell them for fiat cash directly as there won’t be a suitable currency pair on the exchange you’re using. You’ll need to use a cryptocurrency exchange or swapping service that supports the crypto in question to turn them into a coin that is more easily convertible to fiat.
Bitcoin and Ethereum or two examples of cryptos that are widely traded so consider converting your altcoins into one of these coins first before selling.
Litecoin is another good option as the transaction fees are generally much lower than Bitcoin and it tends to track its price so any fluctuations in value during the transaction process will be roughly the same.
Consider a crypto credit card
Another way of accessing your crypto for mainstream use is by signing up for a crypto credit card. Many of the larger exchanges offer credit cards at competitive rates and enable you to spend your crypto as if it were fiat money.
You can use the cards directly in mainstream stores and online as if they were traditional credit cards. In some cases, you’ll even earn ‘crypto-back’ as an incentive to sign up.
Always remember that credit card spending can lead to debt, and the same applies to a crypto credit card. If you’re worried about this, try using a crypto debit card instead. This will enable you to spend your crypto and will also help you manage your spending. The downside is they come with fewer perks.
Payment services that allow you to hold crypto
There are several ways to buy, hold and sell crypto in a more ‘mainstream’ way without having to use a cryptocurrency exchange.
One such method is through services such as PayPal. The payments giant allows you to buy a small selection of the largest cryptos by market cap, hold them in your account, and sell them when you want.
Of course, there are fees involved, but it makes it extremely easy to sell your holding for cash when you want to and get the money into your account instantaneously.
There are several other hybrid platforms that offer similar services so shop around for the one that suits you best. You’ll find the functionality of PayPal and other services is very limited compared to a mainstream cryptocurrency exchange.
You won’t be able to transfer your crypto to other wallets if you want to pay someone in crypto for example, but you can use them as a very basic trading service. At the time of writing, PayPal supported Bitcoin, Ethereum, Litecoin and Bitcoin Cash.
Which UK bank allows you to buy crypto?
Challenger bank Revolut has welcomed crypto with open arms and allows customers to buy, store and sell several coins through its app. You can buy coins through its built-in exchange and hold them in your account where you can cash out instantly when you choose.
You can’t transfer crypto into your account, but you can transfer it to people you know who also bank with Revolut. At the time of writing the Revolut exchange supported around 90 tokens, including the main coins like Bitcoin and Ethereum.
So, while you’re not technically putting your Bitcoin in a bank account, Revolut will be holding the crypto you buy through its trading services so it’s pretty close.
It even offers staking opportunities where you can lock coins away to earn rewards (paid in crypto) for doing so. One example of crypto you can buy and stake through Revolut is Polkadot (DOT).
And if you’re just getting started in crypto, there’s a handful of learn-and-earn courses, similar to those offered by the large crypto exchanges, where you can earn a few free coins to get you started. If you’re keen to grow your investment portfolio, Revolut also offers an inexpensive stock and share trading facility through its app.
Conclusion
The banking sector and Governments are still finding their feet with crypto and more regulation will undoubtedly come. This might be a good thing as banks may become more benevolent towards crypto transactions if they’re being made with properly regulated crypto platforms.
Additionality, more work needs to be done to crack down on crypto scammers who are raking in hundreds of millions around the world each year. As the crypto sector matures, and if adoption continues to grow, banks are likely to become more crypto-friendly, especially as an increasing number of customers will demand this service.