Debates between diehard crypto fans and those that still do not believe in the concept of digital currencies are brilliant to read and can be a lot of fun if you are someone that likes to read both sides of the story.
In the media and public eye, you will come across ‘the lovers’, ‘the haters’, and ‘in-betweeners’. The first 2 are easy to define while the in-between groups are a nightmare to describe.
There are those that like the idea of crypto but they are not sure if it is safe, those that swear by crypto but do not invest because cryptos are too volatile, those that don’t like the idea of crypto but invest because they are worried they could miss out on a sudden bull market, and as you have probably already figured out - the saga continues with many other in-betweener groups we could mention!
Meanwhile, there are plenty of people out there who are still undecided – which by the way is still a form of in-betweeners in our book! For those of you that are new to the world of crypto or still largely undecided as to whether cryptos are worth it, the big question that most of you want to know is can you replace traditional banking with cryptocurrencies?
And… the answer to this question is ‘yes’ and ‘no’. It entirely depends on how you access your money, how you make payments online, how you want to store your money, and it can even come down to simple geographics based on where you live.
These interesting points are exactly what we are going to look at in our ‘crypto vs banks’ debate so you can decide how, what, where, and when the crypto Vs banks debate affects you.
High Risk Vs Low-Risk Savings
First and foremost, getting involved in cryptos comes down to a simple high vs low-risk tug of war. If you are someone that is OK with taking risks, then cryptocurrency is worth dipping into if you want to dedicate a portion of your savings. However, if you are afraid of losing money or if you do not have the money you can afford to lose, then using banks is the right move for you.
The reason cryptos are risky to use a form of ‘savings’ is because of their volatility. Some are more volatile than others, but the long and the short of it is that crypto prices fluctuate. If you use a bank to store your money, then your savings will never decrease.
Yet, with the current state of world economies, interest rates are low, and your savings will increase by maybe 1% or 1.5% per year, which by today’s standards is considered a decent yield for a standard savings account.
For example, BTC was worth $11,950 at the beginning of September, and now we are reaching the halfway point for the month, BTC is worth $10,350. That is a 13.4% drop in value which for someone that has invested $1,000 that cannot afford for that investment to lose money is a $134 loss. This would never happen if you put your money in a savings account.
On the other hand, at the beginning of the year, BTC was worth $7,180, and therefore with its current value of $10,350, that’s an interest rate of 44% which is way beyond any interest rates a bank would pay you even on its high rate savings plans.
Right now, with how volatile cryptos are, those that cannot take a risk should stick with keeping their money in a bank where your funds will maintain value. If you are fine with taking risks in search of higher interest rates (ROIs), then the best strategy is to dedicate a percentage of your savings and invest into cryptos you feel stand the highest chance of gaining you a positive ROI.
Check out our Top 10 Cryptocurrencies to buy in 2020 guide for suggestions on cryptos to invest in and look out for.
· Use a bank for your savings if you cannot risk losing money
· Use crypto if you are ok with risking a loss while in search of higher interest rates
Stablecoins Pitched Versus Domestic Currency
Some of the most unstable currencies in the world are Indonesian Rupee, Venezuelan Bolivar, Iranian Rial, and Argentine Peso. Even the British Pound isn’t great these days. It might be that inflation is so high in the country you live in, if the option of cryptos is available, they could be worthwhile.
In Africa and South America, many citizens use crypto as a backup against their domestic currency. When their currency depreciates, cryptos usually hold. The most common pairing used is the US$/BTC while those looking for a crypto investment that is a little more stable US$/USDT is a perfect choice.
USDT is one of a small number of ‘stable coins’ specifically designed to create non-volatile cryptocurrencies. As such USDT does not fluctuate versus the US$ in the same ways as BTC, ETH, LTC, XRP, and other cryptos.
Just to prove a point here, at the beginning of 2020 USDT was worth $0.999466 and right now it is worth $0.999240. This is exactly how much you purchase USDT for using your currency versus the US$ and looking at these figures, anyone with USDT since the start of the year would lose just 0.02% which is negligible even if your domestic currency is stable.
As you can imagine, when a currency drops versus the US$ because of its country’s economic stability, owning a few USDT as part of your saving plan is a sensible idea.
You may not harness a positive yield in terms of interest rates, but your money will be secure as it is pegged against the US$. In some cases, you may make money from currency fluctuations between your domestic currency versus the US$.
For instance, if you are an Argentine citizen and you put 100,000 Pesos into USDT on 1 January 2020, US$1.00 would buy you 60. On the date of this article, 14 September 2020, you could exchange your US$ at a rate of US$1.00 for 75 Pesos. The interest you earn here is 25%.
Now if you are in a country with no access to US currency bank accounts, but you do have access to crypto exchanges with USDT, then putting your savings into USDT could be a wise decision.
· Some currencies are as volatile as crypto while crypto offers a higher chance of a return
· USDT is the perfect crypto for those looking a non-volatile crypto-investment
Quick Access to Cash Via ATM Withdrawals
Cryptocurrencies are virtual so it's not a good idea to put your month’s salary or earnings into crypto if you need instant access to cash unless your crypto wallet offers ATM withdrawals. In most countries, you still cannot get an ATM card or credit card with your crypto wallet.
Although, the concept of withdrawing fiat cash via an ATM card connected to your wallet is in action. These ‘BTM’ systems use up to the minute BTC to fiat conversions which is pretty exciting stuff – yet, a full-fledged rollout of these ATMs is still a few years away.
It works like this – you enter the BTC amount you want to sell (convert into fiat), then send it from your BTC wallet to the BTM’s displayed address, and voila - cash pops out the wall!
It’s a slightly lengthier process than using your bank ATM but it works. Nevertheless, there is a downside and that is that the price of BTC given is often 5% to 10% lower than the current rate so the BTM owner can cover its costs. Conversely, most ATM cash withdrawals from your bank account are free.
To avoid heft charges, using your bank’s fiat currency account with an ATM is still the cheapest way to make withdrawals
Which countries have BTMs/ATMs available?
· Canada (53 BTMs/ATMs)
· USA (53 BTMs/ATMs)
· UK (11 BTMs/ATMs)
· Australia (16 BTMs/ATMs)
· Singapore (9 BTMs/ATMs)
· The Netherlands (9 BTMs/ATMs)
· Finland (7 BTMs/ATMs)
· Slovenia (4 BTMs/ATMs)
· Italy (4 BTC BTMs/ATMs)
· Isle of Man (1 BTMs/ATMs)
Over the Counter Debit Card Payments
If you need a banking facility that allows you to make instant payments at retail stores, restaurants, or entertainment venues, then having a bank account with a debit card would be the only logical way to get hold of your cash quickly.
There are currently ‘very few ways’ to make over the counter payments using crypto but they do exist. Right now the issue with cryptos like BTC and ETH is the processing time can be considerably slower than a debit card payment because their blockchain built ecosystem can take over a minute to process the payments – not ideal in a busy store with a queue of customers!
That said, cryptos such as DASH are on the horizon and could change the way we bank in the future if this fintech’s POS and eWallet style blockchain tech operated payment system becomes popular. The system processes payments within 1 second - something that has caught the eye of some retail stores as a possible solution for the future when cryptos become fully integrated into everyday financial life.
Ripple could also come out with similar systems for XRP. Nonetheless, these systems are not widespread and would need mass adoption for either of these blockchain tech firm’s ideas to hit the ground running.
Although systems are in place in some locations in the US, South America, and Japan they are not common or widespread and so banks keeping your money in a bank and using its debit card is still the best way to pay for goods or services over the counter.
· DASH & Ripple already have over the counter solutions that could become mainstream
· With only a handful of crypto enabled over the counter systems, banks are the better choice
Large or Overseas Transfers (Business or Personal)
Up until now, banks seem to have the edge over cryptos but there is no doubt which one wins when it comes to business transactions and overseas payments in the crypto Vs banks debate.
Transfering cryptos for business or overseas cuts out the middle man and therefore also cuts out the fees involved in the transaction. Contrariwise, banks can charge 5% to 10% commissions or fees on currency exchanges, receiving/sending foreign payments, plus the exchange rates can also be watered down by the bank. This gives cryptos an almost uncontested edge over banks.
Another advantage is that crypto transactions overseas are almost instantaneous while a bank may hold onto the amount until the next working day or even take 3 to 5 days to process the payment.
How is this possible?
Cryptos are decentralised on their respective blockchain ecosystems. With no central system holding all the crypto no one company (bank) processes transactions so there is no one to add commissions or fees. Instead, users on the blockchain initiate payments that are processed by the ecosystem creating an immutable transaction record automatically.
That does not mean there are no fees. Some systems allow you to choose the fee while others have a fixed fee which could be $1.00 per transaction or 0.05% of the value of crypto processed. Either way, you look at it, it's far more cost-effective to make transfers overseas and business payments using crypto.