What is a bitcoin bank account? This is a common question we are often asked. In short, it is a relatively new concept that allows people to access bitcoin banking services. Bitcoin banks operate in a similar way to traditional banks. Crypto banks take customer deposits, lend them to other customers, enables customers to buy bitcoin and earn interest.
In this review, we will look at the growing Bitcoin banking industry and the best bitcoin bank accounts.
What is a Bitcoin Bank Account?
In the past, we have looked broadly at the crypto industry. We have looked at the origin of bitcoin and how the industry has changed over the years. We have also looked at some of the companies that are trying to change the industry.
There are two types of bitcoin owners. First, there are bitcoin traders. These are people who hold bitcoin for a limited amount of time. Their goal is to benefit from the short-term fluctuation of the cryptocurrency. Second, there are the so-called hodlers. These are the true believers. These are people who believe that the price of bitcoin will continue rising. They also believe that the cryptocurrencies industry will continue growing. As such, these hodlers keep on owning their bitcoins even when prices decline.
Bitcoin bank accounts are products that are created mostly to serve hodlers. These accounts provide a good option for these hodlers to transfer bitcoin to bank account and save their bitcoins in a safe way. They also enable them to borrow money against their crypto.
How a Bitcoin Bank Works
The concept of a bitcoin bank is very easy. The companies that run these banks work in a very simple process. First, these companies enter into agreements with trusted crypto custodians. Some of these custodians are Gemini, Kingdom Trust, and Digital Asset Custody Company (DACC) among others. These are the companies that store the crypto.
Second, these companies create a mobile and web platform where their customers can sign up and access their accounts. A good digital bank must have an easy-to-use and functional web and mobile platform.
Third, users deposit their crypto in the platform and the company saves the money in its custodians. At the same time, the company starts giving out fiat loans that are backed by the crypto. This model removes the need for background checks. The companies then make money from the interest that is paid by the borrowers.
In addition to these services, many online bitcoin banks provide additional services. They provide services like trading and custodial services.
Advantages of Bitcoin Bank Accounts
A common question that is asked is on why bitcoin bank accounts exist. In reality, there are several benefits that people who use Bitcoin bank accounts get. Some of these advantages are:
- Easy credit lines. A bitcoin bank account enables one to get credit that is backed by their bitcoins.
- Bitcoin preservation. A hodler can request a line of credit and continue holding the bitcoin in their bank account. Therefore, they are usually at an advantage because the value of their crypto rises.
- A Bitcoin hedge. Bitcoins are reasonably volatile and their price may drop. As such, a bitcoin loan helps to hedge against this risk.
- Convenient. It is a convenient way of saving bitcoin and borrowing money.
Crypto Bank Review / Best Bank Account for Bitcoin
Not all bitcoin bank accounts are good. As a customer, you should always do a complete review before you join a bitoin bank. You should ensure that the company that you are using has a good track record. Here are some of the best Bitcoin bank accounts you should consider.
Nuri Bank (Formerly Bitwala Bank)
Bitwala, rebranded as Nuri, is a German online bitcoin bank that whose account holders save, withdraw, and trade fiat currencies and cryptos such as bitcoin. Bitwala enables its customers to open a standard bank account that comes with a Visa card. Moreover, Bitwala has a crypto wallet where you can send and receive cryptos.
To sign up for Nuri, formerly branded as Bitwala, you must be a resident of the European Economic Area and Switzerland or a national of these countries.
Read: Complete Bitwala Review
Fidor Bank Bitcoin
Fidor Bank is another German bank that offers bitcoin banking services to its customers. The bank is serving customers from n the European Economic Area (EEA), Singapore, Switzerland and Abu Dhabi. Fidor’s current account holders can buy and sell bitcoin via a Bitcoin.de express trading.
Revolut is British online bank that supports bitcoin accounts and other cryptos such as Ether, Litecoin, and Bitcoin Cash. You can open Revolut bitcoin account in these countries: Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom.
Read: Complete Revolut Review
Xapo bank account is a virtual account that allow account holders to open USD and bitcoin accounts that come with Xapo debit card (Visa and Mastercard). Xapo debit card is a bitcoin debit card. The card supports both cryptocurrency and fiat money functions.
The company was started in 2012 and it is regulated by the Gibraltar Financial Services Commission (GFSC). Customers’ deposits are protected up to the US dollar equivalent of €100,000 by the Gibraltar Deposit Guarantee Scheme.
BlockFi Bitcoin Bank Account
BlockFi offers four services. It offers a BlockFi interest account, where customers can earn interest by saving their crypto. This is a service that works in a similar way to a bank. The interest account service is available in any country that is not sanctioned by the U.S., the U.K. or the European Union. BlockFi also offers crypto backed loan service. This is how it makes money. It extends credit to people who own bitcoin. These people in turn pay back the money with interest.
BlockFi also offers a trading platform, where people can trade in various cryptocurrencies. Finally, the company serves big institutional investors by offering them custodial services. In other words, BlockFi works as a real bank.
Read: Complete BlockFi Review
Summary: Are Bitcoin Bank Accounts Safe?
The concept of Bitcoin bank accounts is relatively new. It is also a relatively easy concept, where you deposit bitcoin as collateral and borrow the fiat equivalent. You should ensure that you do a lot of research before you open one. Don’t rush to deposit money in a company you have just seen advertising. In short, read the “boring” terms and conditions carefully.