What does Fiat Currency Mean?
Fiat currency is any legal currency a government has issued. Dollars, Euros, and Pounds are all examples of fiat currency. It might seem like a simple question to dedicated crypto users, but it’s not a well-known term in everyday life. While almost every crypto user will know what fiat currency is, not all users will have heard it referred to as fiat.
Of course, despite the inherent advantages of using crypto, fiat has some benefits, as well as the associated drawbacks.
- More widely accepted
- Easier to use for significant purchases
- Can be converted into something physical
- Lack of privacy
- Inflation can hit fiat much harder than crypto
- Digital transfers are much slower compared to crypto
Why Convert from Crypto to Fiat?
The benefits of sticking with crypto are significant, it’s something we feel strongly about here at dappGambl. However, there are certain situations when switching back to fiat is the best choice. For users who’re on the fence about converting back to fiat, here are the most common reasons it’s the right choice.
Anyone who has bought a house, or is in the process of buying one, will understand that it’s a significant financial undertaking. A house costs a considerable amount of money, and at this point, most estate agents won’t accept crypto as a payment method. In this situation, converting crypto to fiat may be the only way to purchase a house. It’s not just houses where this would be the case, either. A car, a new front door, or anything with significant value will likely only be available to fiat users.
Many users overlook trading as a reason to convert crypto to fiat. However, traders will have to convert to fiat at the correct times to take advantage of dips and peaks. If Bitcoin hits a new all-time high, traders may feel a dip will follow. In this situation, converting any Bitcoin holdings to fiat is the correct decision. Of course, when Bitcoin bottoms out, users should carry out a reversal.
Although it’s a rarity, some stores will only accept cash. For users with little liquidity, converting crypto to fiat could be the only way to get hold of any money. Likely, this will only be for small conversions, but for users who reside in small towns, it will be a common occurrence.
Aspects to be Aware of when Converting to Fiat
When converting to fiat, there are some caveats users should be aware of. It’s not a perfect system, so there are risks involved. We’ve covered the most critical factors users need to be mindful of before changing to fiat.
When a user goes off-ramp, it typically means they have decided to trade their crypto for something else. While it usually refers to converting to fiat currency, it can also be regarding trade for goods. So, a user who decides to swap some crypto for a new pair of sneakers would be using a crypto off-ramp.
Depending on the off-ramp the user chooses, the verification level will differ. There will be a lot of verification when trading crypto for fiat currency. However, when trading crypto for goods or services, users will likely be able to avoid verification.
The existence of off-ramps also implies that on-ramps exist. This is the case when users initially gain a crypto holding. The method users choose to acquire will impact the level of verification. Just as off-ramps that involve fiat trades have high levels of verification, the same will be the case for on-ramps. However, if users decide to trade goods or services for crypto, then the on-ramps can also avoid verification.
Therefore, users should be aware of the method they use for crypto on-ramps and off-ramps. If avoiding verification is the main factor behind a transaction, users should attempt to trade for goods or services. For fiat trades, it will be highly challenging for users to remain anonymous.
Making the switch from crypto to fiat isn’t too tricky. However, users must follow through with simple steps to convert their crypto. Follow our easy guide to discover how to exchange crypto for fiat.
Choosing the Right Exchange to Convert Crypto
Users must go through some steps to find the best crypto exchange. With so many on the market, choosing the right one is a challenge. We’ve put together the most vital factors to research to help find the most suitable crypto exchange.
Is KYC Guaranteed?
Generally speaking, users must go through KYC to convert crypto to fiat. The reasoning behind this is simple, fiat currency is highly regulated. As such, for an exchange to operate legally, it will have financial regulation. Therefore, it means users will have to understand the KYC process.
Going through KYC
KYC stands for Know Your Customer. It’s the process of an exchange verifying the identity of a user. Therefore, before they can purchase crypto or convert crypto to fiat, users must prove who they are. The reason for this is that regulators have anti-money laundering rules in place.
To complete the KYC process, users will have to provide documents that prove who they say they are. Typically, national ID documents are acceptable to confirm their identity. A passport or driving license is usually perfectly acceptable as an ID. Some exchanges will also accept utility bills. What is and isn’t accepted will vary depending on the financial regulator for each country. It’s vital to carry out this research before signing up, this way, users are aware of what they have to provide to create an account.
Going through KYC will remove the user’s anonymity, so it’s essential to be mindful before going through the process. Users who want to remain anonymous will have to find a different conversion method.
Closing Thought: Is it Right to Convert from Crypto to Fiat?
Every user will have their reasons why they may want to make a trade. It depends on personal reasons whether it’s the correct decision. Finding another method to get off-ramp would be the best choice for users who wish to retain their anonymity. It could be through purchasing goods and services, which users can then trade for fiat. However, it does make it challenging to get access to fiat directly.
However, converting from crypto to fiat could be the only option for users who need access to fiat. Users should be fully aware they will lose anonymity when making the conversion. As such, it’s essential to be fully up-to-speed with any laws around crypto exchanges.
When making the decision, users must understand the consequences fully. If anonymity is a vital factor, then trading for fiat isn’t the right choice. However, users can make the trade without worries if it’s not an essential factor.
Fiat is available in most retail outlets. While some sites won’t accept fiat, it’s a rarity for it not to be accepted. Pure crypto casinos won’t accept fiat as a payment method, so crypto will be a requirement for players who want to use these sites.
It’s legal in almost every country. While there are some countries where crypto isn’t legal, these are rare and getting rarer by the day. As long as users use a regulated crypto exchange, then there will be no problems making the conversion.
The exchange of crypto to fiat completes instantly at the crypto exchange. However, access to fiat funds takes a little longer. This is because a payout using a bank has to go through traditional methods. Depending on the bank, these can take up to 5 business days to complete. Players should be aware of this when carrying out the initial exchange.
It depends on the exchange. Some sites will have high commissions on trades, while others will have low commissions. Users should shop around to find the best deal. Users should take exchange costs into account when calculating profit. If the profit margin is low, then exchange costs could mean users make a loss.