Building a project that uses either blockchain or cryptocurrencies usually involves making the decision on having your own token. That implies the need for providing on- and off-ramping solutions to users – but which options can you use?
Crypto has created new opportunities for many founders and entrepreneurs, while it also became a completely new movement for doing business. Founding a startup doesn’t have to go down the usual route of getting external funding for a–usually significant–share of your project. Issuing tokens has become the way for getting the resources to validate the idea and take it to the market, while not compromising on the ownership structure.
Of course, launching a new project in crypto has much more implications but that’s part of your business idea. But how can you leverage having your own token and implement it within your business? How can the users of your platform obtain the token?
Here are several solutions to this problem.
How To On-Ramp Users Onto Your Platform
In the early days of its emergence, the crypto industry faced a myriad of problems on-ramping users. The process of converting a fiat currency into its crypto counterpart, involved moving value between two vastly different financial systems and as such, these transactions are often met with friction and technical difficulties.
However, the rise of centralized crypto exchanges and payment APIs like WYRE in the past decade, made on-ramping an easy task for businesses. Wrye for instance, allows businesses to create custodial wallets that can hold both fiat and cryptocurrencies. It integrates a variety of payment methods that allow users to transact globally and experience the benefits of blockchain even with minimal technical knowledge.
The slight downside of using Wryre is that it mandates KYC/AML procedures for all users, compromising of their privacy. However, this reduced the scope of scammers and malicious actors getting the better of your business.
Off-Ramping Problems in Crypto
Okay! Now you’ve successfully on boarded crypto users but while cryptocurrencies are accessible worldwide, they are not accepted worldwide. Most countries are yet to recognize digital currencies officially. In such a scenario where Bitcoin and other cryptocurrencies cannot be used for daily needs, users need to convert their crypto holdings back into a fiat currency. And a successful business is the one that provides its users an easy way to get off the crypto highway at will.
However, with the number of crypto users growing by the day, off-ramping problems in the crypto industry have come to light. The crypto industry still lacks a robust mechanism that provides a smooth transition from crypto to fiat every single time. This can cause friction between the business and its users, limiting its growth in the long-run.
So for businesses looking to integrate a good off-ramping solution to provide users with a wholesome user-experience, there are a few ways in which crypto holdings can be converted into fiat currency at will. In this article, we’ve listed some of the safest methods to allow your users to get off the crypto highway.
Centralized Cryptocurrency Exchanges
The first and the most obvious way of converting crypto holdings into fiat currencies is through centralized cryptocurrency exchanges. The crypto market has an abundance of crypto exchanges, nearly 600 spread across the globe. As such, this is the most widely accessible method of converting crypto to fiat currencies and is also the best choice for new crypto users.
Every crypto exchange has a pretty straightforward interface that, in a few simple steps, can convert bitcoins and other cryptocurrencies into a local fiat currency. The converter on the exchange shows users how much in fiat currency they can withdraw by selling their current crypto holdings.
Once users enter the amount they wish to sell, the exchange completes the sale on their behalf and transfers the amount in fiat currency to their bank accounts. However, the caveat here is that it could sometimes take several hours to several business days for the amount to reflect in the bank account, depending on the traffic to the exchange.
Moreover, almost all crypto exchanges require users to complete KYC (know your customer) requirements to comply with the regulations and laws of the country. This procedure could heavily compromise user privacy. There have also been several instances of crypto exchanges freezing withdrawals or experiencing downtime when the market volatility is high.
The safest bet for businesses would be to stick to the top and most trusted cryptocurrency exchanges like Coinbase, Binance, and Kraken and conduct thorough research of their own before choosing an exchange.
Building Your Own Exchange
Although crypto exchanges have the most liquidity, another business decision is building your own exchange. It doesn’t have to involve doing that from scratch, as there are plenty of whitelabel exchange solutions available.
Implementing your own exchange to facilitate on- and off-ramping is an interesting approach that allows you to maintain control over the quality of your whole project. We have taken a similar route with Lendingblock, a crypto lending and borrowing platform we’d built for our client. Users get better rates for using the platform while holding a certain level of the LND token. They can obtain them through this purpose-built exchange that facilitates LND/USDT pair exchange.
A similar solution could be used in your project.
Alternative Off-Ramping Solution
In the instance that cryptocurrency exchange is not the right fit for your business, there are a few other ways in which you can facilitate crypto-to-fiat conversion, although in most cases, that requires a multistep approach and converting to fiat through a better-known cryptocurrency or a stablecoin.
Let’s not forget that using existing cryptocurrencies is often the best way to enable crypto users to use your product. Here are some alternatives that you could utilize in your product or service.
Bitcoin Debit Cards
A Bitcoin debit card is for those users who don’t necessarily need cash but are looking for a quick crypto off-ramp. This debit card connects a crypto payment processing company with the users’ crypto wallets and automatically converts crypto to fiat currency. As such, a Bitcoin debit card can practically be used anywhere that normal debit cards are accepted to make direct purchases.
Popular exchanges like Coinbase, Binance, and BitPay offer debit card services to users, along with independent solutions like Revolut, Wirex, and Coinovy. Users are required to complete KYC requirements and apply for a debit card, which takes a certain number of business days to be approved.
Once approved, users get the ability to spend their bitcoins and other cryptocurrencies just like any fiat currency. Some cards also offer rewards and cash-back in cryptocurrencies to users.
The drawback of crypto and Bitcoin debit cards is that they impose spending limits and charge significant transaction fees.
Bitcoin ATMs or BTMs are Kiosks or standalone machines that were created to make digital assets as accessible as fiat currencies. These BTMs have two main functions. They allow users to buy Bitcoin using cash and send it to a Bitcoin wallet of their choosing and sell Bitcoins in exchange for cash.
In this regard, they serve as a convenient way of converting crypto to fiat. There are nearly 34,000 BTMs installed in developed countries at the end of 2021 and the number is only expected to grow in the coming years.
Using them is quite simple. BTMs produce blockchain transactions back and forth from users’ wallets, often via the use of a QR code. The QR code corresponding to their particular Bitcoin wallet is displayed to the user who then needs to scan it.
The user can then select the amount of Bitcoin they’d like to sell and withdraw cash in their local fiat currency. Some of these BTMs dispense cash while some send the amount in fiat currency to the user’s bank account.
However, BTMs are still limited to a few countries and it might take a while before they become widely accessible. BTMs also charge high fees for conversion and might not be suitable for users looking for affordable options. Moreover, most of these BTMs allow the buying and selling of Bitcoin only. The holders of other cryptocurrencies are yet to benefit from them.
Peer-to-peer exchanges are decentralized marketplaces for buyers and sellers of cryptocurrencies. Sellers and buyers can set their prices and strike a deal that is most profitable to both parties. For instance, a user looking to sell their bitcoins can browse through all the prices set by all buyers and select the most profitable option. Once the sale is complete, the user gets the amount in the fiat currency of their choice.
This is again one of the easiest ways to convert cryptocurrencies to fiat currencies, given that suitable buyers are available. The fact that these marketplaces are decentralized makes it even better. Users can maintain their anonymity and find their way around KYC procedures. But users have the great responsibility of finding reliable buyers because crypto transactions are irreversible and there would be no real way to track the buyer if cash isn’t received in the bank account on time.
Metal Pay is an all-in-one money transfer app that allows users to buy, sell, convert, send, and receive cryptocurrencies with ease. As such, it provides an easily accessible way for them to cash out on over 50 different cryptocurrencies, including Bitcoin. Users are required to complete a simple KYC procedure to use the app. Once done, they can sell their crypto holdings and request a bank transfer of the equivalent amount in fiat money.
SafeGram is an emergent DeFi protocol that allows users to send 1:1 holdings of their digital assets as fiat currencies to bank accounts across the globe. This again is one of the easiest and most efficient ways to transition from crypto to fiat. Using this solution, users can make payments with their crypto holdings or simply send their holdings to a bank account that they can later withdraw from.
To carry out the transfer, all users need to do is select the destination country, choose the amount they want to transfer, select the receiver country and select the digital asset of their choice. The platform charges a nominal transaction fee and users can expect the amount to be reflected in their bank account in 1-3 business days.
Apple Cash and Google Pay
Popular payment solutions like Apple Cash (Apple Pay) and Google Pay allow users to add their Coinbase debit card as a mode of payment. This integration allows users to use their crypto holdings to make purchases with millions of supported merchants. Apple Cash is also in the works to allow tap and pay support from crypto payments by the end of 2022.
PayPal is another money transfer app that jumped on the crypto bandwagon recently. It now allows users to buy, sell, and hold cryptocurrencies on the platform. Users can also select crypto as a mode of payment for PayPal. However, there is a caveat. External crypto holdings cannot be transferred onto the platform. Only crypto bought on PayPal can be sold in exchange for a fiat currency of the users’ choice.
Ensuring Seamless Movement
The crypto-fiat solutions mentioned above, place themselves in between these two financial systems and allow users to seamlessly move from one to the other to meet their needs. However, there are risks involved in this ordeal, and users are advised to conduct their own research before choosing a method that suits them best.
If you have innovative blockchain ideas with transformative potential, don’t hesitate to schedule a meeting with us. Our core team is here to help you transform your ideas into reality.