The blockchain is a self-centered environment. It operates under internal rules and doesn’t support assets other than its native currency. For example, If you want to exchange your bitcoins for my Ethereum, you’ll need to send them to my Bitcoin wallet, and I’ll have to do the same with my Ethereum so that the coins remain on their respective blockchains.
However, traders usually go through this process using cryptocurrency exchanges, which serve as an intermediary between the buyer and the seller. Mainstream exchanges operate in a centralized setup and play the role of converters. This allows users to easily trade their crypto against other digital assets or fiat currencies like USD, CAD, EUR, GBP, etc.
In this article, I’ll show you how this process runs and what it takes to convert your crypto funds into your local currency and then transfer the money from your blockchain wallet to your bank account. Before that, I’ll cover a few basic concepts that you need to understand in the process.
What Is a Blockchain Wallet?
Blockchain or crypto wallets are software programs (or hardware devices containing a software program) used for storing and transferring Bitcoin (BTC) and all other types of crypto assets, including altcoins like Ethereum (ETH), Litecoin (LTC), and Cardano (ADA), the never-ending range of DeFi tokens, and stablecoins.
Having a blockchain wallet isn’t optional. It’s the only way to establish contact with the blockchain — a decentralized and immutable database that doesn’t require a centralized establishment to control the information flow.
Blockchain wallets generate a set of two long, random strings — a public and private key. The public key is compressed into a simpler string and serves as an address for other users to find the recipient. The private key is your password and the only proof of your crypto ownership. Technically, your private key is your crypto. That’s because cryptocurrencies don’t exist in a physical or digital form but stay as a record on the blockchain.
As an essential part of your crypto start pack, blockchain wallets can appear in various forms — web platforms, browser extensions, mobile apps, desktop apps, hardware devices, and printed paper. Ultimately, how they store your private keys is what makes the main difference.
Web platforms usually keep the keys on their servers; software apps let you keep your private keys on your device, while hardware wallets store the keys within the wallet device. The term blockchain wallet covers all types of digital wallets that deal with crypto assets. One of the most famous crypto wallets is also called the Blockchain Wallet (blockchain.com), so don’t get confused.
How Do Crypto Exchanges Work?
The examples above refer to non-custodial storage solutions, as they allow you full control over your private keys. However, the largest marketplace for buying, selling, or otherwise converting crypto is centralized crypto exchanges CEX). Most exchanges of this calibre offer storage space for your newly-purchased coins as part of your account.
Let’s move a step back and discuss these centralized entities in more general terms. We use the name crypto exchange for all virtual platforms that provide buy-and-sell crypto services. However, they can differ on a fundamental level, so I’ll take CEXs as an example to explain the operational pattern for bank account transfers. As I said at the beginning, centralized crypto exchanges serve as third-party intermediaries in the trading process. They’re user-friendly, time-efficient, and offer decent customer support at any stage of your stay on their platforms.
Another common feature of all centralized exchanges is their regulated status. In the early Bitcoin era, these platforms managed to get unnoticed by law enforcement, and as such, they were greatly misused on the black market. In this landscape, the blockchain didn’t enjoy a high reputation.
However, now that crypto exchanges comply with all locally-applicable AML/CFT norms, this perception isn’t valid anymore, but the storage concerns are still present. Let’s see why.
How Do Crypto Exchanges Store Your Crypto?
Modern crypto exchanges deliver a full package when you create an account on their platforms. This includes tools for portfolio management, trading panels, and storage space. For example, if you buy a piece of Bitcoin for 200 U.S Dollars on a particular exchange, it will automatically accommodate these funds in a Bitcoin wallet that falls under your account. While this sounds super convenient, giving your private keys to an exchange is a bit dubious for security reasons.
Custodial Blockchain Wallets
As we mentioned above, crypto exchanges offer custodial blockchain wallets. In these cases, it’s the exchange that creates your crypto wallet, and hence, it’s the exchange that gets the keys. For sure, you can monitor, manage, and transfer your crypto holdings by accessing your exchange account with a regular username and password, but you can never get to see what this “string” looks like.
Now, what’s wrong with this approach? Hypothetically, if the exchange pronounces bankruptcy or gets hacked, you won’t be able to access your coins with your username and password. Your exchange account and your private keys aren’t synchronized in any respect. Instead, you’ve put trust in the exchange to take care of your keys and relied on its security measures.
I must admit that today crypto trading platforms employ robust security standards, and as I already said, they fully comply with the existing AML/CFT norms. Despite all this, custodial wallets aren’t the best-recommended solution in the long haul, especially not if you own a large amount of crypto.
At the same time, crypto exchanges are the most secure method for crypto-to-fiat transactions. They’ve got built-in mechanisms to transfer your cash to your bank account in a regulated manner. Certainly, to get the cash, you’ll first have to sell your crypto on the platform.
Depending on the type of the exchange, you’ll either look for a CAD-containing trading pair on its order book or sell your crypto to the exchange itself. And if you keep your crypto funds outside the exchange, you’ll need to transfer them from your external wallet first.
Now, let’s take a closer look at the journey of your crypto funds from the exchange to your bank account.
Factors to Consider
I implied a few times throughout this article that the blockchain doesn’t have a built-in mechanism to convert your virtual currencies into fiat money, but crypto exchanges do. Cashing out your crypto consists of two stages:
- Selling the crypto in exchange for fiat
- Withdraw the fiat from your exchange account to your account.
Before I start with the step-by-step guide, I’d like to point out a few important factors to consider before engaging in this process.
First of all, half the work is done once you land on a trustworthy crypto exchange. There are over 400 different digital currency exchanges on the global market, and it’s impossible to find the perfect one. Still, when it comes to fiat transfers, I’ve got a set of criteria that makes a reliable exchange.
Regulation and Security
I already mentioned that crypto exchanges nowadays are a regulated trading zone. Canada is one of the most proactive countries when it comes to the integration of crypto-related norms. All exchanges operable in Canada have to be FINTRAC-registered Money Service Businesses, and all new users need to complete KYC verification, following the local AML/CFT regulations. If your endeavor on the crypto scene involves fiat, compiling with these norms is a must.
Some may say these requirements work opposite the core blockchain principles, which is quite a legit argument. However, blockchain-based products can’t enter the general public without regulative norms. The short but eventful Bitcoin history has already proved that. After all, how else would you leave thousands of dollars worth of assets on a virtual platform?
Payment Options
Deposits and withdrawals are key components of the performance of any exchange. In this article, our focus is on withdrawals. It’s very important to know what withdrawal methods your exchange supports and how much it charges for this service.
I always recommend a home-based crypto exchange for cashing out crypto. First, you’ll be sure that it offers payment methods familiar to your payment style. In addition, with a local exchange, there will be, for sure, no need for extra conversion, which incurs a high commission.
In Canada, the most popular withdrawal options are regular wire bank transfers. Interac eTransfer is also a widely-used method for cashing out your crypto in CAD. International crypto exchanges (like Binance, Coinbase, and Kraken, for example) that allow Canadian users to withdraw their fiat funds usually use ACH, SEPA, or SWIFT transfers.
Credit and debit cards are becoming an in-demand payment method for fiat interaction on all-level crypto exchanges because of the short processing times. However, they’re more popular with deposits and instant purchases rather than withdrawals.
Finally, a word on PayPal. This globally recognized provider hasn’t been well incorporated into the sphere of Bitcoin transactions so far, despite its great potential.
Fees and Limits
When it comes to withdrawal fees, they’re closely associated with the payment option, but the crypto exchange plays the main role in setting the withdrawal policy. Fiat withdrawals are rarely free, but it isn’t impossible to come across a Canadian crypto exchange with 0% withdrawal fees.
Finally, be careful about the limits. Sometimes the exchange has strictly defined daily limits, but sometimes, you may need to go through a higher level of verification to qualify for higher withdrawal limits.
Ease of Use
Transferring fiat from a crypto exchange can be a hassle-free experience if the exchange provides sleek navigation through its platform. Even if you lack crypto-trading experience, the exchange should give you on-site instructions so that you execute the transaction with comfort.
Processing Times
The majority of user reviews and complaints go to the withdrawal time. Sometimes, it’s up to the payment method. For instance, Interac e-Transfers are much faster than wire transfers, which can take days or even a week to get your CAD delivered to your bank account.
Also, crypto exchanges today utilize the multisig approach, which can delay the withdrawal process. Namely, to ensure a clear record, your crypto exchange executes the withdrawal request only after multiple staff members sign the request personally.
The worst-case scenario is if the exchange delays the transfer because of low liquidity. This is one of the main reasons why choosing the right exchange matters.
How to Transfer Money From Bitbuy to Your Bank Account
Considering all these factors, I recommend Bitbuy as the best withdrawal option for Canadian traders. The exchange does charge for fiat withdrawals (1% and 1.5% for wire transfers and Interac eTransfer, respectively), but all types of fees compared (deposit fees, trading fees, transaction fees, and low spreads), Bitbuy offers rather an attractive deal.
The exchange is highly regulated and provides reliable customer support and exceptionally comfortable navigation. That’s why I’ll take Bitbuy as an example to explain both phases of the process. So, let’s start with phase 1 — sell your crypto. I’ll go with Bitcoin as the most prevalent digital asset.
Sell Your Bitcoin on Bitbuy
Before you can start using Bitbuy services, you need to open a Bitbuy account and verify your account. The good thing is that Bitbuy has a built-in option for Instant and Automated verification. For you, this means you don’t need to upload photos and documents of government-issued documents and utility bills. However, if you don’t qualify for fast verification, you’ll need to go through the process manually.
Bitbuy offers two separate platforms for trading crypto — Express Trade and Pro Trade. The express mode is more beginner-friendly, so I’ll use it as an option to sell my cryptos instantly.
- If you keep your Bitcoin on a third-party wallet, transfer it to your Bitbuy account. Crypto deposits are free on Bitbuy. Once you make sure you have the desired amount on BTC, go to Express Trade at the top of the page. You’ll see a red Sell button.
- Select Bitcoin. You don’t need to scroll through the dropdown list. Bitcoin is always the default option.
- Insert the amount you want to sell, and the exchange will show a full transaction summary with calculated fees.
- Tap Sell to finish the process and wait for your dollars to get delivered to your fiat account.
Send CAD From Bitbuy to Your Bank Account
- Head to the Accounts section from your dashboard and select CAD.
- Next to the CAD option, you’ll notice a Withdraw button. Before initiating the process, make sure that you have at least $50 in your CAD account.
- Choose a withdrawal payment method, insert the withdrawal amount, and find your bank on the given list. Then, tap Next and insert the 2FA (two-factor authentication) code to finish the request. If you don’t find your bank in the supported institutions, immediately call the support center for direct assistance.
- If your withdrawal request is successful, you’ll have your money in your bank account almost instantaneously, while wire transfers may take up to 3 business days.
A Few Words Before You Go…
Cryptocurrencies weren’t envisioned to interact with traditional assets but build an alternate financial system instead. That’s why you’ll never be able to send your bitcoins from the blockchain to your bank account with direct conversion. However, you can easily cash out them with the help of a trustworthy intermediate.
In this article, I showed you the most straightforward path — using a centralized crypto exchange. Apart from popular centralized exchanges, cashing out is possible through a few alternate channels. For example, you can use a P2P exchange and make a direct transaction with the potential buyer. The downside of this approach is the level of uncertainty, even though P2P marketplaces are protected by an escrow service. Also, you can rely on a Bitcoin ATM for immediate service, but these convenient kiosks don’t support all types of coins, and more importantly, they charge astonishingly high commissions.
So, I’ll stick with Bitcoin exchanges. They’re regulated, secure, easy to use, and affordable virtual venues. Centralized exchanges have grown into a new-wave fintech field, bringing crypto into our investment portfolios faster than anyone could expect.