Differences Between Regular and Crypto Banks

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With cryptocurrency becoming more accessible and people wanting to use it more often, the financial world has had to shift to meet the trend head-on. One of the ways this has been done is through the creation of decentralized finance systems that use crypto for regular banking transactions. Keep reading to learn about key differences between regular and crypto banks.

Getting a Loan

Usually, when you go to a bank to get a loan, you find yourself needing to meet many requirements and go through credit checks. Depending on everything that is required and what answers your bank is looking for, you may not be qualified for a loan. However, with crypto banks, you usually do not need to worry about that. Because digital assets are used in crypto banks instead of physical assets, there is usually no need for a credit check and you will be more likely to get a loan. Not needing tangible objects to put up as collateral brings a significant change to the game.

Deposits and Taking Risks

Depositing money in the bank is second nature. Regular and crypto banks both allow for this so you can add money to your bank account whenever you want. The difference comes in what can happen with the money that you deposit. Regular banks have smaller interest rates for qualifying accounts, whereas crypto banks have unusually high interest rates compared to their counterparts, and there is a reason for that. Unlike regular banks, crypto banks are not required to have reserves, so when they loan out their customers’ money, the customers are rewarded more for the risk in the form of those insane interest rates.

Sometimes banks take risks that do not pan out, and as a result, a ton of money could be lost. Regular banks have the FDIC to protect them, so customers have a guaranteed amount that they can get from the bank after a disaster. Crypto banks do not have the same protections, so if you put your money into a crypto bank and the bank loses all of it, there is a good chance that you will not see a cent of it.

What to Follow

If you are keen on investing money in the stock exchange, a regular bank is the way to go. Regular banks use portfolios that follow the trends of physical stocks on Wall Street. However, if you would rather go to a crypto bank, you might want to follow something like the OKX crypto exchange in addition to the typical stock market. This will give you the ability to keep track of what your crypto is worth in real time and know when to bow out before everything crashes.

Crypto banks are wonderful for people who do not care for regular banks. Keep this article in mind as you decide which bank is best for you, and be sure to do additional research. Having all of your questions answered ahead of time will prepare you to have a better experience.