Cashing out crypto can be much more difficult and costly than buying crypto. Wondering how to sell your Bitcoin, ETH and other coins for USD with low fees and how to avoid scams? This article will give you the answers.
There are dozens of exchange platforms and services where you can buy Bitcoin using US dollars or euro, both with a credit card and using a wire transfer or a digital wallet. Often, there is no fee for topping up your balance with a wire transfer. That’s because exchanges want to attract as much liquidity as possible.
Cashing out crypto into fiat is a very different matter. Trading platforms aren’t eager to part with your fiat dollars, so the fees can turn out to be several times higher than for buying crypto. Moreover, you can experience problems with your withdrawal: delays, sudden exchange rate swings, or even a loss of funds if you don’t fill out the form correctly.
Let’s look at the three key ways to cash out crypto, each with its advantages and risks
1. Regular exchangers
Pros: a good selection of payment options, many don’t require know your customer (KYC) compliance.
Cons: a lack of transparency, fraud risks, slow processing, high fees, unfavorable exchange rates.
The popular aggregator Bestchange features dozens of such services. Their main advantage is that they support many payment systems: bank cards, Payeer, AdvCash, PayPal, etc. Exchange rates vary from really good (spreads within 1% of the ‘official’ exchange rate) to, frankly, poor. Those that offer good rates also often have a high minimum transaction size – prepare to cash out at least $500-$1,000.
Many users like the anonymity offered by exchangers: you don’t have to verify your identity when submitting an exchange request. However, this is also their biggest risk. These semi-official services are completely unregulated. They work in the ‘grey zone’ of the law, so there are no guarantees.
Often exchangers send money from personal digital wallets. If you receive a large transaction of this kind, your bank might start asking you questions – together with the tax authorities. And if the money never arrives at all, nobody will help you to get it back.
The time required to process a request is another issue. Exchangers that work during daytime hours may employ just a couple of people, taking a whole day to send you the money.
A lot of exchangers operate out of Russia, where the parliament has recently passed a new digital currency law. Once it comes into effect, exchangers will face the threat of closure as their current business model becomes impracticable.
2. Regulated crypto exchanges
Pros: minimal risks, good exchange rates
Cons: verification (KYC) is required
There still aren’t many crypto trading platforms that allow you to cash out to a credit card or bank account. This is due to the uncertain legal status of digital exchanges: banks and payment processing systems are cautious about working with crypto businesses because of the potential problems with regulators.
Banks make an exception for fully regulated exchanges, such as FREE2EX and Currency.com.
These platforms have all the required licenses and allow users to sell crypto for USD and euro and withdraw money to a credit card or bank account. The standard fee is about 2.5%, and you can withdraw as little as $10 or even $5.
Interestingly, the small Eastern European country of Belarus has emerged as a key hub for regulated fintech companies. Belarus boasts a very advanced crypto legislation: it requires exchanges to maintain high security standards, minimizing the risks of theft and fraud.
To cash out crypto on such platforms, you’ll need to get verified. This is probably the only disadvantage of legal exchanges. On the other hand, the exchange rate is often better than what is offered by unofficial exchangers, because it’s formed as a result of high-volume trading. Besides, trading platforms work with banks directly and can therefore offer lower fees, while exchangers have to use more costly ways to send money. Finally, if you need an official receipt to confirm the transaction, a regulated exchange will readily provide one.
Of course, there are also many US-based regulated services that support crypto-to-fiat conversion, such as Coinbase. However, if you don’t have a bank account in the US or EU, you might not be able to use such platforms.
3. P2P exchange services
Pros: a variety of offers and payment systems
Cons: fraud risk, KYC
P2P platforms act as intermediaries between private buyers and sellers. Anyone can post their offer and choose the payment option that suits them best.
The most famous P2P platform is, of course, LocalBitcoins. As follows from the name, it features only bitcoins, so if you want to cash out ETH, you’ll need to use its sister site, LocalEthereum.
To cash out on LocalBitcoins, you’ll have to complete a verification. The higher the amounts you plan to exchange, the more data you’ll need to provide. On the one hand, KYC should prevent illegal activity on the platform, such as money laundering, financing of terrorism etc. On the other hand, if LocalBitcoins gets hacked, your personal data could fall into criminal hands. Since P2P platforms aren’t regulated or audited, their security standards may not be at the same level as on regulated exchanges.
The platform charges a 1% on each transaction. Plus, sellers often add their own fees when sending money to a credit card or outside of their own region. The total fee can turn out to be higher than on an exchange.
LocalBitcoins provides an escrow service: your counterparty will get the coins only after you confirm that you’ve received the money. However, it doesn’t mean 100% protection against fraud. For example, the buyer can request a chargeback, in which case the bank will not only take back the money from you but possibly also block your account.
Finally, you should consider that you won’t get an official receipt on LocalBitcoins. Therefore, this method of cashing out will work only for private individuals and only for small amounts that won’t raise the suspicion of your bank or the tax authorities. Larger transactions will have to be split in several parts.
Which way of cashing out Bitcoin is better?
It depends on your priorities. If you value security and a good exchange rate (or if you need an official document), then it’s better to spend 15 minutes just once to register on a legal exchange and then enjoy all the benefits that come with it.
By contrast, if your main priority is privacy and you are prepared to accept higher risks and delays, go for a regular exchanger. Consider, though, that with the new crypto laws in Russia the days of unofficial exchangers may be counted. Just a year from now, regulated exchanges may become the only place to cash out bitcoins safely and at a good exchange rate.
George Mordwell
Author, blockchain investor, crypto enthusiast
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