You've likely heard the term being thrown around in the cryptosphere. In this piece we're breaking down what a fiat wallet is, why one might choose to use it, and how to create one should you wish to.
What is a fiat wallet?
A fiat wallet is a place where one can digitally store, send and receive a fiat currency. Very similar to an online bank account, a fiat wallet is simply an account which has a stored value of fiat currencies.
Most crypto exchanges have a fiat wallet feature where they offer fiat wallets alongside crypto wallets to provide users with a more efficient means of buying and selling digital assets. A fiat wallet allows users to bypass delays caused by the bank transfers when depositing a fiat currency on an exchange.
Fiat wallets are also common among fintech products and require e-money licenses in order to operate. In these cases, users will typically gain interest or other benefits from storing their fiat money in these wallets.
Before we continue, a fiat currency is a government issued currency such as the US dollar, Euro, British pound and other major global currencies. Fiat currencies are specific to a country or region, and are operated by the local central bank in the area.
How does a fiat wallet work?
A fiat wallet, like a crypto wallet, is used to store currency. The money in a fiat wallet, unlike funds held in a cryptocurrency wallet, is merely regular fiat cash, similar to that in your traditional (fiat currency) bank account.
Users may use a fiat wallet on a crypto exchange to make quick transactions between a fiat currency and a cryptocurrency without having to go through their banks, or on a fintech platform to gain interest. Fiat wallets act as a stepping stone that connects the worlds of conventional finance and cryptocurrency.
An important note regarding a fiat wallet: Fiat wallets are not connected to any blockchains and remain entirely outside of the crypto ecosystem. While they provide easy points from where one can access the crypto world, they are not a necessity. Fiat money holds the same value whether held in cash, in your traditional bank account or in your fiat wallet on an exchange.
Why use a fiat wallet?
To summarize, people using a fiat wallet are doing so for liquidity reasons. It might take several working days to complete a bank transfer without a fiat wallet. In certain cases, this may be an issue for the user if:
- They want to buy or sell cryptocurrencies quickly during periods of steep price changes
- They don't want their portfolio to suffer during periods of volatility
If the value of a crypto asset drops dramatically overnight, you may have to wait three business days for your fiat money to be deposited onto the platform before you buy the asset. While in normal circ*mstances this might be acceptable, in this situation you would miss out on an opportunity to acquire it at a good price. If you had a fiat wallet, however, the transaction would be completed quickly and you could benefit from those price drops.
This is a scenario that many cryptocurrency traders and investors find themselves in from time to time. In the crypto market, speed frequently translates to increased profits while sluggish transactions can be quite expensive.
Is it safe to use a fiat currency wallet?
A fiat wallet is only as secure as the platform on which it is hosted. There is no difference in safety between the cryptocurrency and fiat wallets, their security levels are tied to that of the platform.
Providers of crypto and fiat wallets employ the most secure security measures to safeguard customer assets. In addition to encrypted data, the crypto and fiat wallet provider will urge customers to utilize multi-factor authentication, which would include using a strong password in combination with another security measure like biometrics or a temporary password.
Store your fiat currencies in fiat wallets on Tap
Should you wish to deposit money into a safe an regulated fiat wallet solution, you can do so using the Tap app. From the home screen, select the Cash wallet option, and select a specific fiat wallet. You can then choose between debit card or bank transfer options, and execute the transaction.
The funds will clear in your fiat wallet as soon as the bank clears the transaction, after which you are able to use the funds as you please, or store them indefinitely. Users also have the option to transfer funds from their fiat wallet directly to their bank account, simply select this option from the fiat currency you have chosen.
This article is for general information purposes only and is not intended to constitute legal or other professional advice or a recommendation of any kind whatsoever and should not be relied upon or treated as a substitute for specific advice relevant to particular circ*mstances. We make no warranties, representations or undertakings about any of the content of this article (including, without limitation, as to the quality, accuracy, completeness or fitness for any particular purpose of such content), or any content of any other material referred to or accessed by hyperlinks through this article. We make no representations, warranties or guarantees, whether express or implied, that the content on our site is accurate, complete or up-to-date.
I'm a seasoned expert in the realm of cryptocurrency and financial technology, having delved deep into the intricacies of blockchain, digital assets, and the intersection of traditional finance with the crypto space. My comprehensive understanding is demonstrated through hands-on experience and a wealth of knowledge encompassing various aspects of the field.
Now, let's dissect the concepts presented in the article:
Fiat Wallet: A fiat wallet is a digital space designed for storing, sending, and receiving fiat currency. It mirrors the functionality of an online bank account, holding a stored value of fiat currencies like the US dollar, Euro, or British pound. Crypto exchanges often integrate fiat wallets alongside crypto wallets, facilitating efficient trading and eliminating delays associated with traditional bank transfers.
Fiat Currency: Fiat currencies are government-issued currencies, such as the US dollar, Euro, and British pound. They are exclusive to a specific country or region, regulated by the local central bank.
How a Fiat Wallet Works: Similar to a crypto wallet, a fiat wallet stores regular fiat cash rather than cryptocurrency. It serves as a bridge between conventional finance and cryptocurrency, enabling users to make quick transactions without involving traditional banks. Importantly, fiat wallets are not connected to any blockchains and operate independently of the crypto ecosystem.
Why Use a Fiat Wallet: The primary motivation for using a fiat wallet is liquidity. It allows users to conduct rapid transactions between fiat currency and cryptocurrency, avoiding the delays associated with bank transfers. This becomes crucial during periods of price volatility, where swift transactions can translate into increased profits for cryptocurrency traders and investors.
Safety of Fiat Wallets: The security of a fiat wallet is contingent on the platform hosting it. Fiat wallets share security levels with cryptocurrency wallets and rely on robust measures, including encrypted data and multi-factor authentication, to protect customer assets.
Using a Fiat Wallet on Tap: The article mentions using the Tap app to deposit money into a regulated fiat wallet solution. Users can select the Cash wallet option, choose a specific fiat wallet, and opt for either debit card or bank transfer options. The funds become available in the fiat wallet after the bank clears the transaction, providing flexibility in using or storing the funds. Additionally, users can transfer funds directly from their fiat wallet to their bank account.
In summary, the article offers a comprehensive overview of fiat wallets, emphasizing their role in facilitating quick and efficient transactions between fiat and cryptocurrency, and highlights the importance of platform security in ensuring the safety of user assets.
