Can crypto really replace your bank account?

If you’re a big enough fan of crypto, you’ve probably heard the phrase “be your own bank” or the term “bankless” — the idea being that crypto can offer more control over your financial future than traditional finance. But how much of your financial life really can be accomplished via crypto?

The answer? A lot! As the cryptoeconomy has grown and evolved, a wide array of DeFi protocols, fintech firms, and crypto-first companies like Coinbase are forming a cryptocurrency infrastructure that can serve as an increasingly viable alternative to the traditional financial system. And with traditional banks offering near-zero interest rates, crypto offers a compelling alternative. 

From crypto direct deposits and debit cards to decentralized saving/lending and cross-border payments, the cryptoeconomy is rapidly challenging many of the core ideas around what money is and how it can be put to work. Here are some of the ways you can get involved:

An increasing number of cryptocurrency and fintech companies — from Square to Paypal to Coinbase — are enabling the ability to direct deposit funds onto their platforms, making it easier to convert or directly receive traditional payments in crypto. Coinbase has begun rolling out the ability to receive direct deposits into your account — creating the possibility of more seamless crypto trades, spending via Coinbase Card (a Visa debit card tied to your account), earning crypto rewards, and more. You can choose to have your checks deposited in either crypto or US dollars — and can deposit as much or as little of your paycheck as you want. All for zero fees.

Some traditional banks are even beginning to integrate crypto directly into user accounts. In September 2021, with the help of Coinbase, Vast Bank became the “first federally chartered bank in the U.S. to offer the ability to buy, sell, and custody cryptocurrencies - directly from a checking account - all under one roof.”

Once you have some crypto, you’ll probably find yourself asking the next question : how do you spend it?

Visa has made significant progress  “connecting crypto and blockchain networks to its trusted, global payment network.” Visa currently has over 50 crypto wallet partners that can connect to over 70 million merchants worldwide. In the first half of 2021, Visa reported that it had processed over $1 billion worth of cryptocurrency payments. 

Mastercard is also embracing crypto. In July 2021, Bloomberg reported that Mastercard is looking to make it easier for consumers to buy, spend, and hold cryptocurrencies. And merchants on its network will soon be able to accept crypto.  

Coinbase customers can sign up for Coinbase Card — a debit card that allows Coinbase customers to seamlessly spend crypto held in their account at any merchant in Visa’s vast global network, while earning rewards for each purchase. Paired with Coinbase’s direct deposit feature, the Coinbase Card is a significant step toward a self-sustaining cryptoeconomy.

One potential downside of staking rewards is that they’re paid in the native cryptocurrency, which can be volatile. But you can earn dollar-denominated rewards simply by buying and holding stablecoins like Dai and USD Coin (USDC).

As of November 2021, you can earn 2.00% APY rewards by simply holding Dai in your Coinbase account or .15% APY for holding USD Coin.

Near-zero interest via traditional savings accounts mean that inflation drives down the value of your money over time. If you’re looking for higher yield — and are willing to accept the higher risks that come with new financial tech — DeFi protocols may offer a viable alternative. 

DeFi protocols use smart contracts to enable transparent, peer-to-peer lending for potentially higher yields than traditional financial offerings. In this scenario you supply crypto assets into a liquidity pool, and earn yield from your crypto being borrowed by other users. As of September 2021, DeFi users could potentially earn yields up to 11% by lending stablecoins such as USDC on popular protocols like Aave and Compound. (You can also lend and borrow a wide range of cryptocurrencies including wrapped Bitcoin and ETH. DeFi is not without risk, so make sure to research any protocols you’re trusting with your crypto.)

In order to access DeFi apps, you will need a self-custody cryptocurrency wallet such as Coinbase Wallet or Metamask. These crypto wallets aren’t just places to hold assets. They also let you send and receive crypto — and, more importantly, they allow you to discover and interact with a huge array of crypto apps, from games to NFT markets to DeFi.

Looking for a line of credit that doesn’t require you to navigate DeFi apps? Residents of many U.S. states can also borrow up to $1 million from Coinbase using your BTC as collateral — no credit check required.

One of the most innovative features of cryptocurrency is that it’s truly borderless. In September 2021, El Salvador made history by becoming the first country in the world to make Bitcoin legal tender, likely driven by a desire to reduce costly remittance payments — or payments sent home from family and friends living abroad. The nation’s official Bitcoin app Chivo had processed over $3 million worth of remittances on October 15th alone. For residents of developing economies – and their family and friends living abroad — the ability to send cross-border payments near-instantly and cheaply is transformative. Imagine if anyone with a smartphone could connect to a global monetary system and decentralized services for borrowing and lending?

In many developing countries, traditional remittance payment processors can be exorbitantly expensive, and cryptocurrency is an increasingly popular solution. As crypto research provider Chainalysis estimates, developing nations including Vietnam, India, and Pakistan are leading the world in crypto adoption.

In October, Facebook — now Meta — announced that it is partnering with Coinbase and Paxos for a new digital payments initiative called Novi. Novi’s initial pilot will enable users to transfer crypto between the U.S. and Guatemala instantly, securely, and with no fees.

Two paths are emerging. Crypto will likely become increasingly integrated with traditional payment channels and banking infrastructure. And decentralized protocols will become more and more viable as alternatives.