People often wonder how they can buy into crypto, but how crypto can be used to buy into different currencies is seldom explored.
To understand the relevance of this question, we’ll first discuss some of the issues around fiat currencies and what opportunities crypto offers. Then, we’ll look into how Bitspark makes trading crypto to fiat possible, and discuss a few reasons why it may be attractive to use crypto to buy into different currencies.
The inefficiencies of fiat
In spite of its everyday utility, fiat currency comes with a range of issues that are increasingly difficult to defend. Here, we’ll discuss two of them briefly.
Inflation vs store-of-value
Whereas the gold standard, at least in theory, provided some degree of protection against inflation, fiat’s decoupling from scarce commodities has made it extra vulnerable. One of the most recent examples comes from Venezuela where earlier this year inflation peaked at 1.7m%. That’s the kind of hyper-inflation that causes people’s life savings to disappear into thin air quite suddenly.
FX markets vs peer-to-peer
Another issue with fiat currency has to do with cross-border money transfers. In an increasingly globalised world, it is absurd how inefficient and expensive it can be to transfer funds overseas.
Whether you’re moving funds via bank transfer, or sending money across via a retail service, the hassle and costs involved in exchanging currencies cannot be explained.
Cryptocurrencies, in part, solve this problem. Not only because they can be sent across borders on a peer-to-peer basis, but also because they operate outside of conventional FX markets.
Stablecoins are bridges between fiat and crypto
Bitspark’s expansive ecosystem is built on the Bitshares blockchain. This enables us to work with crypto-collateralised stablecoins and create our own local currency stablecoins.
Stablecoins are cryptocurrencies pegged to the value of another asset, usually a fiat currency. In contrast to trusted stablecoins, such as Tether or TrueUSD, crypto-collateralised stablecoins do not expose its holders to counter-party risk. Instead, they are backed by Bitshares, held in a smart contract.
Stablecoins form a bridge between crypto and fiat, mostly because it’s usually pretty complex to directly convert Bitcoin to cash for example. It usually involves banks, which charge high fees; OTC services, which likewise operate through expensive payment systems; or you’ll have to find someone to trade with in person like the cash point network available in the Bitspark mobile app.
Currently, we support a range of stablecoins including sparkdex.HKD, sparkdex.GBP, stable.PHP, BitUSD, BitCNY, BitEUR, BitJPY, and BitGold. Ultimately, we intend to create stablecoins for each of the world’s 180+ fiat currencies.
In a nutshell, our cash in cash out network which consists of an easy-to-use mobile app, web platform, decentralised exchange and cash points, enables users to exchange cash for local currency stablecoins.
Once you’ve obtained your stablecoins, you can easily trade into regular cryptocurrencies such as BTC, ETH, or BTS, or against other fiat pegged stablecoins.
This ecosystem is perfect for anyone who wants to use crypto to buy into multiple fiat currencies.
4 reasons for using stablecoins
There are a number of scenarios where it may be wise to use crypto, in the form of stablecoins, to trade into different fiat currencies.
When faced with inflation, recession, or in anticipation of certain macroeconomic crises, it can be wise to park some of your funds in other currencies or commodities. Instead of holding only USD, you could spread your assets across multiple assets, including JPY, gold, and EUR, without having to liquidate or subject yourself to banking fees.
Bitspark’s ecosystem can also serve entrepreneurs who cater to different markets. For example, if you have an e-commerce business that caters to Vietnam and The Philippines, you can enable your customers to pay and instantly settle in their own local currencies. Depending on where you’re based, you can then trade into your desired currency.
Cross-border money transfers
If you want to send money abroad, say from Hong Kong to The Philippines, there is no need to go through a bank, or an MTO like MoneyGram. Simply use the mobile app to buy stable.PHP in exchange for one of your cryptocurrencies or other stablecoins.
You can then send that to an affiliated shop in the Philippines for a recipient to pick up, or directly to the recipient’s app if they have one too. The entire process is faster and cheaper than anything a bank or retail service could provide.
If you hold crypto or one of our stablecoins in your Bitspark account and you’re traveling abroad, for example from Hong Kong to Indonesia, simply trade into our IDR pegged stablecoin to withdraw cash upon arrival. Once again, no FX rates, expensive withdrawal or credit card fees come into play.
These are just some of the use cases where the ability to use crypto to buy into different currencies may be helpful.