I don’t understand how or why any digital currency is converted to bank currency. I thought the entire point of crypto was to operate autonomously from the global banking system. Why are banks paying out so much to crypto valuation?
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>I don’t understand how or why any digital currency is converted to bank currency.
Generally, this is done at a “centralized” or “custodial” exchange (CEX), which works essentially like any brokerage. You open an account on one, and that account consists of various “wallets” for your* crypto, as well as a cash account. You can sell your crypto in exchange for credit in your cash account, and then transfer that cash out however you normally would (usually with an ACH transfer). Many CEX’s also offer debit cards, which you can load with either your cash account or your crypto (or more specifically, you trade in your crypto for its present cash value on the card).
(* – it’s not really “your” crypto since the exchange has custody of these funds)
>I thought the entire point of crypto was to operate autonomously from the global banking system.
If you ask 100 different cryptobros what the “point” of crypto is, you’ll get 100 different answers. Having access to financial infrastructure *outside* of the traditional consumer finance is surely a goal of crypto for most people, and it’s a goal that has already been satisfied to a significant degree.
But the overwhelming majority of cryptobros *don’t* want to live in a world that’s *just* crypto. They need a way to offramp their crypto into more widely usable fiat (and they need the reverse as well). This is perhaps the main function that CEX’s have–to service the flow of capital from traditional financial institutions to the crypto market. They can make this profitable by charging fees and earning interest on deposits.
>Why are banks paying out so much to crypto valuation?
Generally, it’s not the banks who are swapping cash for crypto. That’s done by the CEX’s.
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