With crypto, sending money is as easy as sending email
Working in crypto, I often find myself forced to use hypotheticals to defend it. For example, when I talk about sending money being as easy as sending an email, I often hear “but I can easily send people money with Venmo.” And it feels both logical and right: I paid for dinner last night and used Venmo to request funds from my friend. We’re all settled, right? Well, sort of.
Imagine that instead of paying with my credit card at the restaurant, I had instead only been able to use a debit card connected to a checking account with a balance of $10. The moment before I pay for the $20 dinner using a debit card, I request $10 from my friend through Venmo. He accepts, the funds hit my Venmo account, and I initiate the transfer to my bank. Trouble is that I won’t have the money in my account for 1–3 days. In this instance, my debit card will be declined for the payment. Upon thinking through this scenario you might think to yourself: that’s interesting, but can’t you just use a credit card so you won’t have to pay the balance off for at least another month? Sure, assuming I have access to credit (which many people don’t).
Let’s look at a more ‘first world problem.’ Say you need to quickly move assets around to take advantage of a time-sensitive investment opportunity? Imagine Bitcoin’s price is rapidly rising you that now is the right time to get in. You want to invest $10,000 immediately, but don’t have that much cash in your bank account. However, you do happen to have $10,000+ in your stock brokerage account and you’re enthusiastic about moving funds from publicly-traded stocks into Bitcoin. But moving your funds turns out to be trickier than it should be.
Let’s imagine that your epiphany for moving funds occurred on Monday morning, so you were able to place a simple market order for $10,000 of your stocks. You go to withdraw or transfer your money to your bank account. Except there’s a settlement issue. While Schwab told you that they executed your trade, it’ll take up to 2–3 days for the cash balance to be available for use in your Schwab account. (NOTE: If this epiphany had occurred Friday evening, however, you’d have to wait over two full days for the market to open on Monday morning.)
So you end up waiting 2–3 days for your funds as Bitcoin’s price fluctuates, and when the money is available to you initiate a transfer to your connected bank account. Except that the funds go through ACH (Automated Clearing House, an archaic system in the US that’s used to transfer money between banks), so it’ll take 1–3 days. Now, if you have the right permissions with your stock brokerage, you may be eligible to pay a $25 fee to wire your money to your bank account, but there’s something silly about paying to move your own money at a speed that you’d probably just expect if you weren’t simply used to the legacy system.
Even once you can see the amount processing into your bank account, it may take an overnight ‘settlement’ period for the funds to actually be available to you to move elsewhere. So you’re looking at a minimum of 3–4 days (and up to a week later) before you have access to your funds to purchase bitcoin.
That’s insane. It’s your money and your property. You could probably sell your furniture and gadgets on craigslist for cash faster than you could get cash from selling your stock, and in an increasingly digital and global world, it feels — and I can’t use this word enough —insane.
Let’s say, however, that you instead had $10,000 of a crypto Stablecoin called USD Coin stored in a hardware wallet (i.e. on a USB in my house) or in some sort of Decentralized Finance tool (like Dharma.io or TokenSets.com). To move those funds into your Coinbase account to purchase bitcoin could take <1 minute and you’d then be able to (almost) instantly convert those funds into bitcoin.
Whatever your view of cryptocurrency, it’s unquestionable that the current financial system makes it too difficult to move your own money around. I’m bullish on crypto being the technology that disrupts the legacy financial system to make it faster, cheaper, and ultimately more accessible to more people.
