Do you want to learn how to withdraw money from DeFi wallet? This guide provides a detailed explanation of how to transfer money from a DeFi wallet to your fiat bank.
Since its inception, Decentralized Finance (DeFi) has been revolutionizing the financial industry, the way we think about and handle money, carry out transactions, and the very concept of our banking institutions.
DeFi allows anyone to interact directly with financial services without the need for intermediaries via the use of DeFi wallets.
However, while DeFi wallets give full control over your money without reliance on intermediaries or banks, they aren’t without challenges.
Most of the time, withdrawing money from a DeFi wallet to a fiat wallet can be confusing, especially for newbies in the DeFi sphere.
To prevent your money from getting stuck, here is a detailed guide on how to withdraw money from DeFi wallet.
Understanding DeFi Wallets
Before delving into the withdrawal process, let’s have a quick understanding of what DeFi wallets are.
As the name suggests, DeFi wallets are decentralized, non-custodial wallets for storing crypto assets. They do not rely on any centralized financial body but offer full control over users’ assets and private keys.
With decentralized finance wallets, you can store and manage several different cryptocurrencies within the DeFi ecosystem. Also, these wallets easily connect to Web3 applications like Uniswap, PancakeSwap, and Crypto.com Onchain.
Lastly, DeFi wallets come in various forms, such as web-based wallets, mobile app wallets, and hardware wallets.
The web-based wallets are accessible via a web browser. They are also convenient and easy to use. However, they are more susceptible to theft and can be riskier if not properly secured.
Mobile wallets are apps and are available on iOS and Android. They offer a mix of convenience and security. Hardware wallets, on the other hand, are physical devices for crypto storage. They offer the highest level of security via cold storage solutions.
Preparing for the Withdrawal from DeFi Wallet to Bank Account
Here are a few things you need to know and check before initiating the withdrawal process.
Whether Metamask, Zengo, or Exodus, you can’t withdraw funds from your DeFi wallet directly to your bank account for now. Hence, you need to first withdraw your crypto funds to a centralized exchange before forwarding them to your bank account.
DeFi wallets generally offer a level of privacy and allow users to transact anonymously. However, centralized exchanges, which act as the bridge, require completing the Know-Your-Customer (KYC) verification process.
Please note that this verification process requires providing some personal information, such as your name, photo ID, and address.
As a result, you will be giving up some level of your privacy during the fund withdrawal process.
Secondly, you need to understand that network fees apply. Being DeFi wallets, Metamask, Zengo, or Exodus do not charge withdrawal fees. Nevertheless, you will be charged network fees when sending crypto assets to another wallet or exchange.
That means you need to factor in the impact of the network fee on the total amount available for withdrawal.
Steps to Convert Crypto to Fiat
At some point in your cryptocurrency journey, you will want to receive your virtual assets in the real world, so you want to know how to withdraw money from DeFi wallet without losing funds.
In this section, we will discuss the step-by-step guide on how to initiate a withdrawal from the DeFi wallet to your bank account.
Step 1: Choose a Reliable and Convenient Crypto Exchange or App
As stated above, you need the services of a centralized crypto platform, which acts as a reliable intermediary service to withdraw money from a DeFi wallet.
If you haven't registered on a centralized crypto exchange or app, make sure you opt for a reliable one. There are many different crypto exchanges or apps available, such as Binance, Coinbase, and Kraken, each tailored to specific activities.
Research the most suitable exchange or app for your bank transfer, and carefully register with your correct details. The exchange/app may or may not support a direct DeFi wallet connection, but it should support the cryptocurrency you want to withdraw.
An ideal exchange should also have a crypto-fiat conversion feature, a spot trade order, or a P2P trading platform. For instance, Binance, Coinbase, and Kraken provide fiat-to-bank account transfers.
Step 2: Initiate the withdrawal process
Foremost, you need to link your DeFi wallet to the crypto exchange. Some exchanges offer secure methods, such as the wallet connect feature, to link your DeFi wallet directly to your exchange account.
After linking the wallet to the exchange, you can then proceed to copy the deposit address of the same cryptocurrency you want to withdraw.
However, if you are concerned about your security and privacy, you may choose not to link your DeFi wallet to an exchange. Instead, log in to your crypto exchange or app and copy the deposit address of the same cryptocurrency you want to withdraw from the DeFi wallet.
Make sure that you choose the right network for the transfer, such as Ethereum, Binance Smart Chain, TON, SOL, and so on.
Go to your DeFi wallet and navigate to the dashboard where the crypto asset you want to withdraw is stored. If you are using a Web3-based wallet to interact with DeFi, such as MyEtherWallet, Trustwallet, or Metamask, you will log in with your private keys.
Find the withdraw option on your DeFi wallet interface and paste the deposit address you copied above.
You must be very careful when entering the withdrawal address to ensure you entered it correctly. Blockchain transactions are immutable. That means they cannot be reversed if sent to the wrong external wallet address.
Step 3: Enter the Amount to Withdraw
Next, specify the amount of cryptocurrency you wish to withdraw. Due to network fees, you may not be able to withdraw all the funds in your DeFi wallets.
Ensure that you have enough crypto to transfer and to cover the network transaction fees arising from the transfer.
Most DeFi wallets often offer a suggested transaction fee. However this can be adjusted, make sure that you set a suitable transaction fee, which usually influences network congestion.
For instance, setting lower transaction fees helps you save money but might result in slower transaction confirmation. Setting higher fees, on the other hand, means faster transaction confirmation.
Step 4: Confirm and Send
After entering the withdrawal amount and the transaction fee, carefully double-check all the details you entered, especially the receiving address.
Also, review the amount to withdraw and the network fees before proceeding to confirm the withdrawal.
Then, confirm the transaction. Confirmation methods may vary on different DeFi platforms. Some involve password confirmation or biometric authentication.
Once confirmed, the transaction will be processed. Transactions typically take a few minutes to a few hours, depending on network congestion. Wait for confirmation from the network or the crypto exchange that the transaction is completed.
You can always track the transaction status with a network scanner using the transaction ID provided by the DeFi platform. This way, you can see if the transaction went through or not.
Some notable network scanners include Etherscan, BTCScan, BSCscan, Blockchain Explorer, and so on.
Once you receive the cryptocurrency in the exchange platform, move on to the next step.
Step 5: Convert to your Selected Fiat Currency
Depending on your chosen exchange, this step may be optional.
Under your exchange account, find the appropriate spot trade order for your newly added crypto to convert it into your preferred fiat currency - USD, EUR, and so on.
Submit a ‘Sell’ order for your crypto. You can either choose a market order for instant selling based on the prevailing market price or limit order for a specific price. Once the order is completed, you should have the fiat currency in your exchange account.
Some exchanges also offer direct crypto-fiat conversion, where you can instantly convert the crypto into its equivalent fiat value.
Step 6: Withdraw to Your Bank Account
The final step involves transferring the converted fiat money into your bank account. All you need to do is navigate to ‘Withdrawal’ or 'Bank Transfer’ on the exchange platform under fiat balances.
Enter your bank account details carefully to avoid transfer errors. Choose the amount you wish to withdraw and confirm the withdrawal. The transfer fund process usually takes one to five business days. Please note that your bank may require additional verification after receiving the funds.
However, if you need your funds urgently and can’t wait for one to five business days, skip steps 5 and 6 for the next step.
Step 7: Try Peer-to-Peer (P2P) Trading
Peer-to-peer (P2P) crypto trading is like a customer-to-customer (C2C) online marketplace for crypto, where transactions are carried out directly between crypto sellers and buyers.
It is swift, and you should receive the cash equivalent almost instantly.
Most notable crypto exchanges like Binance, Kucoin, Bybit, and Remitano offer (P2P) crypto trading features. These exchanges also act as the escrow or arbiter between the buyer and seller to prevent scams and false orders.
Here is a rundown of how to withdraw your funds using this method:
Navigate to the “Sell” section of the P2P platform. Then, look out for a buyer who is willing to buy as much crypto as you want to sell for fiat. Once you find a buyer, place an order. You should be prompted to enter your bank account details where you wish to receive the fund.
Upon placing the order, your crypto will automatically move from your exchange account to an escrow.
Once the buyer confirms sending the money into your bank account, you will be prompted to confirm receiving the same value in your bank account. Check your bank account balance, if you receive the amount, tap on “Received”; otherwise, wait till you receive it.
Please note that crypto transactions on peer-to-peer platforms are irreversible, so you need to be patient, careful, and watchful.
Security Considerations
Here are a few things to consider for the safety and security of your funds:
- Use two-factor authentication (2FA) wherever possible. Doing this adds an extra level of security to both your bank and exchange account.
- Update your wallet software regularly. Having up-to-date software is crucial for security patches.
- Back up your private keys and seed phrases in a secure location. We recommend an offline location.
- Be wary of phishing scams. Always double-check emails and URLs from crypto exchanges to avoid malicious and phishing traps.
Understanding Tax Implications
Note that in some regions, returns on crypto transactions may be subject to tax, such as capital gains tax. Hence, research and understand the tax implications of your jurisdiction.
Conclusion
Understanding how to withdraw money from DeFi wallet is essential knowledge. It helps you to use your virtual assets in the real world.
I hope this post has helped you better understand how to withdraw money from DeFi wallet to your bank account. Don’t forget to always practice informed and safe crypto withdrawal methods to ensure smooth transactions and protect your funds.