USD Wallets vs Crypto Wallets | Hydrogen Blog
USD Wallets vs. Crypto Wallets

USD Wallets vs. Crypto Wallets

If you hold cryptocurrency, you will of course be familiar with the concept of a crypto wallet as the location where you access your funds. But, are you aware of what crypto wallets actually are and how they differ from USD wallets?

Even if you’re familiar with crypto wallets, you may not be aware of fiat pegged stablecoins and how they are stored differently than cash in your USD wallet.

Read on to find out what these two types of wallets are, how they differ from each other, and why they’re so important for cryptocurrency users.

What is a crypto wallet?

A crypto wallet works a bit like a physical wallet for cash, except it is normally virtual, rather than physical. The wallet stores your personal private keys, which you use to access your funds and also to exchange your funds for other commodities or currencies, such as fiat currency, or even a good or service.

There are several different types of crypto wallets, which the user can choose depending on their preference and desired type of holdings. Wallets can be custodial, where a third-party looks after the personal keys for you, or non-custodial, where the user is responsible for keeping their keys secure.

Crypto wallets can also be hot or cold. Hot wallets require an online internet connection to access funds and can be used on demand. Cold wallets do not require an internet connection to be accessed, and typically take at least 24-hours to access. Think of hot wallets like your credit card and cold wallets like cash stored in a bank safety deposit box. Wallets can also be found on software (a mobile application, for example), hardware (a USB or Ledger wallet), or even on paper.

What is a Stablecoin?

One of the financial innovations of the past few years has been the creation of a “stablecoin,” or crypto assets that are backed with a basket of fiat currency (e.g. US Dollars or Euros), that are similar to a money market fund. They are designed to allow crypto holders to have a 1:1 exchange rate between fiat currency and cryptocurrency. Examples of stablecoins include:

  • US Dollar Coin (USDC)
  • Tether (USDT)
  • Binance USD (BUSD)
  • TrueUSD (TUSD)

If you want to store USD stablecoins in a crypto wallet with your other cryptocurrency funds, this is also possible. While some users find benefits in using different wallets for different types of coins, you can also make use of a multi-currency wallet. This allows you to store several different types of cryptocurrency coins in the same wallet with the same keys. 

For example, the US Dollar StableCoin (USDC) created by Coinbase and Circle, is compatible with all Ethereum wallets, as an ERC-20 token. This allows you to store USD stablecoins alongside your other Ethereum tokens. It is worth doing research about different types and providers of wallets if you wish to store your USD Stablecoins in a crypto wallet alongside your other crypto holdings.

What is a Central Bank Digital Currency (CBDC)?

The true way for US Dollars, or other fiat currencies, to be used as native crypto assets would be for central banks or governments to launch their own cryptocurrencies. These are what are called Central Bank Digital Currencies (CBDCs). The U.S. Federal Reserve has made no official indication of plans to launch a CBDC, but there has been much speculation about it.

Countries that have experimented with CBDCs include:

  • Venezuela
  • The Bahamas
  • Iran
  • Ecuador
  • China

What is a USD Wallet?

Your USD wallet simply acts as a secure location for you to store your dollars. This USD wallet works in a similar way to a crypto wallet. You can have a “hot wallet” that could be your old-fashioned leather wallet or purse, or a “cold wallet” that is cash stored in a bank account.

A USD wallet can be used to buy cryptocurrency. Transfers or exchanges between a USD wallet and a cryptocurrency wallet via ACH, debit card, or credit card, are known as “crypto on-ramps.”

What are the differences between USD and Crypto Wallets?

The main difference between a USD wallet and a cryptocurrency wallet is the currency that they hold. Unsurprisingly, a USD wallet holds US dollars, while a cryptocurrency wallet will hold the crypto that you have bought with your USD, whether that be Bitcoin, Ethereum, or others.

Another difference is the changing value of the funds that you store within these wallets. The value of the USD that you hold in a USD wallet will not change in value over time. If you deposit $100 dollars in a USD wallet, you will always have $100 dollars (unless, of course, you deposit or withdraw additional funds). 

Alternatively, the value of cryptocurrency fluctuates against the dollar. This means that if you buy $100 dollars’ worth of Bitcoin, this will increase or decrease within minutes, according to the fluctuating market rate of Bitcoin. This is why stablecoins can provide a benefit. It will let you keep funds within crypto assets, but pegged to the value of fiat currency.

USD wallets can also be used to make purchases at merchants, while crypto wallets are typically not accepted for transactions. Since many retailers will not allow purchases with cryptocurrency, and cryptocurrency is commonly not yet linked to debit cards, USD wallets provide an alternate method for spending. Crypto funds can be converted to USD in real time, and used with a linked credit card for purchases.

Crypto Wallets with Hydrogen

Hydrogen Crypto Wallet

At Hydrogen, our clients have the opportunity to launch a crypto debit card program for customers. This debit card is linked to a secure crypto custody wallet can be used to make purchases with cryptocurrency funds at any US merchant, whether they accept crypto as payment or not!

Get in touch today to find out more about USD and crypto wallets with Hydrogen.

hydrogen

Embedded Finance Made Simple
The Crypto Spend Card is issued by Pathward, N.A., Member FDIC, pursuant to a license from Visa U.S.A. Inc. The Crypto Spend Card may be used everywhere Visa debit cards are accepted.

The Crypto Spend Card is not currently available in Hawaii.

The Select Visa® Card is issued by Pathward, N.A., Member FDIC, pursuant to a license from Visa U.S.A. Inc. The Select Visa® Card may be used everywhere Visa debit cards are accepted.

The Select Prepaid Mastercard® is issued by Pathward, N.A., Member FDIC, pursuant to license by Mastercard International Incorporated. Mastercard® is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated. The Select Prepaid Mastercard® may be used everywhere Debit Mastercard® is accepted.

Cash back and other merchant rewards are not offered or endorsed by Pathward, N.A.

Cryptocurrency custody services and the purchase, sale, or exchange of fiat funds for cryptocurrency are not offered or endorsed by Pathward, N.A. Cryptocurrency transaction and custody services are powered by Zero Hash LLC and Zero Hash Liquidity Services LLC. You must agree to the Zero Hash LLC and Zero Hash Liquidity LLC terms and conditions to enable your Zero Hash account. Cryptocurrency balances are not covered by FDIC or SIPC insurance.

Digital assets are subject to a number of risks, including price volatility. Transacting in digital assets could result in significant losses and may not be suitable for some consumers. Digital asset markets and exchanges are not regulated with the same controls or customer protections available with other forms of financial products and are subject to an evolving regulatory environment. Digital assets do not typically have legal tender status and are not covered by deposit protection insurance. The past performance of a digital asset is not a guide to future performance, nor is it a reliable indicator of future results or performance.
By using this website, you agree to our use of cookies, and you acknowledge that you have read and understand our Privacy Policy and Terms of Use   Continue
Close Menu