Just like you can exchange currency such as USD to a local currency at an exchange counter in the bank, you can exchange your local currency to bitcoins and other cryptocurrencies using bitcoin exchanges.
Most bitcoin exchanges are websites. This being said, in the fall of 2017 several bitcoin exchanges, including one in Mexico and one in South Korea, have announced plans to open brick-and-mortar exchanges where visitors will be able to buy, sell and exchange cryptocurrencies using cash and bank transfers.
The laws that regulate cryptocurrency exchanges change all the time and depend on a country, which is why there is no one bitcoin exchange that is available in every country in the world.
Regular banks usually have different offers and rules for different accounts. A checking account at your local credit union is most likely free. If you would like an account with a large bank, you may need to pay a monthly fee, keep a certain amount of money in your account or have direct deposits coming into the account in order for the bank to service the account for free.
Just like regular banks, different bitcoin exchanges have different rules and offers. Some exchanges will pay you a little less than the market rate when you want to sell your bitcoins and ask a slightly higher price when you want to buy coins. Others will allow you to sell and buy cryptocurrencies at the exact market value but will take a small percentage, usually between 0.05% and 0.5%, as a commission.
Bitcoin and other cryptocurrencies are all about direct transactions and empowering buyers and sellers. At the same time, people who want to buy coins and people who want to sell them need a way to connect and cryptocurrency exchanges do provide users with such a way.
Most cryptocurrency exchanges use a trading engine similar to the one that foreign currency exchanges use. The engine matches buyers and sellers and adjust prices based on demand.
A very important fact about bitcoin exchanges is that they not only allow you to exchange your local currency to bitcoins and back but they also allow you to exchange bitcoins into other fiat currencies that are not necessarily your local currency. For example, if you like in the United States, you can use a bitcoin exchange to buy some British pounds or euros.
It is possible that the bank you use for the operations with your local currency doesn’t support accounts in other currencies. If this is the case and you try to withdraw funds in some other currency to your regular bank account, the bank will most likely convert the funds into the local currency and you will see a deposit in local currency in your bank account. The rate that most banks use is typically not in your favor, which is why you want to do your research about the types of transfers that are available before you try and send funds in a different currency into your bank account.
Most countries view cryptocurrency exchanges as currency exchanges and regulate them in a way that is similar to the way in which they regulate regular currency exchanges. Because of this, a bitcoin exchange in your country may need to comply with a legal requirement to obtain some of your personal information. This information may include your full name, address, phone number, date of birth, and more.
The procedure that most bitcoin exchanges in the world use to register new clients is known as “Know-Your-Customer” or KYC. The name of the procedure sounds much scarier than what the procedure really is. It is the same procedure that you are likely to go through when you obtain an online account with a regular bank or a store card with a merchant.
During the first step, you would usually verify your phone number by receiving a text message to it and then entering the message on the website of a bitcoin exchange. Next, you will need to provide some personal identification such as the number, expiration date and the state where you obtained your driver license. Some bitcoin exchanges may require that you upload a scan of your id to the website. Typically, the larger the amount of bitcoins that you want to buy and trade, the stricter the verification process.
Also, a bitcoin exchange may ask you to wait for a few days before it activates your account so that it could verify all your paperwork. Big exchanges are usually able to verify the documents within a few hours. Smaller ones may take up to 5-7 business days.
Whenever you submit documents to a bitcoin exchange, make sure that all the information is clearly legible and easy to read so that you don’t experience any delays during the verification process.