Cryptocurrency On-Ramps and Off-Ramps, Explained

What are cryptocurrency on-ramps?

A cryptocurrency on-ramp refers to an exchange or similar service where you can offer fiat money in return for cryptocurrency.

For anyone to become involved in cryptocurrency, their first step will often be to simply buy some. This will require the trade of fiat money for digital assets, and any service that provides this is known as an “on-ramp” into cryptocurrency. On-ramps are a way for new users and new money to enter into this space, but not all of them act in the same way.

For example, one of the most common places for new users to get their first coin is an exchange. Not all exchanges allow direct fiat purchases, but many of the bigger names will, and more are integrating this feature all the time. In addition to regular exchanges, there are also over-the-counter, or OTC, markets. This is where users trade with each other directly at agreed-upon prices that may not match the exchange rate exactly. There are multiple platforms that can offer this, but the OTC realm is more for large purchases or sales and is more commonly used by institutional buyers. Both exchanges and OTC services often have APIs that can be integrated into other applications, which can then make trading across multiple markets easier for advanced users.

One last common on-ramp is cryptocurrency ATMs, where users can literally deposit cash and receive digital assets in return. Of course, these aren’t available in all cities yet, and there are usually limited assets being offered, so going this route may or may not be a hassle.

What are off-ramps?

Cryptocurrency off-ramps act as just the opposite of on-ramps. They are a way to convert your cryptocurrency into fiat, or possibly products and services.

Just as a user needs to pay with fiat in order to buy in, they also need options to get out of cryptocurrency. This means either trading it back into fiat, as that is still the primary payment means in most parts of the world, or using their cryptocurrency to purchase goods or services. While being able to make purchases with digital assets is, in many people’s minds, the ultimate goal, most users are still looking for a way to simply move their value back into traditional currencies.

Most, while not all, exchanges and ATMs that act as on-ramps can also be used as off-ramps. Exchanges may have limits on how much can be moved off-platform in a given day, week or month, so it is important to check your account details if using this method. On the other hand, OTC trading always goes both ways and is designed for large transactions, but as mentioned, it may or may not be realistic for smaller investors. If users are looking to use their cryptocurrency to purchase, there are a growing number of options available. Certain businesses are beginning to accept it, for example, but this is still somewhat rare. A more practical solution could be using a service that allows you to use digital assets to fund payment cards, but be aware that there could be high fees attached to doing so, depending on the company.

Why are these important for the cryptocurrency industry?

On-ramps and off-ramps are essential for bringing new users and new money into the cryptocurrency market. They also are key to bridging the gap with the traditional financial world.

Being able to simply go to an exchange and buy Bitcoin (BTC), or other assets, with a debit or credit card makes the world of cryptocurrency accessible to anyone who generally understands online purchasing. In the same way, being able to fairly easily turn cryptocurrency back into fiat also makes dabbling in crypto more attractive to new users, as they know they can get out if they want. Having this type of flexibility takes away some of the mystery surrounding digital assets, making them seem more like any tradable commodity.

On a larger level, having access to OTC markets and the like also means that bigger institutions can have the same confidence in their ability to buy and sell cryptocurrency with sufficient liquidity. For large amounts of money to begin flowing into the digital asset space, these avenues are a must, as exchanges сould struggle with the size of institutional purchases and the effect a single order could have on market prices is considerable.

Many feel that offering even more ways for value to move between traditional finance and the digital frontier is imperative if the world is to begin making the transition to a new monetary system. Fortunately, recent developments have seen services such as payment processor Simplex partnering with MakerDAO to allow direct purchases of the stablecoin Dai, and MyEtherWallet integrating Apple Pay into its mobile wallet. Services like these give new on-ramp options to users who want to get involved and make the leap from traditional finance into the decentralized realm.

Are they currently being regulated?

While the laws are still being sorted out in many jurisdictions, quite a few of the platforms that offer these services employ some form of Know Your Customer verification for new users.

Generally speaking, regulation of on-ramps and off-ramps is still a work in progress. That being said, more specific rules and suggestions are being rolled out all the time, such as the recent cryptocurrency directives announced by the Financial Action Task Force. To this end, most providers are trying to stay ahead by implementing fairly comprehensive Know Your Customer and Anti-Money Laundering policies. These will usually include providing some basic personal information as well as some form of identity documentation. On many platforms, especially exchanges, this will be the bare minimum needed before you can make fiat purchases or move actual cash off of the platform.

It should be noted that some exchanges, as well as many OTC markets, do not require this. It will depend on which service you are working with, but all should be very transparent about what is required. While cryptocurrency purists often prefer true anonymity, others find security in knowing their platform is actively working against criminal activity. Also know that while crypto ATMs traditionally have been completely anonymous, this is beginning to change as well, with more requiring ID verification before purchases can be made.

What are some of the biggest providers offering these services?

There’s no shortage of options for on-ramps and off-ramps, including some of the most well known names in the industry.

Starting with custodial exchanges, big-name companies such as Coinbase and Binance all offer purchases of cryptocurrency with a debit card, as well as a variety of options for moving fiat off-exchange. This can be ideal for those looking to get their hands on some assets to trade. However, there will generally be a commission paid when the client eventually does want to withdraw their assets. While this can be ideal for professional traders and larger players like institutions, it is less so for smaller traders or those who just want to hold. Instant exchanges such as Changelly fit their needs more effectively, as they generally provide a seamless exchange with a minimum number of steps: Users can simply choose a pair, get verified and receive coins directly to their personal wallets.

Additionally, there are many exchanges, including those just mentioned, that also offer OTC trading desks as well. Other companies such as Genesis and B2C2 offer strictly OTC experiences for their clients, and these are sometimes more attractive to institutions. As mentioned, cryptocurrency ATMs can be trickier to track down, but there are tools available that allow you to see if there are any in your area, and they can even sort by what types of assets are being offered.

Let’s say you would like to use your coins as payment; well, you certainly have a few options. As mentioned, some companies such as Overstock, Shopify and Expedia already do take Bitcoin directly. If you want to be more versatile, you should look toward cryptocurrency-funded debit cards. Companies such as TenX and Crypto.com offer fairly popular options that can be used just like any payment card but are linked to a cryptocurrency wallet instead of a bank account.

Different users will have different needs when deciding how to move money between traditional financial services and decentralized ones. Knowing what is available is important so that these choices can be made for an optimal experience. Providing many different roads is arguably the key to bringing wider adoption into the cryptocurrency realm, and with a combination of existing and developing means, hopefully soon nobody will be left out.