by Jake Wengroff
A wallet is a physical or virtual way to store money. In the world of cryptocurrency, a wallet can be online or mobile — known as a “hot” wallet — or it can be physical and offline, known as a “cold” wallet.
These digital wallets most commonly store crypto assets, but they can also serve as fiat wallets — which hold a digital representation of physical fiat currency deposited to it. Fiat currencies are currencies issued by and backed by the “full faith and credit” of the central bank of a government — or the currencies that people have used every day around the world for centuries. Examples of fiat currencies include the U.S. dollar, the British pound, the euro, and the Japanese yen.
How to Use a Fiat Wallet
Based on this simple explanation, any online bank account would be considered a fiat wallet, since the value of the account is stored in fiat currency. However, crypto wallets like Coinbase and Bitpanda offer the opportunity for customers to deposit money in their accounts in fiat currency and store it there, so that it can be available in the event that customers want to purchase cryptocurrency.
To use a fiat wallet, the customer simply connects the crypto wallet to a bank account and initiates a transfer of fiat currency to the crypto wallet. Customers can normally do this at any moment, but there may be a few days’ processing time before the funds clear.
Crypto wallet companies generally encourage customers to deposit and store fiat currency in their crypto wallets, in order to have funds available to take advantage of any market opportunities without first having to transfer funds into the account. In this way investing, exchanging, and trading money for cryptocurrencies becomes easier and faster.
Another way for customers to push fiat money into the fiat wallet is to sell cryptocurrencies and receive payment via the fiat currency of the customer’s choice.
Are Fiat Wallets Safe?
Fiat wallets are only as safe as the platform that they are hosted on. The fiat “portion” of the wallet is not necessarily safer or weaker than that of the cryptocurrency side.
To protect customer assets, providers of crypto and fiat wallets use the strongest security protocols possible. In addition to encrypted data, the wallet provider will suggest that customers use multi-factor authentication, which would include the use of a strong password in addition to another security modality, such as a temporary password or biometrics.
Added Security for Your Crypto and Crypto Transactions
No fiat or crypto wallet is 100% safe, as cybercriminals have increased the scale and sophistication of their attacks.
For added protection in the event of a breach, crypto asset owners would benefit from having title to their assets. TransitNet is creating the industry’s first third-party title registry, to add a layer of protection for cryptocurrency assets by providing proof of ownership. With a title in place, investors can feel safer that additional security measures exist to protect them in the event of theft, misuse, or compromise.
Join the forefront of the new crypto infrastructure. Request an exclusive invitation to TransitNet’s title registry when it launches today.
Jake Wengroff writes about technology and financial services. A former technology reporter for CBS Radio, Jake covers such topics as security, mobility, e-commerce and the Internet of Things.