How to Cash Out Your ICO Proceeds


June 7, 2018

How to Cash Out Your ICO Proceeds

Converting cryptocurrencies to fiat money or local currencies is not an easy task. It is always accompanied by extra fees, risks that the transaction doesn’t go through, or if the bank suddenly reconsiders its policy towards cryptocurrency.

Turning funds you managed to raise during the ICO campaign into fiat currency is a critical issue for many startups. Before you can use all Bitcoins, Ether or any other tokens you received from early investors, you must convert them to your local currency so that you could start growing your project. You need to pay rent, salaries and travel expenses, buy equipment and pay for marketing services. All this has to be done via your old-fashioned bank account. While some digital marketers can accept a portion of their fees in cryptocurrencies, especially if they are involved in the project as advisors, you will be paying for all business expenses with fiat currency, either in cash or via wire transfer.

And even if you impress your local adviser about the success of your fundraising campaign, most banks will make it extremely difficult for you to cash out large amounts of cryptocurrencies, even if you then are going to deposit them into your bank account.

Why Is It Difficult To Cash Out Cryptocurrency

While major financial corporations are playing with blockchain and even implementing it in their business processes, when it comes to handling large amounts of money banks are becoming very cautious. While some banks became early adopters of cryptocurrencies, the vast majority of banks worldwide will not open an account for the cryptocurrency-related company. But even if you are lucky to find a bank that thinks ahead of time or simply overlooks the nature of your business, the number of documents to be the file is staggering.

This is not because bankers are so old-fashioned or they are afraid of progress brought upon by cryptocurrencies. The problem is in the lack of legislation designed to deal with the decentralized nature of crypto cash. This means that banks are applying the same policies as they do when they deal with traditional investment. The bank needs to know if your ICO is not a cover-up for an international money laundering scheme, that the money invested didn’t come from drug or weapon trading, and that you have done your due diligence when accepting contributions, no matter how big or small they were.

Even if you assemble all the forms and evidence required, and successfully navigate around all those hidden obstacles, this is not a guarantee that you won. Your brand-new business account still can be closed any minute because of stringent security policies. Financial institutions of all sizes are very nervous when they hear words such as “Bitcoin” or “ICO,” so they will freeze your account the next minute they suspect some unusual activity. Banks would rather lose some profit now than face an audit or risking their banking license tomorrow. So forget about cashing out large amounts of cryptocurrencies using a financial organization – but there is a way for you to be able to open a bank account for your ICO.

The option is to open a bank account in countries that are friendly towards cryptocurrencies such as Switzerland, Malta, Cayman Islands or Gibraltar. The latter is a popular option thanks to its local bank called Turicum that specializes in ICO financing operations. To do that you have to get incorporated in this jurisdiction. For that, you would have to hire a local lawyer and an accountant. But it’s worth it if you aim big. But remember that if you want to convert $10 million worth of cryptocurrency into any local money would automatically raise red flags and get your project audited, especially if your ICO was completed in a jurisdiction that limits its citizen from participating in such activities.

How to Turn Bitcoin Into Cash Using OTC

An over-the-counter exchange is the least sustainable option for exchanging several Bitcoins for local currency. Both parties meet at a physical location where the buyer of coins pays the seller the agreed amount of money in cash and the seller (you) transfers the cryptocurrency to the buyer’s wallet. Such transaction can be completed in as little as 30 minutes. There are certain risks to it such as physical security of all parties involved. You can find the interested parties on online platforms or via brokers, and even if you managed to find a suitable deal to sell coins to a person, there are fees involved also. It’s convenient to cash out small amounts of cryptocurrency this way.

How To Cash Out ICO Profits Via Exchange

This is the most common way to cashing out crypto. There’s always an option to convert money from your digital wallets to fiat money using cryptocurrency exchanges. The benefit of exchanges is that you are guaranteed to receive the local currency into your bank account, which eliminates the risk that the other party will not honor its agreement or compromise your security. This way may appear the safest and less expensive option compared to moving your company to Switzerland or Gibraltar.

You will still need to have a regular bank account connected to your exchange wallet so you could transfer the fiat currency from the exchange wallet to your bank account. First, you have to open an account on an exchange and then link your bank account to it. It’s important to make sure that this particular exchange can pay fiat currency to debit cards. Having your account verified can take a long time, depending on the exchange. You will also have to provide your ID which cancels your anonymity, but this is a standard procedure that cannot be skipped.

Another challenge is to find a trustworthy exchange that will handle your transactions securely and legally in your jurisdictions. The security of exchanges, even the most popular ones, is often breached. One of the most popular exchanges, Mt. Gox, eventually declared itself broke because so many transactions were corrupted and users lost their coins.

It’s important to find an exchange that is regulated to some extent. For example, Bitstamp exchange was among the first ones to receive a banking license, and the benefit of Coinbase exchange is the instant verification of the bank account linked to your wallet. BTC-e exchange allows for automatic trading and exchange of cryptocurrencies into USD, but you will still have to wait up to three days to get the money to your account. You have to be prepared to lose a certain amount of money on fees.

A lot of exchanges double up as a wallet where you can securely store your coins while waiting for the transaction to go through but this is not recommended because of security concerns. Exchanges are prone to becoming targets of hackers and it’s not uncommon for a user to lose control of their wallets while a hacker is emptying them. Read the fine print to learn more about insurances provided by a particular exchange.

Bitcoin ATMs: Use with Caution

While it may sound like a super-easy way to withdraw the fiat money from your digital wallet, Bitcoin ATMs often work one way: to sell your bitcoins in exchange for your cash, not the other way around. If you happen to have a Bitcoin ATM nearby check if it allows withdrawing fiat money, and proceed accordingly.

The Best Way to Cash ICO Funds

Instead of risking the whole amount getting stuck because of investigation or faulty exchange services, you should withdraw only precisely how much you need to cover your projected monthly expenses. Combine the total of your rent, salaries, legal and marketing fees, travel to conferences or other events and start cashing out small portions of the tokens. You can consider exchanging BTC/USD and moving money immediately to your bank account. Local exchange of crypto to fiat currencies is good to cash out money for unforeseen expenses.

Depending on where your startup is incorporated you can find a payment provider that accepts the equivalent in cryptocurrencies for wire transfers of fees, for example, rent and legal advice. To pay salaries, you can issue prepaid debit cards for your employees and load them using cryptocurrencies. Bitwala and cards are viable options. These cards can be used to pay in stores and to withdraw money in ATMs. This method doesn’t suit all jurisdictions. You cannot load prepaid cards with crypto in European Union, and Bitcoin ATMs are not issuing any fiat money there too.

To sum things up, your best approach to converting your ICO funds into your local currency is by combining several options: registering your business in a crypto-friendly country such as Gibraltar, which takes time and certain investment, and in the meantime using cryptocurrency exchanges to cover your monthly expenses to ensure that you have your basic expenses covered. This will ensure a sustainable cashing out of your ICO proceeds to fund your project.