Binance is in the news this week, yet again, because of an important announcement relating to fiat pairs. The giant cryptocurrency exchange announced that they are planning to allow fiat trading pairs this year. At some point in the future, users will be able to use currencies like the US dollar and euro to purchase cryptocurrencies.
While that is great news, a lot of people might think it’s common sense. Have you ever wondered why all exchanges don’t offer fiat pairs? After all, Coinbase allows users to buy bitcoin (BTC) and ether (ETH) with a card or bank account; why doesn’t everyone? Today, we’re breaking down fiat pairs and why they aren’t always available.
What is a ‘Fiat Pair’ Anyway?
To start things off, we first need to understand what a fiat pair is when it comes to trading. The majority of trading done in the crypto world is crypto-to-crypto. Crypto-to-crypto means that all the trading done is only with cryptocurrencies.
In the crypto world, fiat pairs (or fiat pairings) are trading pairs made up of one cryptocurrency and one fiat currency. For example, the largest fiat pairing is with the US dollar and bitcoin: BTC/USD. Fiat currencies are the currencies we typically use every day in our lives. They’re the currency most of us are paid in for work and what we use to pay (at least the majority) of our bills. These are government-issues and rely on trust in the system for them to be worth anything. The most common fiat currencies for most in the cryptocurrency space are the US dollar (USD) and euro (EUR), along with many others like the CAD, RUB, GBP, CNY, and AUD.
Who Has Fiat Pairs?
At first glance, fiat pairs seem like they should be common sense, right? The vast majority of people use fiat currency every day and it’s what we hold everyday. Unfortunately, those pairings are not always the easiest to find in the crypto industry.
At the moment, there are some exchanges that already support fiat pairs including (but not limited to):
Coinbase & Coinbase Pro
Why Are They So Difficult to Find?
Unfortunately, as with many things in the cryptocurrency space, regulation plays a major role in the markets. It’s not just regulation either, it’s the lack of regulation that can leave companies out of the loop. Right now, many companies are still waiting on the sidelines for certain aspects of the cryptocurrency world because of regulators. One of the main reasons institutional investors haven’t gotten fully involved in the space yet is because of regulators as well.
If a cryptocurrency exchange is only dealing with cryptocurrencies, and no local fiat currencies, then the exchange doesn’t have to worry about a variety of complicated laws. Many countries have rules put in place to prevent terrorism funding, money laundering, tax evasion, etc.
Because of those laws and requirements, it can be very expensive and time consuming for an exchange to keep compliant with all the various laws. However, as we’re seeing with the recent announcement from Binance, it looks like things are starting to change.
As more regulators and governments start solidifying what their policies on cryptocurrencies are, we’re likely to see more fiat pairs on exchanges. For now, it looks like we’re limited to a select number of exchanges offering them, and we’re going to pay a higher fee for the convenience. Make sure to keep your eye out for new exchanges allowing fiat pairings in the future though, it’s only a matter of time for many.