The Bitcoin Gateway

14 May, 2018

Bitcoin remains the undisputed king of the cryptocurrency world. It was the first to appear on the scene, and it is the bedrock upon which all other cryptocurrencies rest. The price of bitcoin serves as an obvious bellwether for the health of the market in general, due to its psychological importance. No other coin grabs headlines quite like bitcoin.

Bitcoin leads the market for another, perhaps more important, reason. At the moment, it is difficult to enter the crypto market without first buying bitcoin. The necessary infrastructure for fiat conversions1 to one of the thousands of altcoins available simply doesn't exist.

Several new market initiatives threaten bitcoin's privileged position. Their likelihood of success, however, is far from certain.

The Binance Move

Binance is inarguably one of the most important cryptocurrency exchanges, which gained its reputation with a decent altcoin offering, a fairly stable system, and relatively low exchange fees.2

Binance, however, lacks a portal to convert fiat currency like U.S. dollars into altcoins. To make use of Binance - and most other cryptocurrency exchanges - fiat currency must first be converted to one of the exchange's offered pairs. As of April 2018, these pairs are most likely to be bitcoin, Ethereum, or Litecoin. bitcoin dwarfs its competitors. It is the lingua franca of the cryptocurrency world.

Following the shift of its headquarters to crypto-friendly Malta, Binance hinted that it may soon implement fiat-to-altcoin pairs.3

Theoretically, this would shake bitcoin's hold on the market. New crypto users hoping to catch an altcoin as its rising would no longer have to buy bitcoin first. Those new users could potentially take their fiat dollars directly into the crypto market, as long as their banks or other financial institutions permitted the purchase.

Binance has since clarified their statements on the subject. Fiat does not necessarily mean U.S. dollar, and since Malta is within the European Union, the most likely fiat offering to come will be in those terms.

"While we can't predict the future, others keep attempting it on us," said Binance CEO Changpeng "CZ" Zhao on Twitter. "Both 'news' are not accurate. We are working with banks (to potentially support fiat), but no plans for USD in the short term. No xvg or xpr involved. Be careful around predictive 'crystal ball' news."4

That still potentially opens an entirely new market for crypto, as one Reddit user pointed out on a Binance forum.

"Fiat deposit to Binance will benefit us a lot because we can just purchase the altcoin directly without having to go through the trouble to buy BTC first then using BTC to buy the coin we want," said user Tanjianyuh. "Another benefit would be the coin will be less dependent of BTC price up and down since we bypass BTC."5

Binance is apparently still negotiating with its Maltese bank partners. No further updates on the matter have been issued since CZ's April 20 tweet.

Automated Crypto

Outside of the exchange space, automated teller machine (ATM) operators are also looking to bridge the gap between fiat and cryptocurrency.

Bitcoin ATMs are now appearing in major cities, and about half of those ATMs provide support for cryptocurrencies other than bitcoin.6

Most of the ATMs only work in one direction - changing fiat currency into cryptocurrency. Some, however, have taken things to the next level. In South Korea, some machines provide users with the ability to convert Ripple to fiat currency.7 This sidesteps adoption issues, as a business or service provider does not necessarily have to accept the cryptocurrency itself. A holder of Ripple or a similarly capable cryptocurrency need only visit an ATM to convert his or her holdings into cash. This isn't wildly different from using a conventional ATM to withdraw digital funds from an online banking account into physical money for spending at street markets and the like.

The catch is that newer machines, at least in the in the U.S., must comply with know-your-customer regulations, so using one of these ATMs might involve scanning a passport or other identifying document. Machines installed before the regulations went into effect can skirt the law, while machines in countries like Canada and Australia obviously do not need to comply with U.S. regulatory standards. In fact, these machines do not even have the physical hardware to support such a demand. This could potentially create a knock-on effect in the market. The center of balance in the crypto world is still solidly in the U.S. due to the sheer crush of available money. Looser regulations, tax laws, and opportunities in non-U.S. markets, however, might threaten that dominance. The U.S. and bitcoin might together lose market share to developing crypto scenes.

Dodge and Weave

There are other noteworthy exceptions to the usual fiat-bitcoin-altcoin pathway. Airdrops are the most obvious.8 By investing time and effort instead of fiat, a user can set up a wallet in an altcoin of his or her choice and potentially receive "free" coins as a sort of participation prize. This is obviously not a threat to bitcoin on its surface. The volumes are small and uncertain, and most coins participating in airdrops are in the early stages of development. They lack both value and, in some cases, representation on major exchanges. There is also no way to work fiat into the mix. Some initial coin offerings are in a similar boat, though those are largely off-limits to U.S. investors due to the classification of cryptocurrencies as securities.9 Very few altcoin developers have the money to meet U.S. Securities and Exchange Commission regulatory standards. That's part of the reason these coins were holding initial coin offerings in the first place.

The Future of Bitcoin

For the moment, bitcoin is secure in its position as the premier cryptocurrency and the best possible way to inject fiat money into the crypto market. For many investors in this stage in the market's development, the very first crypto asset they purchase is almost guaranteed to be bitcoin.

Change is inevitable, however. If Binance manages to pair euros with various altcoins, the door could suddenly swing very wide open for a whole new class of less tech-savvy investors to enter the market. These coins, in turn, could provide the basis for new trading pairs, cutting bitcoin out of the equation altogether. This sea change is unlikely to be restricted to Binance. Binance has major competitors in the crypto sphere, and those competitors would have to introduce fiat pairings of their own to keep up. Eventually, someone is going to create true U.S. dollar or Chinese yuan/renminbi to altcoin pairs, and that will open further doors to adoption.

Bolstered by ATM availability and the increasing sophistication of airdrops and initial coin offerings, this scenario puts bitcoin at risk of finding itself a big fish in a rapidly expanding pond.

That's not necessarily a bad thing for the coin, as the most recent downturn suggests. bitcoin led the way out of the early-year bear market, and it was, in turn, supported by buyers who used it as a gateway to acquire altcoin. bitcoin will likely always retain its psychological advantage and its "first to market" stability, so altcoin holders might eventually transition to using it as a kind of safe harbor in uncertain crypto times.

This all will be slow in coming. In fact, Google currently auto-corrects "fiat to altcoin" to "fiat to bitcoin" automatically, such is the nature of its entrenched position.10 But it appears to be coming, nonetheless.


1) "How to Convert Altcoins to USD and Other Fiat Currencies." CoinCentral, 21 Mar. 2018.


3) "Binance Hopes to Offer Fiat Pairs After Relocating to Malta." EBit News

4) @cz_binance. "While We Can't Predict the Future." Twitter, 20 Apr. 2018.

5) Reddit

6) "The bitcoin ATM Black Market: Regulatory Blind Spot Allows Crypto Traders To Subvert KYC Requirements." CryptoSlate, 26 Apr. 2018.

7) Stead, Chris. "Watch a Man Successfully Convert Ripple to Cash with an ATM.", 7 Feb. 2018.

8) "All Available Airdrops"

9) "Statement on Cryptocurrencies and Initial Coin Offerings." SEC Emblem, 11 Dec. 2017.

10) Google Search