How to Cash Out Crypto and Transfer to Your Bank

Converting digital assets into traditional currency involves moving funds from a digital format to a bank balance. This process allows individuals to realize gains or convert holdings for everyday financial needs.

Choosing a Platform

Selecting a platform is the initial step for converting cryptocurrency. Platforms include centralized exchanges (CEXs), peer-to-peer (P2P) platforms, and over-the-counter (OTC) desks for large transactions.

When evaluating platforms, consider the range of supported cryptocurrencies and fiat currencies. Fee structures vary, including trading fees and withdrawal fees.

Security measures like two-factor authentication (2FA) and cold storage are important. A user-friendly interface and customer support are beneficial. Platforms must adhere to regulatory compliance, including Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures. Liquidity influences transaction speed and efficiency.

Selling Your Cryptocurrency

After selecting a platform and completing account setup and identity verification, deposit cryptocurrency from a personal digital wallet into the designated wallet on the chosen exchange. Users generate a deposit address on the exchange and then send their crypto to that address.

Once cryptocurrency is in the exchange wallet, place a sell order. Platforms provide a trading interface to specify the amount. Two common order types are market orders, which execute immediately at the current price, and limit orders, which allow users to set a specific price. Market orders offer speed, while limit orders provide price control.

After entering the amount and selecting the order type, confirm the transaction. Review trading fees, which are deducted from sale proceeds. Upon successful completion of the sell order, the cryptocurrency is converted into the chosen fiat currency, and the equivalent balance is reflected in your account.

Transferring Funds to Your Bank Account

After selling cryptocurrency and converting it to fiat currency on an exchange, transfer funds to a bank account or financial service. Link your bank account by providing routing and account numbers, and completing any verification steps.

Common withdrawal methods include Automated Clearing House (ACH) transfers, wire transfers, or transfers to services like PayPal. ACH transfers are low-cost but can take 1 to 5 business days. Wire transfers are more expensive ($15-$35) but faster, often completing within one business day. Platforms may also support instant debit card withdrawals, which can carry higher fees.

After selecting the preferred withdrawal method and entering the amount of fiat currency to transfer, users confirm the transaction. Platforms often have daily or monthly withdrawal limits, which vary by account verification. Platforms often require two-factor authentication for withdrawal requests to protect funds.

Tax Considerations

Cashing out cryptocurrency for fiat currency is a taxable event by the Internal Revenue Service (IRS). Any profit or loss from the sale must be reported. Tax implications depend on whether the gain or loss is short-term or long-term.

Capital gains are considered short-term if the cryptocurrency was held for one year or less. If held for more than one year, profits are long-term capital gains, taxed at more favorable rates (0%, 15%, or 20%). Track the “cost basis” (original purchase price plus acquisition fees) to calculate gains or losses.

Thorough records of all cryptocurrency transactions are essential for accurate tax reporting. For the 2025 tax year, cryptocurrency exchanges and brokers are required to report digital asset transactions to taxpayers and the IRS using forms like Form 1099-DA or Form 1099-B. These forms provide details for completing IRS Form 8949 and Schedule D, which are then used to report on Form 1040. Consulting a qualified tax professional for personalized advice is advisable.