Fiat vs Crypto Wallet – 8 Differences & Which is Better

What are the differences between fiat vs crypto wallet? In this article, you will have a clear knowledge about the differences between fiat and crypto wallets, two terms that are often confused, especially by the beginners.

Having such knowledge will help you to decide which one to use and why. The information provided in this article is based on the user experiences and opinions as well as on the ways they understand these wallets work.

Though both wallets are used for depositing, storing, and withdrawing your currencies, there are some significant differences between the two that are good to know for any crypto trader or investor.

8 Differences Between Fiat vs Crypto Wallet

Differences Between Fiat vs Crypto Wallet

Here are a few significant differences between crypto wallets and fiat wallets. Check out Fiat vs Crypto Market.

Since each of these wallets and their different types comes with its characteristic pros, cons, and tradeoffs, it is important to know which the right one to use is.

Well, that is what this article is for.

1. Definition

The crypto wallets are specialized apps that can be on a crypto exchange or even a personal digital wallet. The main purpose of these wallets is to store the private keys so that your crypto is kept safe and you can access them easily so that you can monitor the transfer of crypto assets.

You can use these wallets to spend, send, or receive crypto coins such as Bitcoin, Ethereum and others. All cryptocurrencies transactions are recorded here on a blockchain. It basically implies the transfer of ownership of a specific cryptocurrency to the address of the wallet.

The fiat wallets, on the other hand, allow the users to deposit money to their accounts and use it whenever they make a purchase of a financial asset. This means that it is the same as storing money in banks and physical wallets.

If the particular exchange supports cryptocurrencies, you can also buy and sell crypto coins and withdraw money from your fiat wallet at any point in time. This allows you to respond quickly to the market conditions irrespective of the processing period of the payment method.

2. Functions

The crypto wallets typically do not store crypto coins in the physical form, which it ideally does not have. It primarily stores the private keys, which are the passwords that allow the users to have access to their crypto assets to make a transaction. These keys actually prove the ownership of the crypto holdings that typically reside on the blockchain.

This allows you to make transactions with your digital money. It also helps in managing your digital assets since all are in one place and you have more control over the private keys, interacting easily by using the usernames instead of a hexadecimal and long public key address, as well as browsing decentralized finance apps or dApps.

The fiat wallets, on the other hand, hold the virtual representation of money deposited in it. It is typically a mobile or a web application that accepts deposits made through any standard financial system such as inter-person bank transfer, a SWIFT transfer, or any other.

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The primary objective of it is to make a representation of the amount of money deposited in an exchange. This money deposited is entirely compatible with the rest of the crypto available on the exchange. This eventually helps in making instant transactions, investing, trading, or exchanging money for crypto much easily.

3. Forms

The crypto wallets come in different forms. You can have a hardware wallet that looks more like a USB flash drive like Ledger or those that are typically a mobile app or software, called the online wallet, like the Coinbase Wallet.

You can also have paper wallets to store your private keys. The primary objective of the crypto wallets is to make crypto use as easy as online shopping using a credit card.

The fiat wallets, on the other hand, are the services that are typically provided by the exchanges to the users so that the gap between cryptocurrencies and the monetary system can be bridged. These are considered as on/off-board ramps.

These ramps help in making a connection between Bitcoin as well as other crypto coins and the fiat currency world. In addition to that, the fiat wallets are also a cheaper option for sending remittances between other users quickly and easily since it goes around the traditional banking system and thereby reduces the cost of transactions.

4. Risk Factors

When it comes to the risk factors, the crypto wallets are riskier as compared to the fiat wallets. It is therefore essential not to lose your private keys because if you lose them, you will lose access to your own money.

This is in accordance with the principle followed in the crypto world – ‘Not your key, not your money.’ That is why you should store your hardware wallet safely or use a wallet of a trusted and reputed wallet provider.

The fiat wallets, on the other hand, are a more secure option for storing money. The best part of these wallets is that they are always funded which makes it easier for a user to trade between crypto and fiat money instantly.

There is no delay in the proceedings because the users do not need to wait for a traditional bank to approve a trade. Whether it is for making a transfer of money or paying the credit card fees, the fiat wallets are a more versatile tool that will help both the crypto traders and investors alike.

With proper verification of the accounts using the KYC or Know your Customer database based on documentation and proof of addresses issued by the government, funds here are more protected. These are stored with a regulated and licensed custodian such as a bank or any Electronic Money Institution that operates according to the law.

5. Reach

Typically, you can access a fiat wallet only in a region or a country that specifically uses that particular money system. This means that the fiat wallets are essentially local in nature.

Therefore, a person using a particular fiat wallet that is designed and designated for the US Dollars will not be able to use the same fiat wallet to send US Dollars to another person residing in Mexico where Pesos is the official currency.

In contrast, the crypto wallets are typically global in nature. This means that you can use a crypto wallet to transfer money or send remittances to anyone living in any part of the world and that too by using another crypto wallet. They can use any particular crypto coin type of their choice.

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Following the example mentioned above, if you want to transfer funds to a person living in Mexico using a crypto wallet you will not have to change your US dollars into a stable coin such as USDT and then send it. It also means that the person receiving the fund will not have to exchange the crypto coins for Pesos to use them.

6. Storage

In the case of a fiat wallet, it acts just like any online banking account. The transactions are stored in it and for that specific purpose, it uses a server. The money deposited into the fiat wallets is typically held by a third party.

It is the responsibility of this third party to assure that both the internal as well as external security protocols of the wallet are in place so as to keep the stored items safe. As said earlier, in a fiat wallet, there are no public or private keys attached to it.

On the other hand, the crypto wallets do not store the crypto coins actually but it simply helps in identifying the new blocks created or the old ones existing in the blockchain.

These are actually the representations of the different addresses that the wallet has received the crypto coins from and that are related to it specifically.

All the transactions, receipts and remittances are recorded typically in the distributed ledger of the particular blockchain or network. This is done in two specific ways namely by using the UTXO model of Bitcoin or the balance of Ethereum on the global scale.

7. Deposit

There are also notable differences in the capabilities of the fiat wallets in terms of deposits. These wallets can accept deposits that are made only in that particular fiat currency that the wallet uses as its denomination.

This means that if a fiat wallet is meant for US dollars, it can receive only US Dollars as deposits and that which is designed for Euros, can only receive Euros and no other types of fiat currencies.

In contrast, almost every crypto wallet that you will get out there is able to receive deposits made in any type of crypto coins and tokens and actually in one single application.

It is this ability of the crypto wallets which allows it to hold different crypto assets that makes it more versatile in comparison to a fiat wallet which is primarily meant for single specific use.

8. Working Process

Typically, the working process of a crypto wallet is based on a random and theoretical number for the purpose of generating public and private keys for the wallet. This ideally depends on the size of the algorithm as well as the technological requirements of the specific cryptocurrencies.

This number is then changed to a private key which is once again based on the specific requirements of the cryptography algorithm of the cryptocurrencies. Then, the public key is typically generated from the private key by using cryptographic algorithms according to the requirements.

The private key is used to access and send crypto coins by the owner and the public key is used to share the wallet address with a third party to receive crypto coins. These keys are not known by anyone else or even by the blockchain.

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The fiat wallets are usually integrated with the exchanges and support a particular fiat currency type. These wallets that help in trading, investing and using digital assets easily ensure that the speed in a transaction made is enhanced which is essential in the highly volatile market of cryptocurrencies.

The money deposited into the fiat wallets is readily available by the user to buy crypto coins anywhere anytime. In addition to that, it also helps in converting your crypto coins to fiat money as well as in booking your profits made from investments and trading.

Which is Better – Crypto Wallet or Fiat Wallet?

Now, this has no specific answer. The choice for a crypto wallet or a fiat wallet will entirely depend on your needs and the type of trading and investing you are in.

Ideally, when you are dealing with fiat currency trading or investment, it is a general idea that you will need a fiat wallet.

On the other hand, if you are into crypto trading and investment, you will need a crypto wallet. This can be an on-exchange wallet or any other. Although there can be a few exceptions depending on the policies of the trading platforms.

Therefore, it cannot be said that fiat wallets are better than crypto wallets or vice versa. However, there are a few concerns that may throw some light as to decide which among a crypto wallet and a fiat wallet is better.

One of the most significant concerns is the access permissions to a crypto wallet.

Since you will need to store the private and public keys separately, it may be a bit difficult to determine who specifically will have access to the copy of the private keys apart from you.

Also, apart from the issues with the signing capabilities, downloading a crypto wallet from a provider to your computer or phone does not necessarily mean that you are the only owner of the copy of the private keys.

This is because access to the same wallet can also be had through the website of the provider.

And, in terms of vulnerabilities, the crypto wallets are prone to be more vulnerable to both known as well as unknown factors and elements.

For example, there can be an attack on the supply chain or on the side-channel attack. And, even the computer, on the whole, can be hacked in extreme cases, even if it is not connected to any particular network.


The crypto wallets and fiat wallets serve the same purpose. You should choose one according to your needs. Just make sure that you check the functionalities and capabilities of each type before you choose.