How to Withdraw Money From DeFi Wallet

In the Web3 era, decentralized finance (DeFi) is the name of the game. DeFi technology gives people more control over how they manage and store their digital assets. Regardless, some people might still wonder how to withdraw money from a DeFi wallet. After all, how do we make the jump from a decentralized to a centralized infrastructure?

If this is your first time withdrawing money from a DeFi wallet, you don’t have to worry because I’m here to walk you through the whole process. Whether you’re using a hardware wallet like Ledger Flex or a software wallet like Binance Web3 wallet.

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What Is a DeFi Wallet

Before we jump into how to withdraw money from a DeFi wallet to a bank account, let’s start with the basics.

A DeFi wallet, also known as a Web3 wallet, is a storage for digital assets that gives access to decentralized finance infrastructure and is not managed by a middleman. This means that you have full control over the private keys of your wallets. In fintech, this is called self-custodial.

With these types of wallets, you can store, buy, and sell your digital assets without any participation in a centralized financial infrastructure like banks. This is made possible with the implementation of smart contracts, which are self-executing programs that automate various blockchain processes.^[1]

Decentralized governance prevents one entity from having too much control and promotes community participation. Stakeholders can propose and vote on changes or improvements, creating a more democratic and transparent financial system where power is shared among participants.

That said, Web3 wallets also have their own fair share of security challenges. The full control you have over your assets also means that it’s up to you to do whatever it takes to ensure your asset is well-guarded at all times.

DeFi wallets come in two primary types: hot and cold. Here are their differences:

• Hot wallets (software). DeFi hot wallets connect to decentralized applications (dApps) via mobile or browser extensions. Examples of well-known DeFi hot wallets include the Binance Web3 Wallet. Hot wallets are known for their convenience and high accessibility;
• Cold wallets (hardware). Cold wallets are crypto storage devices that are not connected to the internet and have a hardware device. Because it’s not online, your hardware wallet's private keys are stored offline, providing much tighter security and asset protection. Notable examples of crypto wallets include Trezor Safe 5 and Ledger Flex.

Regardless of which type you go for, you will have your storage's private key and a backup seed phrase (12 to 24 random words) the first time you set up your wallet. The private key is essential to access the wallet, while the seed phrase is necessary for recovery in the event of damaged or lost storage.

Now, what about the withdrawal of money from DeFi wallets?

Withdrawing money from such wallets requires extra steps in the background and additional work on your part. You either need to find a third-party decentralized app that can aid the process or send your assets to a centralized exchange wallet first.

How to Withdraw Money From a DeFi Wallet

Now, let’s get to the heart of the matter—how to withdraw money from a DeFi wallet? I will demonstrate the steps using several popular Web3 wallets, as you can see below.

Ledger Flex

Ledger Flex is a leading hardware wallet offering top-level security. This wallet supports many cryptocurrencies and integrates with decentralized platforms for secure asset management, making it a top choice if you’re looking for a cold DeFi wallet.

You can trade and manage your crypto assets via the wallet’s software, Ledger Live. Aside from essential asset management features, you can also access decentralized apps like BTC Direct, Transak, Ramp, and Bitply, which offer crypto-to-fiat withdrawal services.

Now, let’s take a look at the steps to withdraw money from Ledger Flex to your bank account. Don’t worry, they all work for all models of Ledger, so follow along!

Step 1: Select the [Discover] tab from the left side menu.

Step 2: Change the [Categories] on the right side of the dropdown to [Sell].

Step 3: Select your crypto to fiat withdrawal app.

Step 4: A [Create order] window will pop up. Specify the cryptocurrency you want to sell and its amount.

Step 5: Enter your bank account details. Confirm that everything is correct by clicking [Preview order].

Alternatively, you can also send your assets to a CEX wallet. Here’s how to withdraw money from a DeFi wallet to a bank account by transferring the asset from Ledger to an external exchange.

Step 1: Choose [Accounts] from the menu. Select [Send].

Step 2: Scan the recipient address using a QR code if you’re on Ledger Live’s mobile app. Or, you can manually enter it if you’re on a desktop. Click [Continue] after double-checking that all details are correct.

Step 3: Enter the amount to send, or choose [Send Max] to empty your wallet.

Step 4: Select the appropriate network fees from the list and proceed by clicking [Continue].

And that’s how you withdraw money from Ledger Flex! Remember, always check the summary of your transaction before finalizing everything.

Trezor Safe 5

Trezor Safe 5 is a leading DeFi cold wallet, offering strong security by storing cryptocurrencies offline. It supports over 7,000 cryptocurrencies and integrates with DeFi platforms for easy asset management. With features like PIN protection and recovery seeds, it ensures secure and user-friendly access for both beginners and experienced users.

If you’re using Trezor, here’s how to withdraw money from a DeFi wallet to your bank account. Same as previously, these steps will also work for all Trezor models.

Step 1: After unlocking your Trezor device, navigate to [Accounts].

Step 2: Choose the account for the cryptocurrency you want to send from the [My Accounts] sidebar menu.

Step 3: Click on [Send] to reveal the Send transaction menu. Enter the required details.

Step 4: Select [Review and Send] and confirm your transaction.

Once you’re done, in Trezor Suite, you can view your transaction history in the [Overview] tab. To find a specific transaction, use the magnifying glass search tool to search by transaction ID, label, or amount.

Initially, transactions will appear as unconfirmed. Once the transaction receives its first confirmation on the network, the confirmation time will be displayed next to it. You can verify the transaction status by clicking on the confirmation time, which will open it in a blockchain explorer that will display further details.

Coinbase Wallet

Coinbase Wallet is a non-custodial software crypto wallet that gives users full control of their assets by storing private keys on their devices. It supports various cryptocurrencies and integrates with dApps. With an intuitive interface and features like biometric authentication and secure enclave technology, it’s ideal for beginners and experienced users.

Now, let’s take a look at how to withdraw money from the DeFi wallet of Coinbase. There are two ways you can go about it: either by selling and cashing out your assets to the Coinbase exchange or using a third-party provider.

If you choose to cash out via the Coinbase exchange, you can do it directly to an ACH bank account if you’re in the US. Or, you can sell crypto to a fiat currency first. Here’s how to do it:

Step 1: Head over to the [Assets] tab and select [Cashout].

Step 2: Connect your Coinbase Wallet to your Coinbase.com account if you haven’t.

Step 3: Select your preferred payment method.

Step 4: Enter the amount and select the asset you want to sell. Click on [Continue] to review the details and confirm the transaction. 

Note that if you’re converting crypto to your local currency balance, you'll see an incoming transaction in your Coinbase account. If you go with the cash-out method, there will be two incoming transactions: one from your wallet and one to your bank account.

Crypto.com DeFi Wallet

Next up, I will show you how to withdraw money from a DeFi wallet if using Crypto.com. First, let’s have an overview.

The Crypto.com DeFi Wallet is a secure storage solution that supports many cryptocurrencies and provides easy access to services like swapping, staking, and yield farming. With a user-friendly design and strong security features like multi-factor authentication and cold storage, it's great for both beginners and experienced users looking to manage crypto and explore DeFi.

The easiest way to send money from a Crypto.com DeFi wallet to a bank account is by connecting the mobile app to the Crypto.com exchange. Then, you can transfer your funds to the platform before cashing them out. Here's how to do so:

Step 1: Open your Crypto.com DeFi Wallet and click [View Settings].

Step 2: Click [Connect to Crypto.com]. 

Step 3: Enter your Crypto.com exchange credentials and follow the steps to verify them.

Step 4: Return to your Crypto.com DeFi Wallet app and tap [Send] to send your asset to your Crypto.com exchange account.

Step 5: After completing the transfer, navigate to your Crypto.com account, click [Sell] and select the asset you received to cash it out.

Now, all you need to do is wait! Your withdrawal request will be submitted and processed immediately.

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Binance Web3 Wallet

Last but not least, I will explain how to withdraw money from a DeFi wallet to a bank account if you’re using the Binance Web3 Wallet.

But before that, an overview: the Binance Web3 Wallet is a hot storage solution with vast support for decentralized exchanges and features like crypto swaps and bridges. It also connects with a lot of decentralized apps like BinaryX, CyberConnect, and Gala Games.

To withdraw money from Binance Web3 Wallet, you can send your assets to the Binance exchange to cash them out to your bank. Take a look at the step-by-step:

Step 1: Open your wallet and click [Send].

Step 2: Specify the cryptocurrency and the amount to withdraw.

Step 3: Paste your Binance wallet address in the proper column.

Step 4: Click [Transfer].

Make sure that all transaction details are correct before proceeding.

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Alternative Methods for Withdrawing Funds

What if the methods above do not work? Fret not, there are other possible ways to restore your funds and continue trading with peace of mind.

Method 1: Converting Crypto Assets to Stablecoins

Converting digital assets into stablecoins offers several advantages, particularly for investors and businesses looking to protect their holdings from market volatility.

Unlike traditional cryptocurrencies like Bitcoin or Ethereum, which can experience significant price fluctuations, stablecoins such as USDT and USDC are pegged to fiat currencies such as the US dollar, providing a reliable store of value.

Consequently, investors can safeguard their portfolios during market downturns without needing to cash out into fiat, mitigating risks of loss.

Compared to withdrawing other cryptocurrencies, which may require additional conversion steps and incur higher fees, stablecoins streamline the process. The process not only reduces costs but also transaction times. With more financial institutions and payment processors now supporting direct stablecoin-to-fiat conversions, liquidating your stablecoins into cash when needed is easier than ever.

Additionally, stablecoins offer global liquidity, allowing users to send and receive funds across borders efficiently. This makes them an ideal option for businesses and individual investors who require fast, low-cost transactions while maintaining price stability.

📚 Read More: Best Stablecoins for a Secure Portfolio

Method 2: Transferring to a Centralized Exchange (CEX)

Withdrawing cryptocurrency to a centralized exchange and selling it for fiat is one of the most common and convenient ways to liquidate digital assets. CEXs like Binance, Bybit, and Kraken offer secure platforms where users can deposit their crypto, trade it for fiat currencies like USD, EUR, or GBP, and withdraw the funds directly to their bank accounts.

One key benefit of this method is reliability. Centralized exchanges provide liquidity, ensuring users can quickly convert their crypto at competitive market rates. They also offer multiple withdrawal options, including bank transfers, wire transfers, and even PayPal in some cases.

Additionally, centralized exchanges provide a regulated environment with fraud prevention measures and customer support. However, users should be aware of transaction fees, withdrawal limits, and mandatory Know Your Customer (KYC) verification.

However, if, for whatever reason, you want to streamline the process of using your assets without the lengthy KYC processes and additional conversion fees, there are alternative ways to access and use crypto on a trading platform without directly converting it to fiat.

One option is using crypto-backed debit cards. Many platforms offer debit cards that convert crypto to fiat at the point of sale, allowing direct spending. This avoids the need for manual withdrawals and often comes with lower fees compared to bank transfers.

Another alternative is peer-to-peer (P2P) trading, where users can sell crypto directly to buyers for cash or other payment methods. However, not all centralized exchanges offer this feature.

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Method 3: Using a Decentralized Exchange (DEX)

Now, we all know what’s the deal with decentralized platforms—they offer greater control and privacy compared to centralized ones. Since DEXs operate without intermediaries, users retain full custody of their assets while trading directly from their wallets.

One major benefit is avoiding KYC verification, allowing faster transactions without identity checks. Additionally, DEXs provide access to a wide range of tokens, including those not listed on centralized exchanges, suitable for traders who want to diversify their portfolios.

Common withdrawal methods on DEXs include transferring funds to a personal wallet, such as MetaMask or Ledger Stax, for safekeeping or future transactions. Using a DEX's cross-chain protocols, users can also swap tokens on PancakeSwap, as an example.

While DEX withdrawals offer more privacy and anonymity, users should consider factors like network fees, potential slippage, and smart contract risks. Ensuring transactions occur on reputable platforms and double-checking wallet addresses help maintain security and efficiency.

📚 Read More: How to Withdraw Money from MetaMask to Bank Account

Why Use a DeFi Wallet

At this point, you might still wonder why people even use this wallet in the first place. After all, isn’t it easier to store crypto assets in a centralized exchange’s built‑in wallet? That way, you don’t have to scratch your head wondering how to transfer money from a DeFi wallet to a bank account.

Well, not quite. There are actually several good reasons why people want to store their crypto assets in a Web3 Wallet despite the additional steps required.

The quick and easy explanation is that Web3 wallets give you access to a decentralized financial system, allowing you to manage your digital assets directly. But how does that work, exactly?

First, DeFi wallets give you self-custody, which means you have complete control over your assets and private keys. You don’t rely on a third party like a bank or an exchange, which protects you from account freezes or the risk of your assets being returned.

Second, there is enhanced security. Non-custodial wallets, where only you hold the keys, make it much harder for hackers to steal your funds than storing money on an exchange. There is no direct link between DeFi wallets and bank accounts. However, it’s a cost that many would rather pay than the potentially heightened risks of some non-DeFi wallets.

Another benefit is access to decentralized applications. DeFi wallets connect you to decentralized apps and platforms for lending, trading, and earning interest on your assets. Many decentralized platforms also offer early access to new crypto tokens and projects before they hit the mainstream market, allowing you to stay ahead of the curve for the latest altcoins.

Interoperability is another reason why DeFi wallets are popular. Many platforms allow you to transfer assets between different blockchains, such as BNB Chain, Ethereum, and Avalanche. As a result, withdrawing from a Web3 wallet to external addresses is straightforward—the process is the same across blockchains, with only the network differing.

In short, the reasons why DeFi wallets are popular have a lot to do with the promises of decentralized finance, where users have complete control over their assets and can transact without centralized institutions as middlemen. While this may add extra steps because a third party does not manage the wallet, the added layer of security more than makes up for it.

How to Choose the Right DeFi Wallet

While knowing how to withdraw money from a DeFi wallet is undoubtedly important, knowing how to choose the right one is equally necessary. There are several key factors to keep in mind to ensure it meets your needs.

First and foremost is security. The best wallets offer features like two-factor authentication, encryption, and backup keys to protect your assets. Whether you're using a hot or cold wallet, it's essential to prioritize fund protection.

Next is usability. A good Web3 wallet should offer a smooth user experience, making it easy for beginners and experienced users alike to navigate and manage their assets. A seamless interface can help newcomers quickly get comfortable with the world of Web3 and DeFi.

Versatility is another important factor. You'll want a wallet that supports multiple blockchains, cryptocurrencies, and decentralized applications. Versatile Web3 wallets can also accommodate a money transfer from a crypto DeFi wallet to a bank account much more seamlessly. If your wallet is compatible with so many blockchains, you don’t have to worry about your money getting stuck.

Lastly, consider the additional features the wallet offers that may enhance your user experience. Some wallets allow you to swap tokens directly within the app, while others let you manage staked assets. If you're into NFTs, you might want wallets that let you view your NFTs directly in the app, for example.

In short, when choosing a Web3 or DeFi wallet, consider factors like security, ease of use, versatility, and compatibility with your preferred blockchains and dApps. Depending on your needs, you might end up using several wallets. Whichever tool you choose, just make sure to store all your private keys securely.

How to Secure Your DeFi Wallet

So, you’ve learned how to safely and securely withdraw money from a DeFi wallet and choose the best DeFi wallet for your assets. Great! However, you can still do more to safeguard and manage your cryptocurrencies with ease.

Although much has been done to improve DeFi wallet security^[2], decentralized infrastructure as a whole still faces significant challenges, particularly with the rise of hacks and scams. As with any new technology that offers the potential for financial gain, dishonest actors are quick to exploit it.

In 2023, over $2 billion worth of digital assets were lost to various hacks, scams, and other cyberattacks. With DeFi expected to continue growing in the upcoming years, these threats are likely to persist. However, since you have full control over your Web3 wallet, there are steps you can take to protect your assets and reduce risks.

First, safeguard your recovery phrase, also known as a seed phrase, which is your key to accessing your crypto wallet. Never share it with anyone, and store it offline in a safe location. Cold wallets like Trezor Safe 5 or Ledger Flex provide extra security by keeping your assets offline.

Second, ensure your wallet is constantly updated with the latest safety features. Avoid using public computers or networks for transactions, and be cautious of any investment offers that seem too good to be true. It's also a good idea to use separate wallets for receiving airdrops to minimize risk and always be wary of various scam tactics.

Phishing is a common scam type where attackers create fake websites that look like legitimate DeFi platforms. To avoid this, always ensure you are interacting with the correct site. Many Web3 platforms provide anti-phishing features that allow you to verify links sent to your email. By enabling these protections, you’ll receive special codes to confirm whether a link is authentic.

Another common type of scam involves admin impersonation. Scammers often target people who seek help on online communities or social media, pretending to be helpful administrators. To protect yourself, never respond to unsolicited messages claiming to be from a DeFi platform support staff or community admins without double-checking their identities. Admins will never contact you directly without you reaching out first.

If, after following everything, you still become a victim of a scam, there are steps you can take to minimize further harm.

First, disconnect your wallet from the compromised site immediately. If you still have funds left, quickly transfer them to a secure or new wallet. Stop using the compromised wallet altogether, as scammers may be monitoring for new deposits.

Second, if you encounter a phishing scam, report it to the relevant project team so they can investigate and alert other users. 

By following these precautions and staying vigilant, you can significantly reduce the risk of falling victim to DeFi scams and keep your digital assets secure.

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Conclusions

In conclusion, withdrawing money from a DeFi wallet requires some work, but it’s not difficult. What matters is that you remain cautious. By knowing the best practices on how to withdraw money from a Web3 wallet, like connecting to the correct platform, checking transaction details, and factoring in any fees, you can safely access and transfer your funds.

Staying vigilant against potential scams and safety risks, such as phishing sites or compromised wallets, is key. With the right precautions, you can confidently manage your assets and navigate the DeFi space with ease, ensuring your funds remain secure.

On top of that, factors like security, usability, versatility, and access to additional Web3 features need to be taken into account when choosing your decentralized wallets.

The content published on this website is not aimed to give any kind of financial, investment, trading, or any other form of advice. BitDegree.org does not endorse or suggest you to buy, sell or hold any kind of cryptocurrency. Before making financial investment decisions, do consult your financial advisor.

Scientific References

1. Amler H., Eckey L., Faust S., Kaiser M., Sandner P., Schlosser B.: ‘DeFi-ning DeFi: Challenges & Pathway’;

2. Rezaeighaleh H.: ‘Improving Security of Crypto Wallets in Blockchain Technologies’.