After the birth of the blockchain and cryptocurrencies in 2009, other innovators used the technologies to create some amazing products and services. Cumulatively, these innovations made the use of virtual currencies easier and widespread. An epitome is crypto ATMs.
A crypto ATM is a device that allows crypto adopters to buy virtual currencies using fiats or debit cards. This helps crypto enthusiasts make quick and secure transactions without visiting over-the-counter exchanges. Some crypto ATMs are bi-directional, meaning they support buying and selling of crypto. In some instances, crypto ATM providers need users to have a crypto address before using the machine.
There are two variations of crypto ATMs, Kiosks and ATMs. Both devices have an internet connection, and they let their users buy BTC using cash or debit cards. They then print a paper receipt showing that you have bought coins. Alternatively, they move funds to a public key on the blockchain. While kiosks look like traditional fiat ATMs, they do not connect to bank accounts. They instead create a direct connection between the buyer and a crypto exchange. Crypto ATMs are traditional ATMs that have been tweaked to let users buy digital currencies directly through bank accounts.
The history of crypto ATMs
The first known crypto ATM was installed in Canada six years ago on October 23. It was a Robocoin machine, and its exact location was in the Waves coffee shop in downtown Vancouver. The ATM dealt with BTC exclusively. It supported both buying and selling functions. Robocoin stopped creating bitcoin ATMs three years later. The first crypto ATM in the US went live five years ago on February 18. It was in a cigar shop in New Mexico. Its installer removed it a month later. Then, Coinme installed an ATM in Seattle, Washington. Prior to this, the firm had become the first-ever crypto ATM provider to get a money transmitter license.
How to use a crypto ATM
After 2014, more crypto ATM manufacturers emerged, and with them came a variety of machines. According to reports, there are more than 30 types of crypto ATMs. Examples include Robocoin, Lamassu, Genesis1, Coinplug, Umbrellab, Paymaq, BTM, and BTC-O-MATIC. While some of these machines let you buy or sell crypto, others only support buying.
Nonetheless, the steps involved when purchasing crypto assets through them are more or less similar. This procedure is as follows,
- Verification (Varies from one machine to another)
- Providing a crypto address in which the coins will be sent
- Feed money into the machine
- Confirm the process to have the purchased coins sent to your address
The selling process is also somewhat similar across all machines that support this function. The steps involved are,
- In most cases, the ATM operator will need you to identify yourself. That said, the identification process may vary when dealing with different machines or operators.
- Send crypto to the ATM by scanning its QR code
- Get fiat currencies from the machine. The time that the funds are released is dependent on the type of machine. Some release fiats on the spot while others give you a redeem code that you have to keep safe until your transaction is confirmed.
Crypto ATMs charge a fee whenever you complete a transaction on them. In a publication by the Consumer Financial Protection Bureau (CFPB), bitcoin ATMs charge high transaction fees, reaching up to 7 percent. Their exchange rates are also $50 higher than in other financial sectors.
The regulation of crypto ATMs
Being the first country to have a crypto ATM, Canada has proposed regulations for all crypto exchangers. However, the country does not have specific rules that regulate cryptocurrency ATMs. Crypto ATM operators across the globe only need to follow AML/KYC policies to prevent money laundering and terrorist financing. In some states, crypto ATM operators have to apply for a money transmitter license.
Where to find bitcoin ATMs
Different manufacturers have installed crypto ATMs in different parts of the words. Per data from a statistics company, the US has the highest number of crypto ATMs. At the moment, there are 2,616 ATMs in the US. Despite being the pioneer of crypto ATMs, Canada comes second with 629 machines. Austria has 274 ATMs, and the UK follows closely with 212 devices.
According to Coin ATM radar, a firm that provides data on where to locate bitcoin ATMs, there are 4,564 crypto ATMs in the world. They support leading coins such as BTC, BCH, ETH, DASH, and LTC.
Challenges of operating a crypto ATM
Some countries have an anti-crypto stance. Consequently, their governments do not let crypto ATM manufacturers install their machines. In India, Unocoin, a crypto ATM-making firm installed the first ATM in the country to help its citizens bypass RBI’s crackdown on crypto. Reportedly, India’s cybercrime police seized the ATM a few weeks after its installation. The authorities claimed that the state government had not given the ATM kiosk permission to operate out of the country. Unocoin’s co-founder was also arrested in the process.
Finding a good market
Although crypto assets have become more common compared to five years ago, they are yet to achieve mass adoption. This poses challenges for crypto ATM operators as it becomes rather difficult to pinpoint suitable locations for installing the machines.
Thefts of Crypto ATMs
Over the past few months, there have been more than four incidents of crypto ATM thefts spread across different countries. Examples include,
According to a report, a group of burglars actively broke into stores that have bitcoin ATMs in seven Canadian cities in 2018. The thieves made away with more than $150,000 in just ten days. Authorities in the country failed to identify the perpetrators. The report notes that the thieves took advantage of double-spending in crypto.
In what must be one of the hilarious thefts, three men broke into a grocery shop armed with a machete and sledgehammer to steal bitcoin from a bitcoin ATM. One of the men threatened the shopkeeper while the other two used the sledgehammer to yank the machine from a wall. They took the machine with them, but due to lack of knowledge, their attempt bore no fruits as crypto is stored in the machine virtually.
Earlier this year, a Dutch trader made fun of bandits that stole a bitcoin ATM from his shop. He noted,
Bitcoins are virtual coins, so I think it’s logical that they do not get out of the machine. They would have thought they hit a jackpot with a full-blown machine.
A man armed with a sledgehammer broke into a bakery in Brentwood. He used the sledgehammer to dislodge the machine from a wall before proceeding to thump it several times. The ATM remained intact despite his efforts. He finally gave up and took the machine with him. He must have thought the bitcoins were there in physical form.
Crypto ATMs play a significant role in encouraging the mass adoption of crypto. They have introduced crypto in places that would have otherwise remained in the dark regarding virtual currencies for a long time.