Inset the side of a North London Barclays Bank stood the world’s first automated teller machine, unveiled on June 27, 1967. Inauguration of the device provided banks a way “to give working people access to their money when they were closed,” according to the BBC

These machines have since evolved into common practice for banking on the go. Now, nearly a half century following their debut, these machines are getting crypto-fied as Bitcoin ATMs, coming to a corner store near you.

What Is a Bitcoin ATM?

Bitcoin ATMs are standalone, internet-enabled kiosks that facilitate cryptocurrency-related transactions, most notably buying Bitcoin with cash.

 

What Is a Bitcoin ATM? 

Bitcoin ATMs, synonymous with crypto ATMs or BTMs, are automated teller machines that allow users to buy or sell Bitcoin on-the-go using cash, debit or a cryptocurrency wallet

While traditional fiat kiosks connect a user to their bank account to perform an assortment of services, Bitcoin ATMs are still primarily one-way operations, where users feed cash into the machine to purchase digital currency. Newer models, such as Coin Cloud ATMs, allow users to withdraw cash for crypto, create a printed paper wallet and direct purchased Bitcoin to a hardware wallet.

These standalone, internet-connected kiosks generally comprise a touch screen interface, QR scanner, bill acceptor and dispenser.

“Unlike traditional ATMs, crypto ATMs don’t require customers to have a bank account ... This means that anyone who is interested in investing [in crypto] can start building a portfolio immediately.”

Crypto-compatible ATMs can be found near specialty shops, grocery stores, gas stations, airports, restaurants, banks and malls. Users can check online sites, such as this map posted on Bitcoin’s website, to locate one of the 38,638 Bitcoin ATMs worldwide nearest to them.

“Cryptocurrency ATMs make cryptocurrency accessible through their easy-to-use technologies while also lowering barriers to entry for investors,” said Daniel Polotsky, founder and chairman of the board at CoinFlip, the third-largest Bitcoin ATM operator in the United States. CoinFlip hosts 10 percent of crypto ATMs nationwide, which offer instant access to an assortment of leading digital currencies.

“Unlike traditional ATMs, crypto ATMs don’t require customers to have a bank account,” Polotsky said, “This means that anyone who is interested in investing [in crypto] can start building a portfolio immediately.”

More on Starting a Crypto Portfolio How to Invest in Cryptocurrency

 

How Do Bitcoin ATMs Work?

The installment of Bitcoin ATMs put passersby just a few steps away from crypto exchanges. Like a traditional bank auto-teller, there are instructions to guide users through a reasonably intuitive process.

“Depending on the size of your transaction [and the ATM model], all that’s required is cash, a crypto wallet and a phone number,” Polotsky said. Identification may be needed for transactions of a higher amount. Other than that, Polotsky advised to have a crypto wallet set up before visiting a kiosk. 

“A crypto wallet is necessary to securely store your assets,” he said. 

Follow along to learn how to interact with a crypto teller the next time you see one in the wild.

 

How to Use a Bitcoin ATM 

Step one: A user must activate the screen by touching the monitor. Then, they would select whether to buy or sell Bitcoin and disclose the value range they wish to buy or sell within on the following screen.

Step two: Depending on the selected option, a user may then be prompted to provide identification. Some Bitcoin ATMs require one to verify a phone number, take a photo and/or scan a government-issued ID, such as a driver’s license or passport, in order to prevent fraud for all transactions. Transactions of a lower amount, however, typically require little to no identification. This machine, found in a Canadian mall, for example, has a set threshold of $3,000 Canadian dollars, or around $2,250 U.S. dollars, and only requires the user’s crypto wallet address to perform the transaction.

From here, the steps will vary in respect to a user’s needs.

 

When Buying

Step three: Crypto wallet addresses are necessary to record a transaction on the Bitcoin blockchain. At this stage, a user would then provide their wallet address by scanning the QR code associated with the account. 

Step four: Cash is inserted into the ATM’s bill feeder for the desired amount of Bitcoin.

Step five: The ATM processes the transaction. The ATM will deposit bitcoin in one’s bitcoin wallet, which may take up to 10 minutes depending on network traffic.

 

When Selling

Step three: After the appropriate level of identification is submitted, the user would then input the exact amount they want to sell. If they haven’t already in the previous step, the user may be prompted to input a phone number in order to receive an SMS notification once the machine has successfully processed the transaction.

Step four: Once the sale amount is finalized, a receipt prints, containing instructions and a QR code. Stepping away from the machine, the user must send their Bitcoin to the code provided, an address linked to the ATM machine, within a specified amount of time using a smartphone. Here, the user accesses their crypto wallet via their app of choice, scans the QR code, hits send and authorizes the transaction.

Step five: The ATM will then process the transaction, which may take up to 10 minutes. If the user inputted a phone number, they will get a text informing them when the withdrawal is ready. 

Step six: With ticket in hand, the user returns to the machine, but selects “redeem ticket” instead of “sell” on the options menu. Once the user scans the QR code, the ATM processes the request and dispenses the sale amount in cash.

 

Benefits of Bitcoin ATMs

Part of the attraction to adapting crypto to common banking practices — such as an ATM — has everything to do with convenience, speed and ease of use, said Shuo Chen, a blockchain expert at Singularity Group, a business training company that offers executive educational programs.

Benefits of Using a Bitcoin ATM

  • Convenience
  • Quick transactions
  • Familiar process
  • No bank account or identification required
  • Privacy

“[Crypto ATMs] can be a convenient way to buy and sell Bitcoin since they provide immediate access to cash,” she said, noting the ubiquity and 24/7 availability that spurred auto-teller tech in the first place. Before Bitcoin ATMs, converting crypto directly to cash wasn’t possible. Re-introducing new tech in recognizable forms benefits those that may want to participate but have otherwise felt too intimidated to get involved.

“ATMs are a familiar way for people to interact with conducting financial transactions,” Chen said, noting their potential to welcome in a new wave of crypto investors.

Like ordering a Frappuccino before setting foot in Starbucks, some crypto ATMs are equipped to save you a spot in advance, said David Kemmerer, co-founder and CEO of CoinLedger, a crypto and NFT tax software service.

“Additionally, users who want to sell Bitcoin can even reserve cash at the ATM ahead of time using a wallet app,” Kemmerer said. “This allows users to quickly and easily buy and sell Bitcoin without the need to wait for lengthy verification processes … Transactions made with these machines are often almost instant,” he added.

“ATMs are a familiar way for people to interact with conducting financial transactions.”

Chen, who is also an early stage Silicon Valley-based investor and lectures about the future of finance and entrepreneurship at the University of California, Berkeley, also pointed out that some individuals may opt for a Bitcoin ATM as their ability to work in the medium of cash allows users to forgo any type of banking that may need to be arranged prior to a transaction.

On that note, Bitcoin ATMs offer an unmatched level of privacy. With online exchanges, users are required to share sensitive information, including debit or credit card details or bank account information in order to buy and sell Bitcoin. Bitcoin ATMs users only need to share minimal information.

Furthermore, Chen highlights the new level of anonymity — or pseudonymity — that Bitcoin ATMs provide users, as some machines only require a phone number and do not require users to input any personal identification at all.

More on Anonymity in Blockchain What Role Does Anonymity Play in Web3?

 

Challenges (and Risks) of Bitcoin ATMs

At a time when countries are still grappling with cryptocurrency as a whole, Bitcoin ATMs add another layer of complexity that governing agencies must consider. Fortunately, with traditional banking networks well established, a system of regulation already exists.

Challenges and Risks of Using a Bitcoin ATM

  • High fees
  • Uninsured funds
  • Transaction limits
  • Availability
  • Fraud and scams

For instance, in the United States, all Bitcoin ATM companies are bound by federal anti-money laundering laws. This means that every operator must register with the Financial Crimes Enforcement Network and are subject to the Bank Secrecy Act. Even so, regulation so far has been lax at best, as found by a New Jersey oversight agency, CNBC reported, with law enforcement officials convinced that the machines are aiding in illicit activity such as money laundering and drug trafficking. As Politico points out, “Legitimate companies may run most of these machines, but some are set up by unlicensed operators.”

 

High Fees

Sky-high fees are the main deterrent for active crypto users when it comes to visiting a Bitcoin ATM.

In traditional banking, flat rates are incurred for out-of-network usage. These rates have an average combined cost of $4.66, as found by Bankrate in a 2022 study, and an average surcharge that presents as $3.14 per transaction.

Bitcoin ATMs, however, charge a percentage based on the transaction amount. Most operators charge a 15 percent fee to buy Bitcoin and anywhere from 0 to 15 percent to sell, according to crypto kiosk mapping service Coin ATM Radar. Comparatively, that same transaction made on an online crypto exchange would likely sustain a 1.5 percent transaction, or “gas,” fee, which have historically ranged from under 1 percent to under 5 percent.

 

Uninsured Funds

In lieu of bank backing, Bitcoin ATMs do not provide insurance against theft or loss. If there are issues with a transaction, customer support may not be as readily available as well-established institutions.

“It’s important for investors to do their own research and consider self-custodial options,” Polotsky said, which may be as simple as vetting any third-party involvement — such as an exchange or digital wallet provider — and routinely storing one’s crypto offline, in cold storage. Accountability from both ends, users and providers, is ideal.

“We use proactive blockchain analytics to proactively determine whether a wallet is connected to any criminal activity,” he said. “If it is, we block the wallet address so that it cannot be used for transactions at CoinFlip.”

 

Transaction Limits

Similar to both traditional bank auto-tellers as well as online crypto exchanges, Bitcoin ATMs exercise a daily transaction limit. According to Investopedia, this range typically spans from $10 to $10,000, but it depends on the operator. For example, Polotsky’s company CoinFlip features four tiers, with the lowest ranging from $20 to $900 and the highest from $8,005 to a maximum of $16,000 per day.

 

Availability

While Bitcoin ATMs have multiplied by the thousands in the decade since inception, they’re no match for online exchanges in terms of availability, which remain just a web search away.

 

Fraud and Scams

The FBI discovered a trend where scammers leveraged Bitcoin ATMs, phishing emails and QR code tech to trick victims in fraudulent schemes. These cybercriminals would couple a QR code — containing the scammer’s wallet address — with an urgent message via email, then direct the victim to a physical crypto ATM to complete the transaction, according to the FBI.

“It is important for users to be aware of these risks and take steps to protect their personal information when using a crypto kiosk.”

Bitcoin ATMs also provide easily accessible, hard-to-trace outlets for crypto users with ill intent. A lack of identification could have unknowing victims lose out on their funds in the event their private key is discovered, whether through their own mishandling or covert measures. 

“Data sniffers and spy cameras can be installed into these ATMs, allowing criminals to steal a user’s personal information, which can be used to steal their cryptocurrency in the future,” said Kemmerer of CoinLedger. Additionally, crypto ATM operators may try to complicate oversight efforts designed to prevent fraud and protect user data in defense of their business.

“It is important for users to be aware of these risks and take steps to protect their personal information when using a crypto kiosk,” Kemmerer added.

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