For years, cryptocurrency has been used by the tech and financial elite as a way to hedge against the economic uncertainty. Today, a new trend is emerging: the crypto ATM. These ATMs allow consumers to buy cryptocurrencies, such as Bitcoin (BTC), using fiat currency. For example, users can purchase Bitcoin through cash, debit card, and bank transfer. The ATM then converts the digital currency into physical cash, and the consumer can walk away with the crypto.
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When it comes to buying Bitcoin (BTC), cash may reign supreme, according to new statistics, which shows a 71.3 percent rise in crypto ATM installations from January 1, 2023, until the time of publishing. In particular, there are now over 24,000 crypto ATMs situated all over the world. According to the data, crypto ATMs are being built at a pace of about 52.3 each day.
While the cryptocurrency industry is definitely expanding, the increase of crypto ATMs may be attributed to a desire for buying Bitcoin with cash. According to Alona Lubovnaya, director of product operations at Bitcoin Depot, a Bitcoin ATM operator, more individuals from all walks of life are getting interested in cryptocurrency, especially the underbanked. “We’ve reached a new age in which conventional bank accounts may be replaced with digital wallets, and as a result, more individuals are buying crypto with cash.”
For the average person, cash is convenient and familiar.
While there are a variety of reasons why some people might choose to purchase cryptocurrencies via an ATM rather than an exchange, the majority of the popular use cases seem to be centered on having simple and fast access to bitcoin.
According to one study, nearly 50 million Americans are expected to purchase cryptocurrencies in the next year. According to the findings, the greatest obstacle for new investors is a lack of knowledge. Specifically, 20% of those polled claimed they still don’t know how to purchase bitcoin.
Many individuals wanting to get started with crypto appreciate the haptic aspect of a real machine, such as an ATM, according to Derek Muhney, head of marketing and strategy at Coinsource, a supplier of Bitcoin ATMs. Bitcoin ATMs, according to Muhney, are the greatest method for a growing number of unbanked and underbanked people to purchase Bitcoin. While this may seem self-evident, Muhney went on to say that this is especially true among baby boomers and millennials, adding that they account for the majority of Bitcoin ATM transaction volumes to far.
Ben Weiss, CEO of CoinFlip, a Chicago-based Bitcoin ATM operator, told Cointelegraph that the primary purpose of Bitcoin ATMs is to make bitcoin consumable and accessible to new users who may not be familiar with cryptocurrency or blockchain technology. CoinFlip ran a Twitter survey to see how many individuals on Crypto Twitter have utilized a Bitcoin ATM to illustrate this argument. According to the CoinFlip study, 72.2 percent of people have never used a Bitcoin ATM, while just 27.8% have.
Weiss said he wasn’t shocked by the findings, pointing out that Crypto Twitter is made up of individuals who are enthusiastic about cryptocurrencies and have a good knowledge of it. As a result, mainstream people are the major clients of Bitcoin ATMs, according to Weiss:
“The easiest method to buy cryptocurrency is to use a crypto ATM. You won’t have to wait weeks or months for verification, and you’ll usually have your cryptocurrency before returning to your vehicle. People are familiar with ATMs, and crypto ATMs aren’t much different.”
Alex Mashinsky, the CEO and co-founder of Celsius, a centralized cryptocurrency lending platform, went on to say that there are many different types of consumers in the crypto world. Hodlers, for example, would never sell their crypto, while speculators try to time the market, according to Mashinsky. However, “tourist” customers would most likely utilize a Bitcoin ATM, according to Mashinsky. Mashinsky continued:
“A Bitcoin ATM is less expensive than Western Union or a bank transfer for temp employees and the 25% of the population who do not have a bank account. This sector will continue to expand, displacing conventional financial firms who overcharge their customers.”
Bitcoin ATMs will become more common, but security issues will persist.
Given that over 6% of households in the United States, or 14.1 million people, are presently unbanked, Bitcoin ATMs will certainly grow in popularity in the future. According to the projection, “more than 100,000 Bitcoin ATMs will be deployed by 2025, and the business will expand to over $1.7 billion,” according to Muhney.
While this is significant for the burgeoning bitcoin industry, security concerns may limit usage. According to John Jefferies, chief financial analyst at CipherTrace, a cryptocurrency intelligence company, Bitcoin ATMs in Canada did not need any kind of Know Your Customer, or KYC, procedures as late as last year. “None of these Bitcoin ATMs needed KYC, making this a wild west situation,” Jefferies added. The majority of Bitcoin ATMs in the United States now demand KYC from customers, according to Jefferies, as the crypto industry has matured:
“To become a member of the conventional banking system, these money service companies need KYC. We’re seeing a lot of Bitcoin ATM suppliers (those who manufacture the hardware) and operators concentrate on compliance these days.”
“Similar to conventional money services companies, inspectors will pay Bitcoin ATM operators a visit,” Jefferies said. For the Financial Crimes Enforcement Network, the IRS performs this.”
Furthermore, according to Jefferies, Bitcoin ATM providers are beginning to show interest in a solution to comply with the travel restriction. In 2023, the Financial Action Task Force’s (FATF) Travel Rule for Virtual Asset Service Providers, or VASPs, went into force. During transactions, the Travel Rule compels regulators and VASPs to collect and exchange consumer data.
According to Jefferies, CipherTrace is collaborating with six Bitcoin ATM operators to provide a travel rule solution dubbed “Traveler” to satisfy the FATF-mandated counterparty VASP due diligence. While several exchanges, including as Binance and Crypto.com, have recently adopted the Traveler tool, Jefferies claims that CipherTrace is making the product more feasible for Bitcoin ATM operators to be compliant.
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Despite this, some industry professionals think Bitcoin ATMs are equally as secure as conventional ATMs. According to Jonathan Ovadia, CEO and co-founder of Ovex, a South African cryptocurrency exchange, “we don’t think Bitcoin ATMs will be utilized for very big transactions” based on the company’s research. As a result, Ovadia stated that, in comparison to conventional ATMs, there is no need for specialist protection, both physically and in terms of cybersecurity.
Chainbytes, a Bitcoin ATM maker, runs HippoAtm.com, which charges a high 17 percent fee every transaction, according to Eric Grill, CEO of Chainbytes. Grill revealed that the average transaction amount on HippoAtm.com machines in July 2023 was $1183.92 and $1325.98, respectively.
In terms of security, this is an essential issue to consider. Bitcoin ATMs that handle big transactions, according to Jefferies, may be suspect. Kunal Kalra, also known as “shecklemayne,” was running an illegal money services company in August 2019, according to Jefferies, where he traded US dollars for Bitcoin and vice versa. Kalra operated on commission, according to Jefferies, and only dealt with clients prepared to swap at least $5,000 each transaction.
Despite these reservations, Bitcoin ATM operators are upbeat. End-users of Coinsource have already invested “many hundreds of millions” in Bitcoin, according to Muhney. “This is why we are very optimistic about the next phase of spike adoption, which we anticipate to begin in the second half of 2023 and will be comparable to 2017/2018.”
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