There are various ways for users to access cryptocurrency like Bitcoin (BTC). The most common method is through a trusted digital exchange, like Coinbase and Binance. All that this requires the user to have is a smartphone with an app installed. Once they have the app, users can purchase cryptocurrency that is listed on the exchange.
Another way to get into crypto is by using a Bitcoin ATM or BTM. Using a BTM is a fast and easy way to access Bitcoin and other cryptocurrencies (offered by the BTM operator) if you are using cash. They can be found throughout the world in public places like airports, hotels, and commercial centers. All that a user needs to have is a cryptocurrency wallet that is installed on their smartphone or the wallet address.
A BTM is just like an ATM. The main difference is that an ATM is connected with a bank, a BTM is connected to the blockchain via an operator. While banks have their own rules and policies for withdrawing and depositing money, the blockchain is an open decentralized database that keeps a record of accounting information. The blockchain tracks balance and secure it using cryptographic techniques, which encrypts data for tamper prevention. A user’s Bitcoin is actually stored as a value in a cryptographically secured database on many computers that are participants in a network. The main role of operators is providing users access from a BTM.
Banks have business hours, document requirements and need the approval of a user before they can have an account to use an ATM. A BTM does not require any of this, as the blockchain has no business hours or submission of any documents to use. While an ATM goes offline on occasion, a BTM will only go offline if there are problems with the operator. The blockchain never goes offline because it is a network of many computers. If one computer is down, there will always be another computer to provide services on the network.
Bitcoin ATM kiosk (Source Chainbytes)
Users will be familiar with the BTM setup. They are kiosks that can be found in many public places. A user walks up to the BTM with their smartphone and interacts with a screen and keyboard or a touchscreen with instructions to follow. A user will need to have their cryptocurrency (in this case Bitcoin) wallet address on their smartphone that can be scanned by the BTM as a QR code. Users can also manually type in their address, but this can be more tedious so scanning a QR code is much faster.
If a user wants to deposit money to their Bitcoin wallet, they will need cash (in the currency of their location). This is how users can buy BTC. Many BTM also supports other cryptocurrencies which users can purchase (provided the wallet address is given). A user can also withdraw cash from their wallet using a BTM. Once a user scans or enters their wallet address, they have access to their crypto. The BTM then has an option to withdraw to cash.
Some BTM will require user authentication or a form of verification, just to make sure you are the owner of the account provided to the BTM. This can be through an SMS text sent to the user’s smartphone as an OTP (One-Time Password) or a code sent by e-mail. All a user needs to do is enter this code to verify their account, and they can go about using the BTM.
Bitcoin ATM (BTM) kiosk
As cryptocurrency value has surged to $1,677,623,229,028 (As of 6/7/21) market cap, the number of BTMs has seen growth as well. According to Coin ATM Radar, the number of BTMs has increased from 7,756 in May 2020 to 19,452 in May 2021. BTMs have grown by 150% in just a year. In the US alone, there are 16,378 BTMs in operation (as of writing). The trend continues as more users get into the greater cryptocurrency market.
BTMs can be found in 71 countries (latest data as of writing). There are a total of 41 producers of BTM and 596 operators. Producers include companies that build the BTMs like Chainbytes, while operators are those who provide access to users. There is a low cost of entry to the market with a high potential return for operators. BTMs are also becoming more common and easy to use, so they are user-friendly and convenient.
Besides BTC, BTMs can support other cryptocurrencies as well. These are good signals that wider support for cryptocurrency as a digital asset is growing. Signs that cryptocurrency is going mainstream include reports that 46 million Americans, or 17% of US adults, now own Bitcoin (Based on a survey by NYDIG). Overall, there are an estimated 73 Million users on the Bitcoin network (source Statista). The numbers are still a small segment of the world population, so there is plenty of room to grow.
Travelers, like tourists and businessmen, will often have to use a money exchange to convert currency. According to many jurisdictions, you have to declare the amount you are carrying before you can enter the country. The problem starts at customs, where users will be asked to declare how much cash they have on hand. There is a limit (depends on the country) for foreigners who are visiting.
A problem with carrying bundles of cash is they can get lost or even confiscated due to certain circumstances (e.g. customs law violations). The way around this is to, of course, withdraw money from a bank that can release your funds. Instead of a bank, travelers can also use a BTM. They are legal to use since the operators are vetted for compliance. This brings a convenience that allows withdrawing cash in the local currency.
During the Bitcoin Miami 2021 conference, Fred Thiel (CEO of Marathon Digital Holdings) made mention of BTMs as a way that helps users remit money back to their home country. This is because cryptocurrency is borderless. It allows a user working in a foreign country to send money in the form of crypto back to their home country with less friction (lower fees and less time). The recipient of the crypto can then exchange it for fiat via a BTM. With banks or wire transfers, the fees could be larger and it can also take much longer to receive the money.
It might actually be better to use a BTM rather than an exchange for any user. You have full ownership of your digital assets, unlike in an exchange where your BTC is under the exchange’s custody. A BTM does not hold your BTC, it just provides access to crypto on the blockchain. When exchanges go bankrupt or experience a hack, it can also affect the user’s funds. By not having their BTC under an exchange’s custody, users do not have to worry about losing their funds. They just have to be responsible for holding it (e.g. paying taxes on crypto, keeping wallet secure).
Exchanges often experience outages or congestion during busy periods of trading. When many users are trying to buy a dip or withdrawing to fiat after reaching a top, the system can get bogged down with many requests it cannot handle simultaneously. This has happened to Coinbase on certain occasions, and the problem has to do with many users trying to access the exchange at the same time. A BTM gives users direct access to their BTC since there is no other party to deal with. BTMs bypass exchanges so that users directly access their BTC on the blockchain from their wallets.
A BTM is also the best way to convert crypto to fiat or cash and vice versa. Exchanges and banks do not provide money-changing services from crypto. If you were to use an exchange to convert crypto to US Dollars (USD), for example, you would then have to go to an ATM or local bank to withdraw cash. A BTM is a one-stop shop for cryptocurrency conversion to fiat and money withdrawal. Likewise, users can purchase crypto with cash on BTMs. On exchanges, you need to have a bank account or electronic payment method connected to your account before you can do this.
BTM provide the convenience of an ATM and an exchange. (Source Chainbytes)
Before you can use an exchange you need to follow their policies. As required by regulators, a user must submit their KYC (Know Your Customer) documents to the exchange for compliance with financial laws. KYC information includes PII (Personally Identifiable Information) about a user. That type of information includes any government-issued ID (e.g. Driver’s License, Tax ID Card) or passport. This can be used during investigations by regulators like the SEC (Securities and Exchange Commission) in US jurisdictions. This is used to vet a user when it comes to AML (Anti-Money Laundering) and ATF (Anti-Terrorist Funding) policies.
This is to ensure that a user is not involved with any criminal or illicit activity with their funds. This allows regulators to track users to prevent financial crimes and to make sure that their funds are not being laundered. If a user is under investigation, this allows regulators to request information from the exchange to review their transactions. This is also how regulation works with traditional financial systems, so cryptocurrency is not exempted from the law.
While this is the law, unfortunately, authentic documents can make it difficult or impossible for many people to buy crypto. This is because there are people who don’t have the appropriate documents, especially in developing countries. This can be due to many reasons, ranging from social status to political persecution. Not having documents is a disadvantage for many. For that reason, they also don’t have access to a bank account and have less opportunities to access financial services. The lack of access to even basic banking for savings or checking accounts means that their only method of finance is through cash or fiat currency.
This is where BTMs come into the picture. The unbanked and financially excluded can access crypto-based financial services through a smartphone by installing a crypto wallet. The BTM operator takes care of the legal issues involved in cryptocurrency, so the only responsibility a user has is with their crypto. A BTM provides a gateway to these services that will allow them to access Bitcoin for investing or receiving payments. Users do not need a bank, just cash for any transaction for buying crypto. They can also use a BTM to withdraw cash from their crypto, for spending purposes. What is important now is to bring more awareness to these types of users so they can benefit from BTMs.
BTMs are a fast and convenient way to access digital assets like Bitcoin. It also provides a gateway for the unbanked to enter a more inclusive financial system. The use of BTMs can help accelerate further adoption of cryptocurrency because of their availability. Their growth is in line with the increased demand for cryptocurrency.
The important thing here is educating users about BTMs and where they are available. This can open opportunities to new financial services that allow users access to digital assets. It won’t matter that it can help with financial inclusion if users are not aware of their existence. The good news is that the number of BTMs is growing. In that case, the growth of BTMs in operation will be an important part to further the adoption of cryptocurrency.