Bitcoin ATMs: What You Should Know Before Purchasing Bitcoin from an ATM


The world's first automated teller machine, introduced on June 27, 1967, was inset into the side of a North London Barclays Bank. The device's debut gave banks a way "to offer working people access to their money when they were closed," according to the BBC.


Bitcoin ATMs What You Should Know Before Purchasing Bitcoin from an ATM

These machines have since become commonplace for mobile banking. Today, over a half-century later, these machines are being crypto-fied as Bitcoin ATMs, and they're heading to a corner store near you.


What Is a Bitcoin ATM?

Bitcoin ATMs, also known as crypto ATMs or BTMs, are automated teller machines that allow users to buy or sell Bitcoin using cash, debit, or a cryptocurrency wallet on the move.


Whereas regular fiat kiosks connect a user to their bank account to conduct a variety of services, Bitcoin ATMs are still essentially one-way transactions in which customers pump cash into the machine to purchase digital currency. Newer types, such as Coin Cloud ATMs, allow customers to withdraw cash in exchange for cryptocurrency, generate a printed paper wallet, and transfer purchased Bitcoin to a hardware wallet.


These internet-connected freestanding kiosks typically have a touchscreen interface, QR scanner, bill acceptor, and dispenser.


ATMs that accept cryptocurrency can be found near specialty stores, grocery stores, gas stations, airports, restaurants, banks, and shopping malls. Users can use online resources, such as this map on Bitcoin's website, to find one of the 38,638 Bitcoin  ATMs globally that are closest to them.


"Cryptocurrency ATMs make bitcoin accessible through its simple technologies while also lowering entry barriers for investors," said Daniel Polotsky, founder and chairman of the board of CoinFlip, the third-largest Bitcoin ATM operator in the United States. CoinFlip operates 10% of the nation's crypto ATMs, which provide rapid access to a variety of popular digital currencies.


"Unlike standard ATMs, crypto ATMs do not require clients to have a bank account," Polotsky explained, "so anyone interested in investing [in crypto] can do so."


How Do Bitcoin ATMs Operate?

The installation of Bitcoin ATMs brought passers-by within a few steps of cryptocurrency exchanges. There are instructions to help consumers through a pretty intuitive process, similar to a standard bank auto-teller.


Bitcoin ATMs What You Should Know Before Purchasing Bitcoin from an ATM

"Depending on the magnitude of your transaction [and the ATM type], all you need is cash, a cryptocurrency wallet, and a phone number," Polotsky explained. For larger transactions, identification may be required. Aside from that, Polotsky advised setting up a crypto wallet before visiting a kiosk.



How to Make Use of a Bitcoin ATM

The first step is for the user to activate the screen by touching the monitor. Then, on the following screen, users would choose whether to purchase or sell Bitcoin and disclose the price range within which they desire to buy or sell.



Step 2: Based on the option chosen, the user may be asked to produce identification. To prevent fraud on all transactions, some Bitcoin ATMs demand you to verify your phone number, snap a photo, and/or scan a government-issued ID, such as a driver's license or passport. Lower-value transactions, on the other hand, often require little to no identification.


This machine, for example, found in a Canadian mall, has a predetermined barrier of 3,000 Canadian dollars, or roughly $2,250 US dollars, and simply requires the user's crypto wallet address to complete the transaction.


The stages that follow will vary depending on the needs of the user.



Step 3: Crypto wallet addresses are necessary to record a transaction on the Bitcoin blockchain. At this level, a user would then provide their wallet address by scanning the QR code connected to the account.


Step 4: Insert the desired quantity of Bitcoin into the ATM's bill feeder.


Step 5: The transaction is processed by the ATM. The ATM will deposit bitcoin into the user's bitcoin wallet, which could take up to 10 minutes depending on network traffic.



Step 6: After submitting the necessary degree of identification, the user would enter the exact quantity they want to sell. If they haven't already done so in the previous step, the user may be asked to enter a phone number to get an SMS notification after the transaction has been completed.


Step 7: Once the sale price is finalized, a receipt with instructions and a QR code is printed. After stepping away from the machine, the user must use a smartphone to send their Bitcoin to the code provided, an address linked to the ATM. Here, the user accesses their crypto wallet using their preferred app, scans the QR code, deposits funds send the transaction, and authorizes it.


Step 8: The transaction will then be processed by the ATM, which could take up to 10 minutes. If the user provided a phone number, they will receive a text message when the withdrawal is complete.


Step 9: Returning to the machine with the ticket in hand, the user picks "redeem ticket" rather than "sell" from the choices menu. When a user scans the QR code, the ATM processes the request and cashes out the sale amount.


The Advantages of Bitcoin ATMs

According to Shuo Chen, a blockchain expert at Singularity Group, a business training company that offers executive educational programs, part of the appeal of adapting crypto to regular banking processes — such as an ATM — is all about comfort, speed, and ease of use.



  • Convenience
  • Transactions that are completed quickly
  • A well-known procedure
  • There is no need for a bank account or identity.


"[Crypto ATMs] can be a handy way to purchase and sell Bitcoin since they allow rapid access to cash," she added, stressing the ubiquity and 24/7 availability that prompted the development of auto-teller technology in the first place. Before Bitcoin ATMs, it was impossible to convert cryptocurrency to cash. Reintroducing new technology in recognized forms aids those who wish to engage but are too afraid to do so.


"ATMs are a familiar way for individuals to interact with making financial transactions," Chen explained, stressing that they have the potential to attract a new wave of cryptocurrency investors.


Certain crypto ATMs, like ordering a Frappuccino before entering Starbucks, can save you a seat in advance, according to David Kemmerer, co-founder, and CEO of Coin Ledger, a crypto wallet, and NFT tax software service.


"People who wish to sell Bitcoin may also use a wallet program to reserve cash at ATMs ahead of time," Kemmerer noted. This allows users to purchase and sell Bitcoin fast and easily without having to wait for lengthy verification processes... "Transactions with these machines are frequently almost instantaneous," he noted.


Chen, who is also an early-stage Silicon Valley investor and teaches about the future of finance and entrepreneurship at the University of California, Berkeley, also mentioned that some people may choose to use a Bitcoin ATM because their ability to work in cash allows users to avoid any type of banking that may be required before a transaction.


On that note, Bitcoin ATMs provide unrivaled levels of privacy. To purchase and sell Bitcoin on internet exchanges, consumers must submit sensitive information such as debit or credit card data or bank account information. Users of Bitcoin ATMs just need to provide basic information.


Additionally, Chen emphasizes the new level of anonymity — or pseudonymity — that Bitcoin ATMs allow customers, as some machines just require a phone number and no personal identification at all.


Bitcoin ATM Risks And Challenges

At a time when governments are still grappling with cryptocurrency in general, Bitcoin ATMs offer another degree of complication that regulators must consider. Thankfully, because traditional banking networks are well established, a regulatory structure already exists.





In the United States, for example, all Bitcoin ATM companies are subject to federal anti-money laundering legislation. This means that all operators must register with the Financial Crimes Enforcement Network and follow the Bank Secrecy Act. Even still, as a New Jersey oversight body discovered, regulation has been inadequate at best, with law enforcement officials believing that the machines are aiding in illegal activity such as money laundering and drug trafficking. According to Politico, "most of these machines are run by legitimate companies, but some are put up by unlicensed operators."



When it comes to visiting a Bitcoin ATM, the major barrier for active crypto users is the exorbitant costs.


Out-of-network usage is charged at a set rate in traditional banking. According to Bankrate's 2022 study, these rates have an average combined cost of $4.66 and a fee of $3.14 for each transaction.


Bitcoin ATMs, on the other hand, charge a percentage of the transaction amount. Most operators charge a 15 percent fee to acquire Bitcoin and range from 0 to 15 percent to sell, according to crypto kiosk mapping firm Coin ATM Radar. In comparison, the identical transaction on an online crypto exchange would most likely incur a 1.5 percent transaction, or "gas," cost, which has historically fluctuated from less than 1% to 5%.



Bitcoin ATMs do not protect against theft or loss in the absence of bank backing. If there are problems with a transaction, customer help may be more limited than with well-established institutions.



"Investors must conduct their research and examine self-custodial methods," Polotsky said, adding that this might be as simple as evaluating any third-party involvement — such as an exchange or digital wallet provider — and routinely putting one's crypto offline, in cold storage. Accountability is desired from both ends, users, and providers.



Bitcoin ATMs, like regular bank auto-tellers and online crypto exchanges, have a daily transaction restriction. According to Investopedia, this range normally ranges between $10 and $10,000, depending on the operator. Polotsky's startup, CoinFlip, for example, has four tiers, with the lowest ranging from $20 to $900 and the highest ranging from $8,005 to a maximum of $16,000 each day.



While Bitcoin ATMs have proliferated by the hundreds in the decade since their birth, they are no match for online exchanges, which are still just a web search away.



The FBI uncovered a pattern in which scammers used Bitcoin ATMs, phishing emails, and QR code technology to dupe people into fraudulent schemes. According to the FBI, these cybercriminals would send a QR code containing the scammer's wallet address along with an urgent email, then direct the victim to a physical crypto ATM to complete the transaction.


Bitcoin ATMs also provide easily accessible, difficult-to-trace outlets for malicious cryptocurrency users. If their private key is discovered, whether via their misuse or covert methods, unwitting victims may lose their funds due to a lack of identity.


"Data sniffers and spy cameras can be installed in these ATMs, allowing thieves to obtain a user's personal information, which can later be exploited to steal their bitcoin," stated CoinLedger's Kemmerer. Furthermore, to defend their business, crypto ATM operators may attempt to complicate monitoring measures aimed at preventing fraud and protecting user data.



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