What Are Bitcoin and Crypto ATMs and How Do They Work?
Since Automated Teller Machines (ATMs) were first invented they’ve provided a convenient way of accessing your cash and carrying out simple banking tasks at all times of the day and night.
So, it’s not surprising that ATM technology is being used to support the rapidly expanding Bitcoin and cryptocurrency ecosystem.
Latest figures show that – at the time of writing in August 2020 – there were nearly 8,500 Bitcoin ATMs (sometimes referred to as BATMs) globally, enabling holders of debit or credit cards, or cash, to carry out crypto transactions for a fee.
This figure represents a huge surge in installations, with the rate doubling in 2020 alone. Bitcoins can now be found in a wide range of locations, even small convenience stores.
Two types of BATM
There are currently two main types of Bitcoin ATM. Firstly, you have simple ATMs that allow users to purchase Bitcoin for whatever reason – to use for a transaction or to add to their investment portfolio.
Then you have the more advanced ATMs that actually allow users to buy, sell and transfer a wide range of digital currency – effectively meaning they can trade using the machine.
Physically, the machines are often a lot smaller than your typical ATM. You don’t necessarily need an existing digital wallet to buy coins – the machines will supply you with one when you make your transaction.
Once you’ve purchased your coins you are given a printed copy of your new wallet address and balance, together with a copy of your private key which means only you can access your coins.
Bitcoin ATMs also cater for people who are less-tech savvy – ie those who aren’t confident when it comes to setting up online accounts and wallets and then buying coins through an exchange.
They’re used by people who prefer the increased anonymity an ATM can offer, especially ones which allows cash purchases.
While most machines require some form of ID to use to comply with regulations in any given country, this can be something as simple as a phone number which can easily be anonymous and dispensable.
However, an increasing number Bitcoin ATMs are now requiring some form of formal photo ID (ie a driving licence or passport) which has to be scanned in before you can purchase coins.
Two companies have emerged as global leaders in ATM technology – General Bytes and Genesis Coin, both of which having around 30% of the market share.
The United States leads the way in terms of the availability of Bitcoin and cryptocurrency ATMs, with around 80% of all units located in North America.
Canada, the United Kingdom and Austria followed in terms of the number of Bitcoin ATMs in operation.
Bitcoin ATMs by country:
- United States – 6,866
- Canada – 815
- United Kingdom – 279
- Austria – 153
- Switzerland – 83
- Spain – 81
- Germany – 70
- Czech Republic – 66
- Poland – 60
- Italy - 59
Like the price of Bitcoin, ATM growth has been exponential – from a mere 450 units in 2015 to the figure we have today.
And the curve is getting steeper, with many more countries around the world expected to start more widely using the technology in the near future.
Used for criminal activity?
But as the number of ATMs in use soars, some analysts have suggested they are increasingly being linked to money laundering activities and facilitating other criminal activities.
Crypto analytics firm CipherTrace found that Bitcoin ATMs were often being used to send funds to what it said were ‘high-risk exchanges’, ie trading platforms known for facilitating nefarious activity.
The firm also found that an increasing percentage of Bitcoin ATM transactions made in the United States throughout 2019 were used to send funds to offshore destinations.
In a Spring 2020 report, CipherTrace wrote: “The percentage of funds sent to high-risk exchanges from U.S. BATMs has seen exponential growth, doubling every year since 2017.
“While approximately 2% of U.S. transactions went to high-risk exchanges in 2017, that number is now knocking at the 8% mark.”
Bitcoin ATM operators insist that they are following all the regulations stipulated for them to operate.
However, it’s likely that tighter regulation and more controls over BATM use will come into force as their popularity grows.