Cryptocurrency ATMs are a popular way of buying or cashing out bitcoins and other cryptocurrencies bypassing the conventional banking system. In September, the total number of crypto ATMs around the world reached 10,000 — 67 % more than a year ago. This sector is growing exponentially and shows no signs of slowing down. We’ve figured out how cryptocurrency ATMs work, why their popularity is rising and what it means for the crypto world as a whole and for UMI in particular. Here we go!
What is a cryptocurrency ATM and why we need one
Cryptocurrency ATM (crypto ATM or BTM, i. e. Bitcoin Teller Machine) is a machine for buying or cashing out bitcoins (BTC) and other cryptocurrencies: Bitcoin Cash (BCH), Ether (ETH), Dash (DASH), Litecoin (LTC) and others. Instead of a bank card, it uses a crypto wallet to send coins to/from.
Examples of cryptocurrency ATMs owned by General Bytes. Source
Crypto ATMs are primarily a convenient way to instantly exchange cryptocurrency for cash without any tap dance. They’re mainly popular with users who have no permanent broadband Internet connection and users who have no bank account or no intention of opening one for privacy reasons.
How the sector is growing
The first crypto ATM was installed in the Waves coffee-house in downtown Vancouver, Canada, in October 2013. According to Coin ATM Radar, the number of crypto ATMs around the world exceeded 10,000 in September 2020. A year ago this number was just 6,000, in early summer this year — 8,000. In just a year, the number of crypto ATMs grew by 67 %. Even though it’s a drop in the ocean compared to 3.5+ mln conventional ATMs, it’s the trend that matters. The sector is growing briskly and showing no signs of slowing down. As cryptocurrencies gain in popularity and trust levels, more and more crypto ATMs spring up.
Most crypto ATMs are installed in the USA (7,800 — which is by 127 % than a year ago), Canada (812) and Great Britain (260). Crypto ATMs are also popular in developing countries and countries with fluctuating financial markets. Demand for this service is also exponentially growing on Latin American, Asian and Australian markets. Crypto ATMs operate in 71 countries. There are currently 51 crypto ATMs in Russia, 23 in Ukraine, 3 in Kazakhstan.
Overall, there are over 400 manufacturers of cryptocurrency ATMs. They are mostly produced by Genesis Coin (35 % market share) and General Bytes (30 % market share) as well as Lamassu, BitAccess, Coinsourse. They have slightly different principles of operation, but we don’t want to go into detail — we rarely have a variety of crypto ATMs in the vicinity to choose from.
Regulations for crypto ATMs: how authorities view them around the world
Cryptocurrency ATMs can be used to buy and sell digital currencies as well as cash them out. Anything that has to do with cash is the responsibility of banking regulators which is why that cannot leave crypto ATMs unnoticed. Thus, in countries where cryptocurrencies are legal and regulated by law, operators of crypto ATMs ought to comply with anti-money laundering legislation. Thus, US operators need to comply with the same standards as banks: they must register with the Financial Crimes Enforcement Network (FinCEN) and obtain a state license. Canadian operators are to report all transactions involving amounts exceeding 10,000 Canadian dollars (about $ 7,400). We need to mention though that authorities often claim criminals use cryptocurrencies to conceal their earnings. In reality, criminals only launder about $ 1–3 bln via cryptocurrencies and $ 0.8–2 trln via banks and cash. Thus, only 0.3–1 % of all digital assets are used for criminal purposes.
Status of crypto ATMs in many countries is undefined. They are not banned, but authorities are suspicious about them: always inspecting and sometimes seizing devices or even arresting their owners (but not clients). Operators of crypto ATMs often have to change jurisdiction. For instance, after Germany introduced licensing for crypto ATM providers, their numbers began to dwindle. Thus, in August this year German authorities seized 17 crypto ATMs owned by the Polish company KKT UG for violating legal requirements. Nevertheless, ATM users did not sustain any losses. Crypto ATMs operated seamlessly until they were dismantled.
Even in countries where crypto ATMs operate legally, they have no guarantee of a glittering future. Authorities are more and more concerned by the possible use of these devices for money laundering. Thus, according to the analytical firm Cipher Trace, 88 % of funds sent to trading platforms via American Bitcoin ATMs in 2019 ended up on offshore accounts. The firm’s analysts believe crypto ATMs could be the target for regulators.
However, no one can say for sure how it will all end since cryptocurrencies are becoming part of our everyday life. The number of crypto ATMs is still increasing, with demand for these devices exponentially growing. Banning progress is far from being the best idea generated by the authorities. Logically, if cryptocurrencies are legal, crypto ATMs mustn’t be banned either.
Situation with crypto ATMs in Russia
In Russia, the first crypto ATM was only installed in 2017 — in the city of Ufa. According to Coin ATM Radar, there are 51 machines all around the country: in Moscow, Voronezh, Ekaterinburg, Kazan, Krasnoyarsk, Novosibirsk, Omsk, Rostov-on-Don, Smolensk, Samara, Tomsk, Chelyabinsk and some other big cities.
Crypto ATMs in Russia according to CoinATMRadar. Source.
Development of this sector in Russia is impeded by legal uncertainty. The country has not yet adopted adequate legislation regulating all aspects of crypto market. Once the relevant norms are formulated, we expect the number of crypto ATMs to increase steeply. That is if legislation is lenient.
How crypto ATMs work: how you can find and use them
Finding the nearest crypto ATM is not so complicated. There’re special services that can help you: for instance, Coin ATM Radar, Bitcoin ATM Map, Buy Bitcoin Worldwide. You can see the nearest crypto ATM on the map and find out about its functionality, buy/sell limits and coins it works with.
Map of crypto ATM distribution across countries according to CoinATMRadar.
Buying or cashing out cryptocurrency in a crypto ATM is as easy as refilling your mobile phone account or withdrawing cash from a bank card.
You can only buy cryptocurrency in most crypto ATMs, you can only sell it in some, thus cashing it out, but there are multi-functional ATMs where you can do both. You can find out functionality of crypto ATMs on the services above, such as Coin ATM Radar.
The specific sequence of actions depends on the crypto ATM, but the basic idea is always the same. Assume you would like to buy or cash out bitcoins:
- Press Buy BTC or Sell BTC (cash out).
- Scan you wallet’s QR-code from the mobile app or a printout. You can also enter it manually, but it’s important to make no mistakes as you cannot cancel the transaction. If you have no wallet, the crypto ATM can create a new one for you.
- Authenticate if required (see below).
- Find out the price and the fees.
- Lodge cash if you’re buying cryptocurrency or send cryptocurrency to the specified address (scanning the QR-code is usually enough) if you’re cashing out. Some ATM models will instantly dispense cash while others will wait for transaction confirmation.
- Confirm the transaction and wait until the machine completes it. If you’re buying, cryptocurrency will be sent to your address; if you’re selling, you will receive cash.
- Save the receipt, just in case. You might need it if one day authorities start asking questions about where you got cryptocurrency or cash from selling it.
As you can see, it’s quite simple and almost identical to the usual routine with any payment machine or ATM.
Crypto ATMs usually don’t accept bank cards — you can only buy coin for cash. Cards allow you to cancel transactions while cryptocurrencies don’t. However, some crypto ATMs accept cryptocurrency cards bound to your blockchain wallet.
You can buy as much cryptocurrency as the operator holds. You can also withdraw as much cash as the crypto ATM contains. We’d also like to emphasize a couple of things:
- Price and fee. Coin price and fee amount depends on the crypto ATM and its provider. In crypto ATMs digital assets usually cost more than on the exchange. That’s their major drawback. If the machine does not authenticate users, the price difference could be as big as 10 % or even 20 %. The total cost including the fee amounts to 5–10 % on average. The fee is conditioned by the need to incur additional costs on the part of the ATM owner: rent of space, maintenance, regulatory compliance, payment of bank fees for use of fiat money. Naturally, they also earn on the price difference.
- User authentication. In countries where cryptocurrencies are legally regulated, you might need to authenticate to use a crypto ATM: take a picture, enter an ID, such as your phone number, scan your passport or even finger prints. These checks are usually conducted if you buy or cash out a big amount, for instance, $ 1,000. The bigger the amount, the more details you need to provide.
For operators of crypto ATMs, user authentication is the legal requirement according to the anti-money laundering legislation. This check makes it harder for criminals to launder their criminally obtained receipts. Honest users have nothing to fear.
In countries where cryptocurrency is not legally regulated, you can use crypto ATMs anonymously. Users in Russia and Ukraine are not required to authenticate.
Advantages and disadvantages of crypto ATMs
Crypto ATMs are a convenient tool with both advantages and disadvantages.
Advantages of crypto ATMs:
- In a crypto ATM, you can usually buy cryptocurrency faster than on a regulated exchange where you need to undergo verification and provide a complete set of documents. Verification in crypto ATMs (if required) only takes a few minutes while on the exchange it could take weeks.
- Using a crypto ATM can be more confidential than buying or exchanging coins on an exchange (but it depends on the jurisdiction and the provider).
- You can buy cryptocurrency for cash.
- It’s often the most convenient way to buy or cash out cryptocurrency for people with no access to the banking system.
- Even if you do have access, it’s still very convenient as it’s really simple: you just need to go out into the street and withdraw cryptocurrency from a crypto ATM with no exchange transactions. It’s as easy as using a bank card.
Disadvantages of crypto ATMs:
- Coin prices and fees are less attractive than on exchange platforms or auto-exchangers.
- Crypto ATMs are only available in big cities — there might simply be none in your area.
- Advanced users who are not afraid of using bank accounts and cards to buy or cash out cryptocurrencies, don’t really need crypto ATMs, primarily due to high fees and price differences.
As a final note
Crypto ATMs are a useful and convenient tool. It doesn’t suit all users and all cases. Users who do not care about their privacy and have access to banking services, can well do without ATMs. However, ATMs can be of help to holders of cryptocurrencies from developing countries or cryptocurrency newbies. Anyway, the more machines we have, the wider will be acceptance of cryptocurrencies.
Crypto ATMs make transactions with digital assets more habitual for all of us. They allow anyone to cash out cryptocurrency — just as it happens in usual ATMs.
Unfortunately, right now you cannot buy or cash out UMI in a crypto ATM. But we’re confident that as the project grows and gains in popularity you will have this possibility. We will work on creating and promoting UMI ATMs. Moreover, we will make every effort to provide you with services of both maximum quality and maximum profitability — without “extortionary” fees and price differences. As always — it’s all for you. 😉
Would you like to have a UMI ATM in your city? Would you use it? Share your opinion in the comments below.
P. S. As a reminder, we’re now designing UMI cards you will be able to use to cash out the coins in the usual ATMs all over the world. Cards will be issued in partnership with ISPClub — an IT-platform and verified UMI pool. We will also release a mobile app to pay for goods in UMI in any stores.