Bitcoin and ATMs: Uncertainties and Possibilities
Despite the uncertainties surrounding the virtual currency, several firms already have rolled out ATMs to handle bitcoins and more are on the way, according to a new report.
Titled “Introduction to Bitcoin ATMs,” the report by Tremont Capital Group for the ATM Industry Association includes a rundown on how bitcoin works and an update on efforts to regulate it around the globe, including in the United States. The Financial Crimes Enforcement Network said last March that bitcoin administrators and exchangers are considered money service businesses and therefore required to register with FinCEN and be subject to the Bank Secrecy Act.
That means also then following anti-money laundering and know-your-customer rules and reporting requirements, as well as the net worth, surety bond, registration and licensing requirements for money transmitter businesses in the 47 states that have those requirements. (The exceptions are Montana, New Mexico and South Carolina, the Tremont Capital Group report said.)
“Proper registration and compliance across the country is estimated to cost at least $5 million to $10 million and is therefore cost prohibitive for many,” the report said.
However, some major companies such as Overstock.com and the Sacramento Kings of the NBA have begun accepting bitcoins and the report said some exchanges are reporting adding thousands of other participating retailers in recent months, a list they claim is growing rapidly.
“To the extent that bitcoin becomes a desired payment mechanism for Millennials in the future, many retailers will accept it,” the report said.
The report also outlines the various ways to obtain bitcoins, including in person and through online exchanges, marketplaces and mining, and concludes that ATMs may lead the list in some ways.
“The easiest way to exchange cash for bitcoin locally and instantly is to complete a transaction using an ATM-like device,” the report said. “A purchaser simply scans his or her digital or paper wallet, inserts cash into the machine, and bitcoins are added to his or her wallet according to the exchange rate listed on the device.”
The report lists details on several makers of bitcoin ATMs, ranging in price from $5,000 to $18,500, and said, “Tremont Capital Group anticipates that a wide range of new players will attempt to enter the Bitcoin ATM market in 2014. Bitcoin as a currency needs to become more mainstream and the bitcoin ATM business/profitability model needs to be refined and proven further in order to attract additional deployers.”
The exchange rate has varied wildly amid reports of regulator crackdown on the virtual currency, including at Mt. Gox, the major exchange whose account at an Iowa credit union was seized by the U.S. Department of Homeland Security from payment processor Dwolla because of alleged FinCEN guideline violations.
Also a problem has been hack attacks that have purloined hundreds of thousands of the virtual coins – and led to Mt. Gox’s recent collapse and bankruptcy filing in Japan.
The report is free to ATMIA members and $195 to non-members, $145 until April 30.
“As of the writing of this report (March 2014) there remains a great deal of excitement and uncertainty as to whether the use of bitcoin and bitcoin ATMs will expand or contract in the coming years,” the report concluded.