A Bitcoin ATM is a kiosk or a physical access point that enables buying or selling of Bitcoins using physical cash.
Instead of interacting with the centralized servers of banks, the ATM service providers enable buy/sell of specific cryptocurrencies, which can be used as a medium of exchange globally. Apart from Bitcoin, there are ‘cryptocurrency ATMs’, which provide cash-based transactions for other cryptocurrencies like Litecoin [LTC] and Ethereum [ETH].
Moreover, there are some teller machines which allow for purchase via debit cards as well. There is usually a percentage charge involved in the process which varies from 3-10% globally.
Buying Bitcoins
The ATM either generates a new offline wallet (paper wallet) with the purchase, or funds are transferred to a user specified wallet.
The service providers more often than not need to comply with KYC/AML rules on these ATMs. Therefore, along with physical cash, it also requires a document for identity proof. The machines come with an optional scanner which performs the verification process, and scans QR codes as well.
After the verification process is complete, the user can buy Bitcoins using cash bills. Nevertheless, there is usually a daily limit to the buying amount using an ATM. It varies between $3,000-$10,000 depending on the service provider, and levels of verification cleared by each customer.
Selling Bitcoins
Entering the full Bitcoin private key can be a cumbersome process, and also creates a security risk. Moreover, transferring funds using one’s mobile or hardware wallet to the ATM address can create various disputes. Hence, selling Bitcoins using the ATMs can be tricky.
Therefore, the basic operation of Bitcoin ATMs usually allow buying of Bitcoins only.
The ‘selling’ process usually requires registration with the service providers of the ATM. KYC and AML verification along with regulatory adherence is mandatory. Moreover, the wallet on the service provider’s account can be used to sell Bitcoin without any hassle. However, in this case it is required to trust a third party with your private keys.
Bitcoin ATM History
Canada is credited for installing the first ever Bitcoin ATM on 29th October 2013. Nevertheless, there was an attempt to launch an ATM in the US earlier that year. A cigar bar in Albuquerque, New Mexico opened the unit in February. However, it was shut down in the next 30 days due to lack of regulatory compliance.
The initial idea of Bitcoin ATMs included the anonymity feature providing for direct purchase with cash. However, it opens up opportunities for converting and sending unaccounted wealth worldwide, which can be a challenge for authorities.
Eventually, in April 2014, the first ever regulatory complaint ATM was launched in the US in Seattle, Washington. Operating an ATM requires a money transmitter’s license and the provider must comply with other specific regulations in the country as well.
However, in India no progress has been made, the founders of Unocoin attempted to bypass the ban by the country’s central bank in providing banking services to firms engaging in virtual currency by the ATM. It was seized within weeks of installation and the founders were arrested by the police as well.
Check out the Full Guide here: https://itsblockchain.com/bitcoin-atm/
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