Most people are familiar with Automated Teller Machines(ATMs). You know, those machines from which you can withdraw cash from your bank account or sometimes even deposit money in your account.
But did you know there are cryptocurrency ATMs as well? Yup, you can actually buy cryptocurrency with cash from a machine. Crypto ATMs or Bitcoin ATMs are not necessarily a new thing. The first Bitcoin ATM, for example, was installed in 2013 in Canada. There are now over 40,000 crypto ATMs across the globe.
Cryptocurrency ATMs are popular mainly because they are accessible and don’t require users to have a bank account. If you’re also interested in learning more about Bitcoin ATM machines, then this article is for you.
Here, we will talk about Bitcoin ATMs, what Bitcoin ATMs are used for, how crypto ATMs work and whether they are safe or not.
How Does Crypto ATM Work?
Just like bank ATMs enable people to withdraw and deposit cash, cryptocurrency ATMs allow users to buy and sell cryptocurrency with cash. In other words, you can use a crypto ATM to convert your crypto into cash and vice versa.
The hardware of these ATMs generally comprises a monitor, QR code scanner, bill acceptor and dispenser. However, unlike traditional ATMs, crypto ATMs do not connect to a bank account. Instead, they use the internet to connect to a cryptocurrency exchange through which customers can buy and sell cryptocurrency.
The process generally involves first scanning a QR code that corresponds to the user’s crypto wallet. The user can then buy the cryptocurrency they want and the coins would be transferred to their wallet. The transaction record will also then appear in the user’s wallet.
The process is more or less similar for selling cryptocurrency. You need to first scan your wallet’s QR code and select the crypto and the amount you want to sell. The machine will dispense the cash once the transaction has been processed.
Crypto ATMs are of two types- unidirectional and bi-directional. The former are one-way machines that support either the buying or selling of cryptocurrency while the latter are two-way machines that support both the buying and selling of cryptocurrency.
Benefits of Cryptocurrency ATMs
Now, you may be wondering what benefits a cryptocurrency ATM offers. Why not simply use a crypto exchange? Well, crypto ATMs definitely have some advantages that make them so popular in the crypto community.
Convenience
This is one of the major advantages of crypto ATMs. While transactions on an online exchange still take some time, crypto ATMs provide immediate access to cash. Some Bitcoin ATMs even let users reserve cash in advance if they’re selling BTC. Therefore, cryptocurrency ATMs are a convenient option to buy and sell cryptocurrencies.
Accessibility
Cryptocurrency ATMs are a familiar technology for accessing new financial instruments. Most people are familiar with ATMs and using them for converting crypto to cash makes it easier for people to participate in crypto trading. This has the potential to bring more people into the crypto fold.
Privacy
You need to share minimal information while using a crypto ATM. On the other hand, you often have to submit your bank details including debit or credit card information for buying and selling cryptocurrency. Cryptocurrency ATMs mostly just ask for a phone number and not much else providing users with a high level of privacy.
Risks of Cryptocurrency ATMs
Cryptocurrency ATMs are still an emerging technology and at a time when cryptocurrency regulation itself is not precise, crypto ATMs add another dimension that regulatory agencies need to tackle.
Though in some cases existing ATM laws and rules may apply to cryptocurrency ATMs, the latter often come with their own set of challenges and risks.
High Fees
The biggest disadvantage of cryptocurrency ATMs is the high fees charged by them. Crypto ATMs generally charge a percentage of the total transaction amount as fees. This fee can range anywhere from 7% to 15% for buying or selling cryptocurrencies. In comparison, the same transaction would be way cheaper on a cryptocurrency exchange.
Transaction Limits
Just like bank ATMs have a daily withdrawal limit, crypto ATMs also have transaction limits. This limit can range between $1,000 to $10,000 making crypto ATMs unsuitable for large-value transactions.
Geographical Availability
While more and more Bitcoin ATMs have started coming up in different places, they are still concentrated in only a few locations. There are over 40,000 Bitcoin ATMs in the world and more than 30,000 of them are in the USA. Therefore, people outside of North America and Europe to some extent do not have much access to Bitcoin ATMs.
No Insurance for Funds
Cryptocurrency ATMs generally do not provide any insurance in the case of theft or loss. On the other hand, cryptocurrency exchanges offering custody services to users often provide anti-theft insurance. Further, customer support may not even be available if you have problems with any transaction.
Frauds and Scams
Since crypto ATMs allow users to anonymously buy and sell cryptocurrencies, they can be easily used by malicious actors for less-than-legal activities. Criminals can also install data sniffers and spy cameras in these ATMs to steal users’ personal information. According to the FBI, there have been cases where crypto ATMs, phishing emails and QR codes have been used to defraud people.
How to Use a Crypto ATM
For using a crypto ATM, you generally need to have a phone number and a crypto wallet. Depending on the regulations in the country, the ATM may be subject to Anti-Money Laundering(AML) laws and hence, may require you to scan a photo ID as well.
Though the finer details may differ between different crypto ATM providers, the main process is more or less the same:
Step 1: Get a Crypto Wallet
You need to have a crypto wallet address to transact on a Bitcoin ATM. Therefore, you should first sign up for a digital wallet before searching for a Bitcoin ATM. Most ATMs support multiple wallets and some even have their own wallet software. You can research and choose any wallet that is compatible with Bitcoin ATMs.
Step 2: Verify Your Identity
Bitcoin ATMs, atleast in the USA, have compulsory ID verification. For this, you are usually asked to submit your phone number after which you receive a verification code. Next, you have to input the exact code mentioned in the text message.
Certain ATMs may even have further ID requirements such as scanning a photo ID such as a driver’s license or entering your social security number.
Step 3: Scan the Wallet QR Code
Now, you have to scan your crypto wallet’s QR code to let the machine know the address where the cryptocurrency is to be sent. For this, you need to go to your wallet’s app and find the option for displaying a QR code. After that, you can use the ATM’s QR scanner to scan the code.
Step 4: Purchase the Cryptocurrency
Next, insert the amount of cash you want to exchange for crypto into the bill acceptor. The ATM will then display the value of the cash in terms of your selected cryptocurrency. You can proceed with the transaction if you’re satisfied with the amount.
Step 5: Complete the Transaction
Press “Buy” or “Confirm” to complete your purchase. Since crypto transactions are blockchain-based, they can take some time to process. Therefore, don’t panic if you don’t see the purchase amount reflected immediately in your wallet. The transaction is complete when the funds are deposited in your wallet and you receive the transaction receipt from the ATM.
Step 6: Selling Cryptocurrency
For sell transactions, you need to select “Sell” on the crypto ATM. Then, verify your ID and scan the generated QR code to send the cryptocurrency to the specified address. Depending on the ATM operator, you may get cash immediately or may have to wait for the transaction to be first confirmed. After that, you have to confirm the transaction on your end and take the issued receipt.
Are Crypto ATMs Safe?
Crypto ATMs are safe in the sense that they use blockchain technology to process transactions. Funds are securely transferred from one crypto wallet to another and the transaction itself is verified and recorded on the blockchain.
Further, crypto ATMs these days also follow KYC/AML norms and ask for identity verification before allowing anyone to use the machine. Hence, you may be asked to verify your phone number or even submit an additional photo ID such as a driver’s license.
However, these KYC requirements are often inconsistent across different regions making it easy for bad actors to use crypto ATMs for illegal activities. The vast number of crypto ATM operators also makes it difficult to implement anti-fraud measures.
As cryptocurrency ATMs are still a new phenomenon in the crypto world and the regulations around them are unclear, they are all the more vulnerable to phishing scams, private key theft and other attacks.
Frequently Asked Questions(FAQs)
Can I deposit Cash in Crypto ATM?
You cannot use a crypto ATM to deposit fiat money in your account. However, you can convert cash into cryptocurrency with a crypto ATM. You can deposit cash in the ATM and then buy Bitcoin of an equivalent value which will then be directly transferred to your crypto wallet.
What is a Crypto ATM fee?
Crypto ATMs are infamous for charging very high transaction fees to users. As per Coin ATM radar, most ATM operators charge 16 percent of fees for buy transactions. The same can range between 0 to 15 percent for sell transactions.
How Much Can I Withdraw from a Crypto ATM?
Most crypto ATMs impose daily withdrawal limits like traditional bank ATMs. The limits differ from country to country and some places may not require KYC verification for transactions below a certain limit. In the USA, for example, the lower limit can be $5-$10 and the maximum limit is around $10,000.
The Bottom Line
The first Bitcoin ATM was installed in 2013 and since then, thousands of them have come up in different locations around the world. They are an accessible and convenient mode of getting cryptocurrency and have the potential to attract more people towards crypto.
You don’t need to have a bank account to use a Bitcoin ATM and can easily buy crypto with cash using an ATM. However, they are still a novel technology and have their fair share of challenges. The geographical distribution of Bitcoin ATMs is very uneven and they charge extremely high transaction fees.
As ATM regulations are inconsistently applied to them, Bitcoin ATMs are vulnerable to frauds and scams by bad actors. Therefore, it is important to do your research and understand all the risks before using a crypto ATM.