Bitcoin ATMs 101

Executive Summary

Chapter 1 Introduction
Bitcoin ATM statistics
Bitcoin users
Revenue opportunities

Chapter 2 Cash recycling
Bitcoin mining
Bitcoin exchanges
Bitcoin wallets
The block chain
Utility
International remittances
Unbanked and underbanked consumers
Confirmation

Chapter 3 Issues
Niche market
Regulations
The IRS
FinCEN
New York State
U.S. bitcoin ATMs
Texas
Canada
Quebec
The ATM Industry Association

Chapter 4 Types of bitcoin ATMs
Bitcoin ATM network operators
Overview of manufacturers and models

Chapter 5 Bitcoin transaction flow
Robocoin
Verifying ID at bitcoin ATMs
Purchase walk-through
Sale walk-through
Robocoin operator float
Robocoin Exchange Connector
Lamassu advice on float
Remittances
Transaction fees

Chapter 6 Implementation
Location
Operational considerations
Consumer privacy
Lamassu guidance

Chapter 7 Conclusion

References

Bitcoin is a digital representation of value — not issued by a central bank, credit institution or e-money institution — that can be used instead of money. It allows people to send and receive payments within a decentralized peer-to-peer computer network and quickly has become the world’s prominent virtual currency.

A growing number of major online retailers — including Overstock.com, Dell and Microsoft — accept bitcoin, while PayPal allows U.S. consumers to purchase digital goods via bitcoin.

“The [bitcoin ATM] concept emerged after bitcoin enthusiasts concluded that the easiest way to exchange cash for bitcoin locally and instantly is to complete transactions using an ATM-like device,” Sam Ditzion, CEO of U.S. ATM and payment industry investment firm Tremont Capital Group, said in the Virtual Currency Today article, “What’s on the horizon for the bitcoin ATM?”

“Some of the machines that have been developed are also capable of the reverse: converting digital currency into physical currency. The devices are typically sold to individual operators who own and operate the machines in high foot-traffic retail locations in an effort to make money from conversion rate spreads.”

Prior to the advent of bitcoin ATMs, the only ways to buy and sell bitcoins were to use a bitcoin currency exchange, or transact face-to-face or online with another bitcoin user. However, those methods could be challenging for less tech-savvy consumers, not to mention their security risks — e.g., fraud and hacking — and a lack of regulatory protection for consumers’ bitcoins.

“While still in its infancy, the deployment of bitcoin ATMs addresses some of the most significant challenges associated with exchanging cash for bitcoin in an easy, instant, safe and fully transparent way,” according to an ATM Industry Association report written by Tremont, “An Introduction to Bitcoin ATMs.”

By acting as the intermediary between consumers and bitcoin exchanges, bitcoin ATM operators shoulder the credit, counterparty and volatility risk associated with dealing with bitcoin exchanges, according to “Bitcoin: Virtual Currency with Real Opportunities,” a report from the ATMIA and the Electronic Funds Transfer Association.