Introduction
You see them in convenience stores, gas stations, and malls. They often look like traditional ATMs, but these kiosks allow users to buy crypto tokens and sometimes sell them for cash.
Bitcoin ATMs, or btms, exploded in popularity during the height of the crypto craze between 2020 and mid-2022, reaching 34,000 at their peak across the United States. Many shops with BTM that I spoke to see at least one customer a day.
- What’s driven this BTM boom?
- Why is the industry attracting criminals?
- And how are the prosecutors taking?
Explosive growth
The action was that when CO started in 2020, a lot of people were spending more time at home, which translated to a lot more time spent researching crypto, and I think crypto adoption started at the beginning of the pandemic. Something exploded. More people bought crypto. Bitcoin ATMs are one source where you can buy it.
Brandon Minus is the CEO of Bitcoin Depot, which has the largest market share of Bitcoin ATMs across the US. In July, it became the first crypto ATM operator to go public on a major US stock exchange.
Let’s take a look at their second quarter earnings. Even in today’s market, with bitcoin trading at about half of its all-time high, Bitcoin Depot’s business is still growing. The company brought in about $1975 million.
5% from a year ago. Bitcoin Depot has had nothing to do with the price of Bitcoin since we launched.
We’re doing well when the price goes up or stays the same, and we believe that’s because our customers have slightly different buying intentions on average than customers of online exchanges.
Bitcoin Depot is catering to the growing demand for BTMs, not just as a vehicle to invest in crypto, but as an alternative to sluggish traditional finance.
Bitcoin Depot surveyed 625 users and found that about 40% used the machines to take advantage of crypto’s peer-to-peer ecosystem, such as making cross-border payments or sending money to loved ones.
More than a quarter of respondents also said they use machines to shop online. All told, the Kansas City Fed estimates the BTM industry’s annual revenue to be more than 3.
Self-reported data from operators on Coin ATM Radar shows typical commissions of 15 or 16% for buying bitcoins, and does not include additional flat fees charged by crypto exchanges for buying bitcoins.
Fees are higher than listed, but factor in rental costs to BTM operators, cash handling and actual equipment. Still, the industry is attracting more and more customers.
Criminal exploits
It’s also catching the attention of bad actors. In 2021, at the height of the kiosk boom, experts raised concerns over scams and money laundering with CNBC.
You see heists of crypto using, uh, you know, fraudulent access to people’s crypto accounts.
There are all kinds of scams in crypto, and I think Gary Gensler at the SEC has said it’s one of the most scam-intensive areas of finance right now.
In fact, one of the stores I spoke to said they regularly stop customers from becoming victims of BTM scams.
It’s unfortunate that the bad guys benefit from the same thing as the good guys in that you can affect a transaction in as little as 30 to 60 seconds through the kiosk after going through the proper AML and KYC safeguards to effectively go through that transaction.
As opposed to setting up an online account with an exchange, there’s a much more elongated onboarding process, so if we put ourselves in the
This was due in part to the closure of CoinCloud, an operator that went bankrupt. Then there’s Bitcoin of America on behalf of the Secret Service.
I would like to thank all the law enforcement and criminal justice partners that helped us investigate and prosecute this massive and far-reaching case involving one of the largest country’s cryptocurrency ATM operators with over 2500 ATM machines across 31 states.
They were charged with money laundering and failing to obtain their required operating licenses. The Secret Service also mentioned and rooc callers utilize BOA’s lack of consumer protections and anti-money laundering measures to facilitate transfers from victims in Ohio and across the US.
The company also kept fees paid by customers that they knew were victims of scams. Those averaged around 20%. We reached out to them and didn’t hear back in an effort to combat scams. BTM companies have incorporated notices on their devices in hopes of diverting users from falling victim.
If you go to a typical crypto ATM machine, you will see fraud prevention alerts on the screen telling people, Hey, if someone else sent you here, this digital wallet is not yours.
So claiming to be from the IRS and saying you have an outstanding tax bill and paying it in crypto is not a legitimate attempt to try to pay the bill you owe; it is probably a The scam is actually that we have multiple warnings.
On our screens at Bitcoin ATMs, you can see people warning people about things like IRS tax scams, utility bill scams, etc., and we also have a team of over 50 customer support representatives who specialize in being trained to look out for things our customers can say and call with these representatives to further prevent scams.
go, and as technology advances, one group emerges as an easy target. seniors and these criminals that are utilizing AI, it’s important to be aware of what’s possible out there.
They’ll end up contacting a grandparent pretending to be the grandchild and saying, Hey, I got arrested while I was in Mexico, and I really need you to send money.
It has to be done sooner than later. The quickest way to do it is to use a Bitcoin ATM to send it. Separate reports from the Kansas City Fed and the New Jersey Commission of Investigation warn that kiosks are also being used for money laundering.
Manhattan’s district attorney indicted Bitcoin ATM operator Robert Taylor for operating an unregistered money transmitter and committing tax fraud. Taylor allegedly flew under the radar and advertised the anonymity of his kiosks. The operator’s fleet converted more than $5.
6 million in cash into bitcoin across 46 locations, while the operator earned between 10 and 20% of the transactions. The da said that when one customer complained about the fees to the company’s Snapchat account, the reply was, Bro, we got to maintain everyone’s privacy.
My sense is that there’s an enormous variation between the different states in terms of how they look at this problem. Some states have a lot of these, and some states have not quite as many yet, so it’s sort of all over the map.
Buying the competition
A big part of helping the industry mature, like crypto as a whole, will be helping to deal with crime. I listen to or deal with new clients.
- Uh, what it takes to be competitive, you know?
How do I compete with some of the big players who have been around for years, have brand awareness, and are in multiple markets where the industry is seeing consolidation where the big players are smaller operators?
Buying is actually part of our strategy now that we are a public company—to acquire something.
Of these smaller bitcoin ATM operators, one of the reasons is that they don’t have the resources to run their businesses in compliance.
In some cases, as we’ve gone forward, we’ve seen a large The players are getting bigger, but I think there is still an opportunity for new players and smaller players, either to scale or for those who are looking to invest in an industry and possibly compete.
