Crypto ATMs: Everything to Know
By Beluga Research August 7, 2023
- Crypto ATMs are physical machines that allow users to purchase, sell or exchange cryptocurrencies for physical money or other digital assets
- These ATMs were first introduced in 2013 and have since experienced significant growth
- Crypto ATMs come in "one-way" and "two-way forms," supporting multiple cryptocurrencies and providing users with accessibility and privacy.
- To use a crypto ATM, users need to create a digital wallet, follow on-screen instructions, and complete verification steps
Cryptocurrency ATMs, or "crypto ATMs," are physical machines that enable users to buy, sell or swap cryptocurrencies for cash or other digital assets. Crypto ATMs provide a physical interface for individuals to interact with the digital realm of cryptocurrencies, bridging the gap between the traditional financial system and the decentralized world of digital assets. These machines offer a user-friendly experience, enabling both cryptocurrency enthusiasts and newcomers to easily transact with digital currencies.
A Brief History
The first crypto ATM was introduced in 2013 by a company called "Robocoin." This machine was installed in a Vancouver coffee shop and allowed users to buy and sell bitcoin using a combination of biometric verification and a mobile bitcoin wallet. Since then, the crypto ATM industry has experienced significant growth, with thousands of machines deployed worldwide.
Crypto ATMs: Everything to Know
Crypto ATMs come in various forms, including one-way and two-way machines. One-way ATMs only allow users to purchase cryptocurrencies, while two-way ATMs enable both buying and selling. These machines typically support multiple cryptocurrencies, providing users with a range of options.
To use a crypto ATM, users must first create a digital wallet to store cryptocurrencies. Wallets can be software-based (mobile, desktop, or web) or hardware wallets (physical devices). Once a wallet is set up, users can visit a crypto ATM and follow the on-screen instructions. This process usually involves selecting the desired cryptocurrency, entering the amount to buy or sell, and scanning the wallet's QR code. Some ATMs may require additional verification steps, such as providing a phone number or confirming an email address.
Crypto ATMs operate by connecting to cryptocurrency exchanges or other liquidity providers. When a user buys or sells cryptocurrency through an ATM, the machine connects to these platforms to execute the transaction. The exchange rate offered by the ATM is typically based on real-time market prices, with a fee added by the ATM operator. It is worth noting that fees associated with crypto ATMs can vary significantly, so it is essential to review the fee structure before using a particular machine.
One of the advantages of crypto ATMs is accessibility. Crypto ATMs can be found in various locations including convenience stores, shopping malls and airports. This widespread availability allows individuals to easily access cryptocurrencies without the need for a traditional bank account or an online exchange account. Crypto ATMs also offer a sense of privacy, as users can transact without sharing personal information typically required by online exchanges.
To use a cryptocurrency ATM, a user must follow a few simple steps. First, the user must locate a nearby crypto ATM using online directories or mobile apps that provide such information. Once a nearby machine is located, the user should verify operating hours and supported cryptocurrencies.
Upon arriving at the crypto ATM, the user will typically see a screen displaying available options. The user must select the desired transaction type to specify whether they are buying or selling cryptocurrencies. If the user is buying, they must choose the cryptocurrency they wish to purchase from the list of supported coins. For selling, the type of cryptocurrency the user wishes to sell must be selected.
Next, the crypto ATM will prompt the user to enter the amount of cryptocurrency or fiat currency (such as USD or EUR) they want to buy or sell. Some crypto ATMs may require the user to scan a QR code of their crypto wallet to complete the transaction. If the user does not have a wallet, the machine may generate a paper wallet for the user to store their newly-acquired cryptocurrencies.
After confirming the transaction details, the user must provide necessary identification and verification information. This step ensures compliance with "Know Your Customer" (KYC) and "Anti-Money Laundering" (AML) regulations. The specific identification requirements may vary depending on the machine and jurisdiction.
Once the transaction is complete, the crypto ATM will dispense the purchased cryptocurrencies directly to the user's wallet or provide cash if the cryptocurrencies were sold. It is important to note that crypto ATMs may charge fees for services, which can vary between machines and providers.
Crypto ATMs offer several unique aspects that distinguish them from traditional ATMs and online cryptocurrency exchanges. Firstly, they provide a physical presence for cryptocurrency transactions, making them more accessible to individuals who prefer conducting transactions in person or lack access to digital platforms.
Secondly, crypto ATMs enable users to convert cash into cryptocurrencies and vice versa, serving as a link connecting the conventional financial system with the realm of digital assets. This feature is particularly valuable for those who are new to cryptocurrencies and want to experiment with a small investment or those who prefer the anonymity of cash transactions.
Furthermore, crypto ATMs often support a variety of cryptocurrencies beyond just bitcoin. While bitcoin remains the most widely supported cryptocurrency, many machines also allow users to buy or sell altcoins such as ether, litecoin or bitcoin cash. This broadens the range of investment options available to users and reflects the growing diversity of the cryptocurrency market.
Lastly, crypto ATMs can be found in numerous locations accessible to a wide range of individuals, including shopping malls, convenience stores and airports. This widespread distribution helps to support cryptocurrency adoption by providing a familiar and user-friendly way to access digital assets.
- Accessibility - Crypto ATMs provide a simple and accessible entry point for individuals who may not have access to traditional banking services. They enable anyone with cash or a payment card to easily buy or sell cryptocurrencies.
- Convenience - Crypto ATMs are available twenty-four hours a day, seven days a week, and can be found in numerous easily-accessible locations. This convenience allows users to transact with cryptocurrencies at their convenience, without relying on the operating hours of traditional exchanges.
- Privacy - Many crypto ATMs offer a certain level of privacy by allowing users to conduct transactions without providing extensive personal information. While some ATMs may require identity verification for larger transactions, smaller purchases can often be made with minimal or no identification requirements.
- Speed - Crypto ATMs enable near-instantaneous transactions. As soon as a user deposits cash or initiates a transfer, the ATM processes the transaction and sends the purchased cryptocurrency to the user's wallet within minutes. This quick turnaround time is particularly beneficial for individuals who want to take advantage of price fluctuations in the market.
- Diversification - Crypto ATMs usually support multiple cryptocurrencies, providing users with the opportunity to diversify their digital asset portfolio. This allows users to explore and invest in a variety of cryptocurrencies beyond just bitcoin, including popular alternatives like ether, litecoin and more.
- Higher Fees - One of the main drawbacks of crypto ATMs is the high transaction fees compared to traditional online exchanges. These fees may vary depending on the specific ATM and can range from 5% to 10% or even higher. Users should be aware of the fees associated with crypto ATMs and consider whether the convenience outweighs the extra cost.
- Limited Functionality - While crypto ATMs allow users to buy and sell cryptocurrencies, the functionality of the machines may be limited compared to online exchanges. For example, some ATMs only support buying cryptocurrencies and do not offer the option to sell. Additionally, advanced trading features such as limit orders or margin trading are typically not available through ATMs.
- Security Risks - Like any digital transaction system, crypto ATMs are not entirely immune to security risks. Instances of fraudulent ATMs or malware-infected machines that steal users' funds or personal information have already occurred. Thus, it is crucial that users exercise caution and ensure that the crypto ATMs they are using are both reputable and secure.
- Regulatory Challenges - Crypto ATMs operate within a complex regulatory landscape, with varying regulations and licensing requirements across different jurisdictions. This can result in limited availability of ATMs in certain regions or additional compliance measures for operators. Users should be aware of the legal and regulatory implications surrounding crypto ATMs in their respective areas.