Georgia has about 285 machines, mostly inside gas stations and convenience stores in the Atlanta area, many in low-income neighborhoods, where traditional banks often have few branches or even ATMs.
Even though digital currency is on the cutting edge of finance, the ATMs have the flavor of a throwback—they require cash and a bricks-and-mortar retail store.
For consumers who don’t have a bank account, a bitcoin ATM is a way to convert cash into a digital format to purchase items or pay bills online, said Brandon Mintz, CEO of Atlanta-based Bitcoin Depot, one of the largest bitcoin ATM operators.
“A large majority of our customers are unbanked people who have been out of the financial mainstream,” he said. “This gives them the ability to have a digital wallet on their phone.”
Some consumers may find them convenient, but digital currency ATMs pose numerous problems. ATM operators extract huge premiums from users. Some machines have few protections for personal privacy.
“It’s not a very good choice for most people,” said John Hope Bryant, CEO of consumer advocacy group Operation Hope. “People outside the mainstream economic system, when they use a bitcoin ATM, they’re really being taken advantage of.”
And while many digital currency ATMs like Bitcoin Depot's store users' information, others don't, contributing to criminal activity, said Ross Delston, a Washington, D.C. attorney who specializes in anti-money-laundering laws. Criminals convert cash to digital form, which is then used to make virtually untraceable purchases of illegal drugs or for services on the dark web.
“You can gain access to an incredible array of nasty criminal activity,” Delston said. “Drug trafficking, counterfeiting, human trafficking and pedophilia.”
Digital currency, also known as cryptocurrency, is a relatively new technological innovation. The concept was invented in 2008 by an unknown person (although conspiracy theories abound), with the aim of creating a digital currency free from the restraints of government-owned central banks. Bitcoin, Ether and Litecoin are among the thousands of different cryptocurrencies, all based on similar computer processes.
Last year, consumers made $4 billion of payments using bitcoin through traditional payments processors, according to Coindesk. That was a drop in the bucket compared to the $3.7 trillion of credit card payments made in 2018. But a growing number of businesses accept them. Burger King and Subway already take bitcoin, and Amazon, AT&T and Etsy accept online bill payments using cryptocurrency.
Transactions that originated from bitcoin ATMs were only a tiny fraction of bitcoin’s $4 billion of volume. But that could grow if more young people adopt cryptocurrency. It also could become a tool for immigrants who don’t have bank accounts but want to remit funds to their home countries. Many now rely on money wire services like Western Union and MoneyGram.
Digital currency ATMs also work more like a foreign-currency exchange than a typical bank ATM. A customer inserts cash into the machine and purchases an equivalent amount of bitcoin, or another digital currency, based on the current trading price. However, the ATM operator takes a cut from the customer. Bitcoin Depot typically reduces the amount of coin purchased by 10% to 20% from the submitted cash, Mintz said.
And wild price swings in bitcoin can affect a customer’s holdings. The price of bitcoin whipsawed between a 12-month low of $3,566 per coin in February 2019 to a high of $12,575 in July, according to Coindesk. As of Friday, bitcoin traded at $10,317 per coin.
At a Valero gas station on Cheshire Bridge Road on Friday, a native of Gabon (he declined to give his name) bought $60 worth of bitcoin from an ATM using cash. He said he trades the currency online and makes a profit, even with the large cut paid to the ATM operator.
“I’m a used car dealer and I get paid in cash,” he said. “I speculate on bitcoin the same way I speculate on Facebook and Google stock.”
Bitcoin Depot is trying to capitalize. It already has 550 machines nationwide and expects to install 600 to 1,200 more this year, Mintz said. The number of people who say they own cryptocurrency has grown from about 1% in 2018 to around 10% today, Mintz said.
Numerous other companies also operate bitcoin ATMs in metro Atlanta, including CoinFlip, Coinsource and Bitcoin of America.
Consumers are setting themselves up for trouble if they use certain models of bitcoin ATMs that require a large amount of personal information, Bryant said. That’s ironic, since bitcoin is supposed to provide the highest level of privacy controls for holders of the currency.
“You have to be photographed (by the machine), give your fingerprint and type in all sorts of information about yourself,” Bryant said. “Now, all of your private information is floating out in the abyss and you can never get it back.”
Some bitcoin ATMs are more conducive to criminal use than others. Some machines have signage that tout their anonymity, and that few personal details are required, such as a driver’s license or personal photo, Delston said.
FBI Director Christopher Wray in November said that cryptocurrency is a “significant issue” that’s likely to become a “bigger and bigger problem.” Some officials have said that bitcoin and cryptocurrencies have helped fuel the opioid crisis.
Aside from concerns about the ATMs, many financial professionals believe digital currency has a future. Alpharetta-based BitPay recently formed a partnership to make it easier for consumers to pay with bitcoin through a point-of-sale terminal.
Atlanta’s concentration of fintech companies, such as Global Payments, NCR and Worldpay, could make the area a hotbed for digital currency startups, said Edward Marshall, an attorney at Arnall Golden Gregory who advises payment-processing companies.
“Startups will want to position themselves to easily interact and partner with market leaders,” Marshall said.
One digital currency startup was recently led by Kelly Loeffler, until she was appointed to the U.S. Senate seat of Johnny Isakson. Loeffler was the top executive of Bakkt, a cryptocurrency trading platform established by her husband's company, Intercontinental Exchange.
That’s a long way from the bitcoin ATM in a Texaco gas station on North Peachtree Road in Chamblee. After a reporter unsuccessfully tried to purchase $20 worth of bitcoin on the machine, the store’s manager (who asked not to be identified) said he almost never sees anyone use it.
“Maybe one person a day comes in to use it,” he said. “Most of the time they walk out and tell me the machine does not work.”
Bitcoin is a digital currency that doesn’t pass through a government-owned bank, but can be used like any other electronic form of payment. A bitcoin is made of a string of code that’s maintained by a global network of volunteer computer users.
February 8, 2020 Norcross - Bitcoin Depot ATM is shown at Citgo Gas Station on Holcomb Bridge Rd in Norcross on Saturday, February 8, 2020. (Hyosub Shin / Hyosub.Shin@ajc.com)
Credit: HYOSUB SHIN / AJC
Credit: HYOSUB SHIN / AJC