Bitcoin ATM Demystified What It Is & How It Works

Most crypto guides advise users to download and sign up on crypto exchanges, especially if they play in Bitcoin casinos. However, there’s an even more convenient and hassle-free way to transact – using a Bitcoin ATM! Through this machine, buying and selling crypto will be flawless like you never imagined. Let’s find out below.

What Is a Bitcoin ATM ?

A Bitcoin ATM is a standalone kiosk connected to the internet that facilitates buying and selling Bitcoins using fiat currency. They are also called Bitcoin kiosks or Bitcoin Teller Machines (BTMs), and unlike traditional ATMs, they don’t allow users to withdraw or deposit cash.

The first Bitcoin kiosk was a Robocoin machine opened in Vancouver, Canada, on October 29th, 2013, at the Waves coffee shop and was first used by Jason Lamarche.

He deposited a $20 bill and received a tenth of a Bitcoin. The ATM capitalized on the then-operating errors from Bitstamp and operated till 2015 and has since been removed. Another BTM was opened in Bratislava, Slovakia, on December 8th, 2013. The first Bitcoin ATM in USA was installed in New Mexico on February 18th, 2014, but was pulled out after a month of operation.

Types of Bitcoin ATMs

There are two types of Bitcoin Teller Machines:

  1. Unidirectional – These BTMs support only one type of transaction, either buying or selling of Bitcoin.
  2. Bi-directional – These are two-way Bitcoin kiosks that simultaneously support buying and selling Bitcoin.

How Do Bitcoin ATMs Work?

how do bitcoin atms work

To use a BTM, a crypto wallet is required before walking into your nearest Bitcoin ATM for a transaction.

First, you must enter your phone number and verify your identity using a code sent to the phone number before entering your address or QR code for transaction processing. The fiat currency will then be exchanged at the current market rates, referenced from publicly available data from popular APIs of crypto exchanges like Coinbase, and sent to your wallet address as Bitcoins.

To sell Bitcoins, you’ll have to enter the Bitcoins you’d like to exchange and have fiat currency deposited to your bank account.

As a prospective user, you might wonder how to send money through Bitcoin ATM. Bitcoin Teller Machines can also be used to purchase Bitcoins for other people. The purchased coins will then be moved through a peer-to-peer transfer and deposited in their wallets as Bitcoin in exchange for cash. The purchaser must enter the recipient’s wallet address to have the Bitcoins deposited there directly.

Occasionally, users will be prompted to undergo a KYC check by providing specified forms of IDs and scanning or taking pictures of them for the transaction to be completed. That’s basically how Bitcoin ATM works.

Buying Crypto on a BTM

Step 1
How To Step Icon

Enter Phone Number

Input your phone number.

Step 2
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Identity Verification

Verify your identification via a code that the BTM will send to your phone number.

Step 3
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Enter Bitcoin Address or Scan QR Code

Enter your address or scan your wallet’s QR code.

Step 4
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Insert Cash

Insert your fiat currency.

Step 5
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Confirm the Purchase

Verify the amount and click ‘Confirm’ to complete the transaction.

Transaction Fees and Limits

Bitcoin Teller Machine operators aim to offer their customers the most robust security and customer support. This act protects ATM users’ funds and affects transaction limits. Minimum amounts generally start at $20 but can vary and go up to $3,000 (to as high as $10,000) daily. As a user, you are advised to read the instructions on a Bitcoin ATM before transacting to ensure you’re within the daily limit range.

Each transaction attracts some Bitcoin ATM fees, mainly between 5% to 15% of the transaction amount. Besides the fees, some operators may charge a variable miner fee used to pay miners to facilitate transaction validation.

Bitcoin kiosks enforce transaction limits for the following reasons:

Like fiat currency ATMs, transaction limits are set on BTMs to ensure they run high on funds. This way, the machine can run smoothly without reloading and let many people use it. It also ensures the kiosk operators promote excellent customer service consistently.

The limited withdrawals ensure user funds are secure in case someone gains unauthorized access to their private keys. The scammer or swindler can never drain a user’s account since there is a set transaction limit.

Various operators employ different security measures. Some larger companies use digital wallets linked to consumer accounts, and the purchaser may need to know the address of that wallet. Others may require the purchaser to scan a QR code or a driver’s license.

Bitcoin kiosks with transaction limits comply with regulatory laws and may be safe to use. BTM operators are required by the US Treasury’s Financial Crimes Enforcement Network (FinCEN) to implement a written anti-money laundering (AML) program that addresses the following:

  • Creation of internal controls and implementation of procedures compliant with the Bank Secrecy Act (BSA).
  • Continuous personnel training and addressing of their responsibilities under the AML program.
  • Designation of a compliance officer to ensure daily compliance with the AML and BSA programs.
  • Annual independent reviews of the AML program.

Where Can Bitcoin ATMs Be Found?

Bitcoin kiosks can be found in limited parts of the world.

As of May 2023, over 39,000 BTMs were run by 614 ATM operators worldwide.

Around 89% of them are in North America and are in popular locations like shopping malls, airports, and convenience stores. Canada commands about 6% of the worldwide market share, while Europe commands around 4%. The rest are distributed worldwide, including in Africa, Asia, and Oceania. To locate them, crypto users can check the nearest Bitcoin ATM on popular platforms like Bitcoin Depot ATM, RockItCoin, Coin ATM Radar, National Bitcoin ATM, and Coin ATM Finder.

Accessibility of Bitcoin ATMs

Bitcoin ATMs are available for use by anyone with a crypto wallet. Their availability is, however, tied to various factors, including:

  1. Public knowledge on cryptocurrencies: Businesses are yet to learn the benefits of transacting in cryptocurrencies. Investors don’t know where to start, and this is dragging the adoption of BTMs behind.
  2. Limited crypto acceptance, high Bitcoin fees, and Bitcoin safety concerns.
  3. Bankruptcy concerns: Coin Cloud recently filed for bankruptcy, and some industry experts suggest this might indicate a problematic BTM market.
  4. Regulatory uncertainties: Some jurisdictions have some uncertainty regarding the legality and regulation of BTMs. This can discourage operators and potential users since they won’t be guaranteed the safety of their investments.

Bitcoin kiosks have been widely adopted by the underbanked. Compared to traditional banking systems in the US, they don’t require a KYC process for transactions between $250 to $1,000. Matching a user’s phone number against the database in the ATMs is enough proof of ownership of the funds – hence no need for further identity verification requirements.

Bitcoin ATM Safety Concerns

Since central authorities control Bitcoin ATMs, users might be worried about the safety of their funds. There have also been widespread concerns by authorities that kiosks might be used in money laundering schemes. But here’s the good news! There are limitations on how much a wallet address can transact in Bitcoin kiosks daily. Besides, transactions are conducted on the Bitcoin blockchain, an immutable, public ledger that is always open for public scrutiny. There are high levels of Bitcoin anonymity upheld, and no operator can alter the transactions in their favor.

The best Bitcoin ATM providers include Bitcoin Depot, Coin Cloud, CoinFlip, Bitstop, RockItCoin, Coinhub, Byte Federal, Localcoin, Cash2Bitcoin, and National Bitcoin ATM.

Why Use a Bitcoin ATM Instead of an Exchange?

Much as crypto exchanges like Coinbase and Bitstamp offer convenience, Bitcoin kiosks beat them in some way. The kiosks have risen to be a favorite among the crypto community for the following reasons:

why use a bitcoin atm

Convenience: As BTMs become increasingly popular, more are installed worldwide daily. New users opt for them to avoid the stringent requirements of crypto exchanges like the KYC process.

Anonymity: Unlike exchanges, Bitcoin kiosks support more anonymous transactions. Minimal personal details are required in BTMs compared to online exchanges enabling users to maintain their privacy in online transactions.

Time: Bitcoin kiosks take a few minutes to process transactions, sometimes instantly. Also, customers just need to verify their identity on the BTMs to complete a transaction, unlike in exchanges where users have to spend time providing their identification details. This saves BTM users time and has made it a favorite among those who’ve used the service.

Limitations of Bitcoin ATMs

While there are benefits of Bitcoin ATMs, they also have disadvantages. As a user, you should have proper knowledge before transacting in them. Here are some of the limitations:

Cons

  • High Bitcoin ATM fees.
  • Limited geographical distribution.
  • Limited functionality (can only be used for buying and selling crypto, unlike exchanges).

Bitcoin ATMs and Crypto Gambling

Golden Gate Casino and the D were the first casinos to install Robocoin Bitcoin Teller Machines. They partnered with BitPay to process transactions and make deposits in the casinos’ bank accounts. The casinos were assured to be paid in the current exchange rates and hence were cushioned against Bitcoin’s volatile price changes.

Aside from physical casinos, Bitcoin ATMs are helpful to those playing in Bitcoin casinos. Players can directly top up their crypto-casino accounts by purchasing various cryptocurrencies, including Bitcoin, Tether, Ripple, Dash, etcetera. Some of the best crypto casinos that support Bitcoin transactions include BitStarz, BC.Game, and Wolfy.

Top Bitcoin Casinos

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FAQs

A Bitcoin ATM is an automated teller machine that lets you buy and sell Bitcoin for cash.

No. You primarily present your crypto wallet address to use a Bitcoin ATM. Your bank account details are only required to receive fiat currency if you sell Bitcoins at the Bitcoin kiosk.

Bitcoin ATMs let users enter their wallet address or scan a QR code to exchange their cash for Bitcoin.

You can buy other cryptocurrencies like Litecoin, Ethereum, and Tether in BTMs.

Some BTMs require users to verify their identity through government-issued documents like driving licenses and passports.

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