DEFINITION of 'Bitcoin ATM'

Bitcoin ATM is an Internet-connected kiosk that allows customers to purchase bitcoins with deposited cash. A bitcoin ATM is not the same as an ATM backed by a bank or traditional financial institution.

BREAKING DOWN 'Bitcoin ATM'

In the arc of financial history, it wasn’t until relatively recently that an individual could get cash or make a deposit anywhere other than a bank branch. The automated teller machine, or ATM, was introduced in the 1970s, and has now become such a common fixture that it is uncommon not to have one located nearby.

While the use of banking via the Internet and mobile applications has reduced demand for some of the ATM’s traditional features, it has found itself in a renaissance driven by the increasing popularity of cryptocurrencies like bitcoin.

Bitcoin ATMs allow customers to buy and sell bitcoins. The use of “ATM” is a bit of a misnomer, as it is not actually an ATM but rather an Internet-connected machine. The kiosk connects the customer to an exchange where bitcoin transactions can be conducted. Transaction records are provided via a receipt generated by the kiosk, much like a traditional ATM, or they can remain digital.

While a bitcoin ATM looks like a regular ATM, it does not dispense coins or notes. Depending on the ATM operator, customers may be required to connect to their e-wallet in order to complete a transaction.

Bitcoin ATMs are rarely operated by major financial institutions. As such, they do not connect customers to a bank account. Customers instead deposit cash into the bitcoin ATM, which can then be used to purchase the cryptocurrency.

Often, a bitcoin ATM will set an upper and lower limit to the amount of cash that can be deposited. Since the upper limit may be lower than the price of one bitcoin token, customers are able to purchase fractions of bitcoin. After a purchase is made, a record of the bitcoin will appear in the customer’s e-wallet, though this may take several minutes to process.

Some ATMs require customers to pass these security checks before completing a transaction. The ATM may require a two-factor authentication. This may involve the customer inputting a phone number to receive a verification code. The code would then have to be typed into the ATM. The kiosk may also require scanning a government-issued identification, such as a driver’s license.

Bitcoin ATMs are not widely available, with kiosks typically only found in major cities. ATMs are more likely to be owned and operated by companies focused on the cryptocurrency industry. In some cases, a bitcoin ATM may be operated by a company that offers its own trading platform or e-wallet. These companies may require a customer to have an account in order to conduct a transaction, much like how banks do.

Customers are charged a service fee for using a bitcoin ATM. This fee is typically charged as a percentage of the transaction rather than a fixed dollar value typically seen in traditional ATMs. The U.S. Consumer Financial Protection Bureau (CFPB) has indicated that fee percentages may be very high, and that the exchange rates offered may not be as competitive as consumers would find elsewhere.

RELATED TERMS
  1. Electronic Funds Transfer Act

    The Electronic Funds Transfer Act is a consumer protection law ...
  2. Bitcoin Cash

    Bitcoin cash is a cryptocurrency created in August 2017, arising ...
  3. Bitcoin Dust

    Bitcoin dust is the small value of bitcoins that cannot be transacted ...
  4. Bitcoin Unlimited

    A proposed upgrade to Bitcoin Core that allows larger block sizes.
  5. Bitcoin Misery Index

    The bitcoin misery index measures the momentum of bitcoin based ...
  6. Bitcoin Whale

    Large holders of bitcoins are called bitcoin whales, whose actions ...
Related Articles
  1. Personal Finance

    Why You Should Stick With The Big Banks

    Big doesn't always mean bad. We tell you four reasons why.
  2. Tech

    Bitcoin Liquidity: What The Stakes Are

    Liquid markets are easy to exit; illiquid markets can put traders in a tough spot. Here are the main factors affecting the liquidity of Bitcoins.
  3. Tech

    America Launches Its First Bitcoin ATMs : Q&A With Liberty Teller Co-Founder

    Investopedia interviewed one of the co-founders of Liberty Teller, a start-up company that launched the U.S.'s first Bitcoin ATMs.
  4. Tech

    How Bitcoin Can Change The World

    Bitcoin has the potential to not only create savings for consumer, but also to transform global transactions.
  5. Personal Finance

    Best Checking Accounts For Couples

    Being a couple, especially if you both have jobs, can help you qualify for benefits and fee waivers that would be tougher to get on just one salary.
  6. Tech

    What Determines the Price of 1 Bitcoin?

    There are several factors that affect bitcoin's price, including supply and demand, forks, and competition.
  7. Tech

    Countries Where Bitcoin Is Legal & Illegal (DISH, OTSK)

    Although bitcoin has been in existence for five years, most countries still do not have consistent laws regulating the cryptocurrency. However, a few countries have banned bitcoin altogether.
  8. Tech

    How To Trade Forex With Bitcoin (XOM, EXPE)

    We look at ways to trade forex with bitcoin and the pitfalls in doing so.
  9. Tech

    The Rise And Fall And Rise Of Bitcoin

    A look at the reasons behind the recent spectacular surge in bitcoin prices.
  10. Tech

    How to Buy Bitcoin

    It's one of the biggest buzzwords in the financial space, but many people don't know how to buy Bitcoin.
RELATED FAQS
  1. How ATM Fee Reimbursement Works (ALLY, EVER)

    Learn how ATM fee reimbursement works, identify some of the banks that offer it and understand the typical limitations that ... Read Answer >>
  2. Is Bitcoin legal in the US?

    Learn about the legality of Bitcoin as a form of payment in the United States, as well as how it is produced and concerns ... Read Answer >>
  3. What Does the Bitcoin Blockchain Record?

    Read about the bitcoin blockchain, a public ledger shared among all bitcoin users that records the information of every single ... Read Answer >>
  4. Can Netspend cards be used internationally?

    Understand the benefits and pitfalls of NetSpend cards and discover whether they be use internationally. Then learn about ... Read Answer >>
Trading Center