A 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 automated teller machine (ATM) that allows bank customers to withdraw, deposit or transfer funds.
Understanding Bitcoin ATMs
A bitcoin ATM allows customers to buy bitcoin and other cryptocurrencies. The use of "ATM" is a misnomer. The machines are not actually ATMs and do not dispense cash. Rather, they are kiosks that connect to the bitcoin network and allow customers to purchase crypto tokens with deposited cash. Bitcoin ATMs are rarely operated by major financial institutions and do not connect customers to a bank account.
Buyers will typically scan a quick response (QR) code corresponding to their own bitcoin wallet address, to which purchased coins are transferred. If the buyer does not yet have a wallet, a new one can be generated. After the purchase, a record of the bitcoin will appear in the customer's wallet, though this may take several minutes to process.
Most bitcoin ATMs will set a lower and upper limit on the cash that can be deposited. All bitcoin ATM operators in the United States must register with the Financial Crimes Enforcement Network (FinCEN) and comply with anti-money laundering provisions of the Bank Secrecy Act (BSA). Depending on the transaction size, the bitcoin ATM may ask you for a mobile phone number to receive a text verification code. Or it may require you to scan government-issued identification, such as a driver's license, before completing a transaction.
Bitcoin ATM Fees
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. The Consumer Financial Protection Bureau (CFPB) has warned that fees to use Bitcoin ATMs can be very high, and the exchange rates offered may not be as competitive as what consumers could find elsewhere. Bitcoin ATM operator CoinFlip says its average fee for purchases is about 7% higher than the spot price for Bitcoin.
Bitcoin ATM Locations
Bitcoin ATMs are becoming increasingly popular in the U.S. Coin ATM Radar, which maintains an online directory of Bitcoin ATMs, estimates the installed base at nearly 9,000 kiosks in the U.S. as of October 2020.
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 wallet. These companies may require a customer to have an account in order to conduct a transaction, much like how banks do.