ATMs, better known as ATMs, have been part of our lives for over fifty years, making their debut at the Enfield Town branch of Barclays in north London.

Since then, it has been the backbone of the retail payments landscape and continues to play a central role in it. Its introduction has indeed marked the emergence of contemporary digital banking. Fast forward fifty years, at a time when a plausible alternative currency from paper tickets to digital bits called Bitcoin has successfully challenged every idea of ​​what we know about the medium of exchange, ATMs still function as a point physical access.

However, unlike existing ATMs, they don't just distribute cash. These special ATMs allow the buying and selling of Bitcoin in cash.

These machines are not ATMs in the traditional sense because they do not connect to the bank account, but rather connect the user directly to a Bitcoin exchange .

Hole in the wall

It was October 29, 2013 when the first Bitcoin ATM was installed in Canada. Seven years later, the industry shows no signs of slowing down.

Source: CoinATMRadar

As of May 29, 2020, there were 7,886 ATM installations of cryptocurrency, according to the ATM Bitcoin   Coin ATM Radar tracking website . The growth of these ATM facilities has always followed an upward trend. In fact, since the start of 2019, there has been an increase of 90%. Despite the frantic price movement of Bitcoin and the multiple pumping and emptying cycles, however, the growth has been significant.

In particular, the number of crypto-ATM installations does not seem to correlate with Bitcoin price actions .

2020

The Bitcoin has started the year. In January, 432 new machines have been installed, bringing the total number of 6377 to 6705. Of which 104, however, have closed their operations. Net growth was observed at +328, an increase of 5.1%.

Also in February, when the price of   Bitcoin has exceeded the psychological level of $ 10,000, the figures have maintained a stable growth rate, an increase of 5%. The following month, unlike the price of Bitcoin which decided to go north, the number of crypto-ATM installations continued to increase. 484 machine has been installed, of which 108 have closed their stores and a 5.4% growth was recorded.

Also in the second quarter of the year, the number of installations increased by 5%.

So how does it work? There are currently two types of ATMs. The first is the "Purchase only" ATM, which constitutes 67.7% of all ATMs, while some kiosks have two-way functionality, that is, "Buy and Sell" ATMs, which represent 32, 3%.

Survival

It's been almost seven years since Bitcoin ATMs appeared. Interestingly, the growth of the crypto-ATM trend has been observed alongside the current cryptocurrency market.

According to a CoinATMRadar report, a large percentage of businesses that have closed have  only run in one to ten locations. These ATM operators have closed small scale and have lasted on average a year and a half, which means they don ' have not been able to develop their business or have decided to sell hardware / to larger companies businesses.

To top it off, it was also found that for companies with more machines in their network, the probability of closing companies was low, which means that the more machines an operator had, the more the company seemed to work for a long time.

Source: CoinATMRadar

This could be due to a change in regulatory framework or to an acquisition by another large company. The latter leads to centralization problems in which large companies take over from beginners. This trend has been prevalent for the past 2-3 years.

Everything comes with risks

Running a Bitcoin ATM is not an easy task and has its fair share of obstacles.

Currency fluctuation risk   is something an operator faces when buying Bitcoin and holding it for a while. In this case, there is a time lag between the time of purchase and sale of these parts by the operator. For the proper functioning, there should be a certain amount of liquidity available in the hot wallet. So, over time, this value of these locked funds will increase or decrease over the period which depends on the price action of Bitcoin .

However, this can be eliminated by performing a process called "mirroring" on the exchanges. Here, in addition to the liquidity on the hot wallet, the operator holds funds on the exchanges, which means that when a buyer buys coins from an ATM, the machine operator buys the same amount of Bitcoin trading. However, this, in turn, gives rise to what are called “  counterparty risks”   which CoinATMradar explained as follows:

“If the exchange skyrockets, which happened in part with Bitfinex hacking for example - then the operator can lose funds stored on the exchange partially or entirely. Some operators have recently been hit because Bitfinex was a large stock exchange and many machines worked with it. "

The manufacturers

The American market is largely dominated by the Genesis Coin of San Diego, a company that holds a 34.4% share. The company is the world's largest producer of ATMs. The Czech company Genesis Bytes is the second largest manufacturer of ATM machines with a share of 30.6%. A Canadian company, Bitaccess, with a share of 9.7%, is positioned as the third largest manufacturer in the world.

Source: CoinATMradar

The expansion of the Bitcoin ATM market in the still nascent industry has been nothing short of remarkable. Facility growth accelerated in the United States, a country that currently accounts for 73.6% of all of these ATMs. However, this has not been the case on the European market after noting a period of stagnation as few new ATMs have been installed for some time, probably due to AMLD5 regulations.

The 5th European Union Anti-Money Laundering Directive or AMLD5 essentially requires that Member States begin to regulate cryptographic assets and that cryptographic service providers such as exchanges and custodian wallet providers are now covered by the same requirements than banks and other financial entities.

In addition, the machines in the United States are primarily ATMs with purchasing functionality. The majority of machines in Europe, on the other hand, support both buying and selling cryptocurrency for cash. In addition, the fees charged by operators in Europe are lower than those in the United States.

Bitcoin ATMs   in Asia currently stand at 1.6%, with Hong Kong contributing largely to this. According to a recent report, the global market ticket vending Bitcoin is expected to reach 147.9 million by 2025, against 7.1 million in 2017. In addition, it should cro ITRE at a CAGR of 56, 9% over the period from 2018 to 2025.

Licence

It may be a decentralized space, but the regulations must be respected. Chris McAlary, owner of Bitcoin ATM Coin Cloud, in a recent conversation with AMBCrypto, said:

“First, there is federal regulation, which mainly involves FinCEN MSB registration. You must maintain an AML / KYC policy, appoint a full-time compliance officer, undergo independent audits, have a transaction monitoring system, and file ongoing reports with the IRS. Second, you must follow state regulations for each location. "

According to McAlary, he obtained a green light with regard to the latter which was difficult because States, more often than not, do not yet have an official policy for digital currencies or their business models.

Make profit 

The Bitcoin ATM industry has evolved into one of the most competitive sectors in the entire digital currency space. Consequently, profit margins are very marginal for manufacturers. According to McAlary of Coin Cloud, the Bitcoin ATM industry is very competitive with a lot of pressure on prices coming from abroad (especially from China). He added:

“We build our machines in-house and derive our income mainly from buying and selling digital currencies at a higher exchange rate. Our only goal with our manufacturing is to get as many digital currency kiosks out of the world as possible and build the infrastructure for economic freedom.

Buying Bitcoin ATM is more expensive than trading  .

The cost of running a brick and mortar exchange business is always expensive. McAlary explained,

“For example, we sublet 16-inch square space from our reception sites, which are typically gas stations, convenience stores and supermarkets. Their retail space is a precious asset. "

In addition, rental costs also vary by location and depend on their pedestrian traffic, sales revenue and hours of operation. There is also a cost to the compliance process, which includes registering as a money services business [MSB] as well as having a full-time compliance officer to run a compliance program. Bank Secrecy Act.

McAlary also added that cash logistics, including the maintenance of armored trucks and the collection of cash, also comes at a price, which is not the same at every location, but instead varies by region, distance and time required to service the Bitcoin ATM .

Next come the bank fees that accompany the operation of MSBs, Bitcoin- related businesses, and cash-intensive businesses.

“Since Bitcoin ATMs fall into these three categories, the costs of running operating chequing accounts are expensive. Of course, physical machines also carry repair and maintenance costs, as well as operational risks of theft and vandalism. "

While all these things are of utmost importance, they have all cost. Therefore, making the convenience of using a Bitcoin ATM available is much more costly than buying and selling digital currency on an online exchange.