Definition of Bitcoin ATM
Bitcoin ATM is a kiosk connected to the Internet that allows customers to purchase Bitcoin with cash deposited. Bitcoin ATM is not the same as an ATM supported by a bank or a traditional financial institution.
BREAKING DOWN Bitcoin ATM
In the arc of financial history, a person can get or deposit cash anywhere other than a bank branch. The automated teller machine, or ATM, was introduced in the 1970s, and has now become such a common game that it is not uncommon to have one nearby.
Although the use of banking through the internet and mobile applications has reduced the demand for some of the traditional features of ATMs, it is in a renaissance due to the growing popularity of cryptocurrencies such as bitcoin.
Bitcoin ATMs allow customers to buy and sell bitcoins. The use of "ATM" is a misnomer, because it is not actually an ATM, but a machine connected to the Internet. The kiosk connects the customer to an exchange that can handle bitcoin transactions. Transaction records are provided or digitally received by a receipt generated by the kiosk, similar to a traditional ATM.
Although the Bitcoin ATM looks like a regular ATM, it does not dispense coins or notes. Depending on the ATM operator, customers may need to connect to their e-wallet to complete the 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 at a Bitcoin ATM, which can then be used to purchase cryptocurrency.
Often, a bitcoin ATM sets an upper and lower limit on the amount of cash that can be deposited. Since the upper limit may be less than the price of a Bitcoin token, users will be able to purchase fractions of Bitcoin. After purchase, a record of Bitcoin will appear in the customer's e-wallet, but it may take several minutes to process.
Some ATMs require customers to pass these security checks before completing the transaction. ATMs may require two-factor authentication. This may involve inputting a customer phone number to receive a verification code. The code has to be typed in the ATM. The kiosk will need to scan the identity issued by the government, such as a driving license.
Bitcoin ATMs are not widely available, and kiosks are usually only found in major cities. ATMs are largely owned and operated by companies focused on the cryptocurrency industry. In some cases, Bitcoin ATMs are operated by the company providing its own trading platform or e-wallet. These companies need a customer account to handle transactions, as banks do.
Customers are charged a service fee for using a Bitcoin ATM. This fee is charged as a percentage of transactions rather than the fixed dollar value typically found in traditional ATMs. The U.S. Consumer Financial Protection Bureau (CFPPB) has indicated that the fee percentage may be too high and exchange rates may not be as competitive as consumers find elsewhere.