The Democratization of Bitcoin: An ATM Network Appeals to Average Joes

Bitcoin may have slipped from the near $20,000 price it commanded a little over a month ago, but it’s still selling for around $11,000, nearly a dozen times its value a year ago. That’s drawing in plenty of investors and other high rollers, but it’s also attracting average citizens, including the underbanked, and the way they’re getting the digital currency is through a network of specialized ATMs that has quietly sprung up in the past few years.

“A lot of our customers are underbanked, and they’re seeing a really good return,” says Bobby Sharp, co-founder of a 3-year-old network called Coinsource, which says it has nearly 200 machines placed mostly in gas station convenience stores and bodegas in 15 states. Sharp won’t cite specific numbers, but says Coinsource’s Bitcoin teller machines, or BTMs, are being used by “six digits of customers.” The actual number, he adds, “is a lot more than you would think. We focus on small-time players.”

Most of these users, Sharp says, “buy [Bitcoin] and hold it,” hoping the currency will resume its rapid rise. “There’s a lot of people speculating,” he tells Digital Transactions News. The machines make it easy for the average Joe by allowing users to buy fractions of the currency. Most transactions, indeed, fall between $40 and $200.

Demand now is such that Fort Worth, Texas-based Coinsource expects to double its machine count in the next two months and will have BTMs in 29 states by year’s end, Sharp says.

Users enroll through an app by taking photos of their driver’s license, along with a selfie. Once at a machine, they enter their phone number, and then enter an SMS code or use a quick-response code at the machine to start a transaction and receive their wallet key. Users who don’t have a digital wallet can get one from Coinsource.

The machines accept only cash. Coinsource levies an 8% transaction fee, though users who sell their Bitcoin for cash pay a 4% fee. About one-fifth of the installed base can do buy and sell transactions, says Sharp. The machines are made by Genmega Inc., a Hayward, Calif.-based ATM manufacturer, though they run on Coinsource’s proprietary software.

Because the machines take in cash, Coinsource has installed them mostly at gas station c-stores, figuring its customer base would feel more comfortable at these locations. “People are comfortable going into these places with cash. They’re well-lit,” says Sharp.

Coinsource appears to be riding a wave. The number of Bitcoin ATMs worldwide has more than doubled in the past year, to 2,113, according to CoinATMradar.com, a site that tracks cryptocurrency ATMs. Coinsource accounts for nearly 10% of these machines, good for fourth place among deployers, behind Genesis Coin, General Bytes, and Lamassu, according to the site. All of Coinsource’s BTMs are in the United States, which alone accounts for 1,255 of the worldwide machines, more by far than any other country.

The growth in Bitcoin ATM networks comes as some merchants and online processors termporarily or permanently stop accepting the digital currency, citing confirmation delays, price volatility, and transaction costs. The latest is the processor Stripe, which announced this week it will drop Bitcoin as a payment method starting April 23.