What Are Crypto ATMs and How Do They Work?

Since the first cryptocurrency was introduced back in 2009 by Satoshi Nakamoto, its evolution has been boundless. It is reshaping a lot of abnormalities in major sectors, including the banking system. The cryptocurrency world has provided fast, secure, and seamless transactions. A few years ago, a small coffee shop in Vancouver, Canada, unveiled a cryptocurrency automated teller machine (ATM). Presently, thousands of crypto ATMs are available across the globe. A typical crypto ATM has a monitor, a QR scanner, dispenser alongside a bill acceptor. Although these ATMs are like the traditional ones, they operate on a different mechanism. This guide will help many newbies, and crypto enthusiasts get more familiarized with this crypto platform.

Crypto ATMs Defined

Cryptocurrency automated teller machines (ATMs) are electronic outlets that allow users to purchase or sell cryptocurrencies. With these machines, you can exchange crypto using legal tender or debit cards. Most crypto ATMs are only compatible with Bitcoin (BTC), while some additionally accept major altcoins like Ethereum (ETH), Dash (DASH), and LiteCoin (LTC). Many cryptocurrency ATMs are unidirectional (deposit only) only a few are bidirectional (support withdrawal and deposit of fiat).

How to Use Crypto ATMs

If you can use traditional ATMs efficiently, you will find it easier to carry out transactions on crypto ATMs. The steps required to execute a transaction differ slightly from the accustomed method. A transaction could take approximately 10-60 minutes. Here are the steps required to use a Crypto ATM.

1. Open a crypto wallet. To use a crypto ATM, you must have a compatible wallet address. The ATM will deposit into or withdraw crypto from the wallet. This is like owning an account number with a traditional bank. Some ATM outlets require a specific type of wallet for transactions.
2. Visit a cryptocurrency ATM outlet. There are many cryptocurrency outlets available. It is found everywhere at airports, shopping malls, gas stations, etc. Few crypto ATM operators provide services that allow you to locate the nearest ATM outlet.
3. Adhere to the displayed instructions. Crypto ATMs require the input of a phone number for verification. Thereafter, you can input your alphanumeric wallet address. The producing company equipped the machine with a scanner to prevent errors from inputting these long characters. It allows you to scan the QR code of your wallet address easily.
4. Wait for a verified transaction. Unlike the traditional ATM, which is connected to the bank’s server. A crypto ATM is connected to a decentralized ledger. A BTC transaction will go through six confirmations which could take up to 60 minutes to be completed.

People familiar with the crypto space will require little or no form of physical help. Also, users who have performed transactions on digital wallets will seamlessly use the crypto ATM.

Why Use Crypto ATMs

You might ponder on the reasons you should opt for a crypto ATM. The reasons are not far-fetched. Crypto ATMs provide a bypass from financial institutions, merchants, and traditional banks. Most crypto users face challenges in swapping fiat money for crypto or vice versa. Often, these transactions are done at relatively high exchange rates. These rates are determined at the exchange’s discretion.

Crypto ATMs & Identity Verification

Currently, there are no universal identity regulations for crypto ATMs. The device lacks basic identity verifications like fingerprint identification, biometric retina scans, and so forth. The only workable identity verification is the use of a code sent after the user must have inputted their digits. However, an infringement might occur considering the increasing criminal acts in crypto. Hackers can hijack the SMS channel to perform fraudulent activities.

Crypto ATMs As Attraction to Criminal Actors

Fraudulent activities are one of the major threats to the crypto world today. Fraudsters have reportedly swindled many crypto funds. A crypto ATM outlet could be the best place for them to carry out illegal activities. The easy access to many outlets is a great advantage for them. Another major concern is inconsistent identification verification and regulations. Criminals can also cajole their victims into depositing cash to a wallet address or QR code using an ATM outlet. There is a need for a lot of reformation to tighten the security of crypto ATMs.

Bitcoin ATMs

A Bitcoin automated teller machine (often referred to as a BTM) allows users to carry out crypto transactions through their BTC wallet. The internet-connected machine enables users to buy or sell BTCs or other cryptocurrencies for fiat. You can use a card or pay in cash, and it takes more time to process a transaction than a traditional ATM.

In the United States, all BTMs operators are required to register with the Financial Crimes Enforcement Network (FinCEN). More importantly, operators must comply with the tenets of the Bank Secrecy Act. This forces operators to plan regulated restrictions that affect the amount of money deposited and the number of transactions performed by an individual. Transactions above restriction will require a government-issued identification card. As such, submission of a government-approved ID card will destroy the anonymous motive of cryptocurrency.

Pros and Cons of Crypto ATMs

Although crypto ATMs appear to have a lot of advantages, there are also a few disadvantages of the invention. Users must therefore be aware of the dark sides before venturing into using the crypto ATM.

Here are some advantages of the crypto ATM. These are reasons you should explore the crypto ATM:

• A crypto ATM is fully decentralized. It is not attached to any centralized financial institution or traditional banks. Instead, it is connected to an exchange platform where all transactional activities occur. Cryptocurrency continues to maintain its core purpose of bypassing centralized institutions.
• Every activity on crypto ATMs is confidential. A third party cannot alter or intrude on any transaction detail, meaning users can execute transactions anonymously.
• Crypto ATMs are easily accessible, and there are no restrictions. This will increase the number of people who invest in crypto. You can find ATM outlets in every nook and cranny. As of October 2022, there are over 39,000 ATM kiosks in over 77 countries of the world. A higher percentage of crypto ATMs are in North America.

You should also consider the dark sides of a crypto ATM outlet before using the crypto ATM:

• It has a higher transaction fee compared to online wallet exchanges. The fee ranges from 4% to as high as 20%, while online wallet exchanges charge as low as 1.5% per transaction. Meanwhile, traditional banks will only charge a token for transactions carried out on their ATMs.
• A narrow range of tradable coins, a longer processing time, and a high transaction fee impair the use of crypto ATMs. Online wallet exchanges edge the crypto ATM in these aspects. It is sometimes stressful to locate an ATM kiosk. ATMs also have transaction limits. Users with higher amounts of cash will resort to online digital wallet exchanges.
• Scammers leverage the anonymity provided by crypto to cart away assets. Stolen funds cannot be traced or recovered. Fraudsters can also pressure victims to pay a sum of money to a particular wallet address or QR code hiding under crypto’s anonymous mask. The unavailability of KYC modules for cryptocurrency consumers worsens the alarming situation.

Final Thoughts

The invention of crypto ATMs is one of the fascinating innovations of the crypto world. The crypto space is progressively challenging the existence of the traditional banking system. Crypto ATMs provide an avenue to buy and sell cryptocurrencies using cash or a card. Yet, regular digital online platforms are more helpful than crypto ATMs.

The cryptocurrency platform will significantly reduce the rigorous process required to transact between fiat and crypto. Transactions are transparent and easier with these ATMs. Hopefully, the number of cryptocurrency ATMs will be as much as traditional ATMs soon. However, many potential loopholes in the system need to be checked to make crypto ATMs risk-free.