As institutional demand for bitcoin surges above levels seen during the 2017 craze, bitcoin ATM (BTM) providers are poised to be one of the main beneficiaries of the revitalized digital currency market and evolving decentralized finance space.
Over the last 3 years, while bitcoin and other cryptocurrencies have become more bullish, BTM kiosks have been popping up all over the world. According to tracking website CoinATMRadar, there are now 11,195 BTM installations across 71 countries. A once-obscure financial product, BTM operators are now making waves for their contribution to anti-discriminatory banking and financial inclusivity. By recognizing and addressing accessibility gaps in the traditional banking system, the BTM industry may catalyze change in the way the financial sector functions for unbanked and underbanked communities.
While an important institution for centuries, the traditional banking system has proven to be restrictive, discriminatory, and riddled with obstacles to equitable access. In the United States alone, 25% of households have been categorized by the FDIC as having insufficient access to banks. These underbanked people either don’t have a bank account to begin with or lack crucial loan and mortgage facilities. In short, they are stuck with a depreciating asset – cash. More worrying, however, is a review of industry and academic studies determining that compared to white account holders, African Americans and Hispanics pay more on average in account-keeping fees, deposit service fees, and overdraft penalties.
In Europe, however, the statistics are significantly better. Almost all residents of Scandinavian countries have complete access to banks. That said, 25% of Hungary is underbanked and 19% in the Czech Republic. The European Bank of Reconstruction and Development has introduced several initiatives to assist those who have been neglected by the traditional banking system. No such initiatives exist in the US.
Sadly, the developing world suffers even more from inequitable and discriminatory banking. Even when these products are accessible, they’re often out of reach to the general population, with bank accounts subject to ultra-strict identification criteria and housing loans typically attached to absurdly high-interest rate conditions.
Fortunately, BTM service providers have begun to challenge the status quo of the traditional banking system. According to Ben Weiss, COO of one of the world’s leading BTM operators, CoinFlip, these services aim to empower those who have no access to centralized banking systems. As Weiss puts it, the proliferation of digital currencies and ever-increasing sophistication of decentralized finance technology has created a real opportunity for crypto to seriously compete with the traditional banking system.
There are good reasons for industry stakeholders like Weiss to be as excited as they are by the blockchain revolution. Firstly, thanks to the ever-evolving benefits of blockchain technology, cryptocurrencies are not restricted by national borders nor must users overly rely on financial institutions and banking infrastructure.
Secondly, spiking growth in the decentralized finance (DeFi) has helped push the cryptocurrency beyond the mere idea of an alternate currency system. Now, there are entire ecosystems of cutting-edge DeFi products, enabling everything from interest-earning programs, to peer-to-peer lending services, and even insurance.
Given the obvious advantages of a shift away from traditional banking, blockchain firms must maximize public support while encouraging regulators to pay attention and reform archaic laws. This is where leading BTM providers come back into the picture.
As a compliant bitcoin operator and mission-focused company, CoinFlip is attempting to bypass banking bureaucracy and turn crypto banking into an easy to access consumer activity. Wary of bad actors in the space, the company has gone on somewhat of a roadshow in recent months to advocate for blockchain regulatory clarity. Noting on one hand that convoluted US regulations are harming the blockchain industry, Weiss suggests that unclear regulations fail to properly protect consumers as well. Having advocated for regulatory overhaul recently in California, Weiss also testified before the New Jersey Science, Innovation, & Technology Committee to advocate for new regulatory and licensing procedures outlined in a bill being considered by the committee.
The leader of that committee, Assemblyman Andrew Zwicker lauded the new bill as one that “ does not seek to stamp out entrepreneurs and innovators in the virtual currency market with overly onerous requirements” while also confirming the necessity of regulatory clarity for both business operators and consumers.
Weiss argued that the bill “is likely to increase innovation by protecting consumers, legitimizing the [blockchain] industry, increasing transparency, and shutting out bad actors.”
While these new signs in the US may signal a positive shift for the blockchain industry there, Washington still appears to be playing catchup with Europe. The European Commission is set to release new regulations on cryptocurrencies in the next few months and has suggested that when this clear framework is in place, it will protect customers and boost innovation. Germany has already introduced regulation for cryptocurrencies, developing rules for crypto-related activities under the Fifth Anti-Money Laundering Directive (AMLD5), while France has made similar moves after having almost zero regulation in place.
With regulatory clarity underway and consumer demand increasing, CoinFlip has been joined by a host of competing BTM providers, including big European firms like Kurant, Vardex, and American operators CoinCloud, Bitnovo, Cryptospace, Coinsource, RockItCoin, and Bitcoin Depot.
That said, while the surging growth of the industry is certainly promising, there are lingering concerns about the extremely high fees being charged by some operators. Some operators have both come under fire for slugging underbanked communities—the very people these operators allege to support—with fees in excess of 25%, a far cry from the single-digit percentage fees charged by market leaders.
Make no mistake, outsized BTM fees are just as discriminatory as the predatory banking practices the industry at large is attempting to combat.
Fortunately, more and more operators are showing a willingness to compromise on hefty fee structures as the community begins to push back against exorbitant fees. Taking a leaf out of CoinFlip’s sub 7% fee, Coinsource recently dropped their fees to a more conservative 11%. While double-digit transaction fees could still worry investors, the general trend of lower fees should be viewed optimistically. With BTM providers around the world in the midst of scaling up their operations, lower fees from CoinFlip and Coinsource’s may be just what investors, and the industry, need.
Spurred on by institutional and legislative support, BTMs are gaining momentum. As the BTM industry matures and blockchain undergoes the next phase in its disruptive evolution, BTM operators must be prepared to become key players in the next generation of FinTech.