Crypto ATM Industry Thrives in the US Despite Controversies, Reports Federal Reserve Bank
Summary:
The crypto ATM industry is thriving in the US, despite criticisms for illegal or predatory behavior, according to a report by the Federal Reserve Bank of Kansas City. The report highlights the growing customer base of crypto ATMs and the need for better education about cryptocurrencies. It also addresses the controversy surrounding the fees charged by crypto ATMs, which can go as high as 20%. The report identifies different user groups and emphasizes the importance of regulatory compliance. Additionally, it mentions the association of crypto ATMs with money laundering and scams, highlighting the risks involved. The industry is growing after a COVID-related downturn, with Bitcoin Depot's recent IPO as evidence.
The Federal Reserve Bank of Kansas City has released a report stating that the crypto ATM business is thriving in the United States, despite facing criticism for engaging in illegal or predatory behavior. The report highlights that crypto ATMs have a growing customer base that could benefit from better education about cryptocurrencies. These ATMs convert Bitcoin and other cryptocurrencies or stablecoins into or out of fiat currency. Just like traditional ATMs, crypto ATMs are typically located in high-traffic areas and charge a fee for their services. However, the fees charged by these ATMs have been a source of controversy. The average fee to use a crypto ATM hovers around 15-16%, but operators may set an unfavorable conversion rate, leading to fees as high as 20% in some cases.
The report identifies four user groups for crypto ATMs. Cash users who may be unbanked by choice comprise one segment. Another group consists of older individuals who find ATM technology more familiar compared to crypto exchanges. Some users are motivated by the convenience of using an ATM, while others value the relative anonymity provided by ATMs.
To use crypto ATMs, identification such as a phone number is required. As money-servicing businesses, crypto ATMs are subject to state and federal regulations, including Anti-Money Laundering measures. Meeting regulatory compliance often results in significant overhead costs for operators, although compliance levels in the industry can sometimes be low. The report also highlights that minorities and immigrants form a notable user group for crypto ATMs. Immigrants often purchase crypto through ATMs for personal transactions such as remittances, as it can be comparable in cost to sending remittances via cash when considering convenience, time savings, and transactional certainty and speed.
The report acknowledges accusations of predatory inclusion of the crypto ATM industry, which involves presenting high-risk and high-cost services as opportunities for financially disadvantaged individuals to access lucrative financial investments. It further highlights that uneducated crypto investors using ATMs to purchase volatile cryptocurrencies may face significant losses.
The report also refers to data from Chainalysis, indicating that victims of scams moved $345 million through crypto ATMs in 2022. Considering this, the report raises concerns about the industry's role in facilitating money laundering and scams, posing risks to the general public. Although industry statistics are limited and unreliable, the report suggests that the industry is growing following a COVID-related downturn. Bitcoin Depot's recent IPO in July and subsequent revenue increase serve as an example of this growth.
Published At
8/31/2023 7:30:00 PM
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