At the Stop N Shop convenience store on E. Lake Street in Minneapolis, next to racks of potato chips, a new machine invites customers to buy and sell bitcoin.
Bitcoin ATMs are showing up in check cashing, vaping and convenience stores across the Twin Cities. They look like conventional cash ATMs, but they’re installed by entrepreneurs hoping to profit from consumers who previously had no easy way to trade in virtual currency.
Though the blockchain technology behind bitcoin can be bewildering, buying bitcoin at the corner store can satisfy a number of simple needs, according to those in the industry. The digital currency can be used to transfer money or as a substitute for a bank account. Plus, some may think of it as an investment, or even a lottery ticket, given bitcoin’s wild swings in value.
“We are seeing a proliferation of virtual currency ATMs across America because some buyers or sellers like the convenience of a kiosk,” said Bill Repasky, a lawyer with Frost Brown Todd, a Louisville, Ky., law firm that provides legal counsel for bitcoin ATM operators. “It allows for a more immediate impulse buy of a virtual currency versus going on to an exchange or online website to buy or sell.”
It’s also a speculative investment with few of the consumer protections that apply to banks. Minnesota doesn’t have a specific law that governs cryptocurrencies or bitcoin ATMs, said Julia Miller, deputy director of communications for the Minnesota Department of Commerce.
“The department cautions consumers to be aware of the potential pitfalls of cryptocurrencies because they are both volatile and untraceable,” Miller said.
A dozen bitcoin ATMs have popped up in the Twin Cities in the past year, with two companies competing for customers.
Since January, Las Vegas-based Coin Cloud installed eight bitcoin ATMs in the metro area, and the company is planning to bring more, said CEO Chris McAlary. The company rents space from stores and gives the hosts up to $300 a month if they are open 24/7.
DigitalMint, based in Chicago, has four locations in the metro and one in Rochester.
Assad Awaijane, manager of Stop N Shop at 1700 E. Lake St., said he was eager to lease a space to Coin Cloud after the company approached him seven months ago. His son, a bitcoin investor, told him about the ATMs showing up elsewhere across the nation.
“I was excited to bring it in because it had a lot of news hype about bitcoin in the media,” he said.
McAlary describes the digital currency, also known as cryptocurrency, as “cash for the internet,” because it is decentralized, doesn’t require a bank to verify transactions and is independent of government.
“It’s a very powerful tool for those who are underbanked or unbanked,” McAlary said.
Bitcoin is one of the oldest and best-known virtual currencies, although there are thousands of cryptocurrencies on the market. In late 2017, bitcoin’s price skyrocketed to nearly $20,000, and then dropped to $7,000 in February, according to CoinMarketCap, a site that tracks cryptocurrencies.
“People prefer to hold [bitcoin] as an investment more than they would the local currency,” McAlary said.
The traditional way of buying and selling bitcoin follows a complicated process of finding the right digital exchange account and linking it to your bank account. You store your bitcoin in a virtual wallet to trade or buy products or services.
Both Coin Cloud and DigitalMint require users to have a bitcoin wallet, a government-issued ID and a cellphone number. Coin Cloud users can buy and sell fractions or whole bitcoins worth up to $10,000 a day. Transaction fees range from 5 to 8 percent, based on the volatility of bitcoin prices, McAlary said.
For DigitalMint, which places its bitcoin ATMs at check-cashing stores, users can only buy bitcoins. The company allows people to buy bitcoins worth up to $20,000 a day. Transaction fees are from 7 to 10 percent.
Check-cashing stores provide a valuable service to the unbanked population by giving them their money right away, said Jonathan Solomon, CEO of DigitalMint. “That seems to resonate with people buying bitcoins,” he said.
Repasky said regulations governing bitcoin ATMs are found on federal and state levels. These operators are categorized as a “money service business” under the Bank Secrecy Act, a federal law that requires financial institutions to collect information useful for combating terrorism and preventing money laundering.
McAlary and Solomon said their companies are registered with the Financial Crimes Enforcement Network, a branch of the U.S. Treasury Department. They have received no guidance from state regulators, they said.
The bitcoin ATM at the Stop N Shop convenience store was installed in January. The machine has brought a new clientele who stick around to purchase items, Awaijane said.
“I see young kids using it and investing their money,” he said. “I like to see that.”