Bitcoin

How to Use a Bitcoin ATM in 7 Easy Steps | SoFi

Although most bitcoin transactions take place online, sometimes cryptocurrency users have physical cash that they want to convert to bitcoin. in that case, they would want to use a bitcoin ATM.

what is a bitcoin ATM?

A bitcoin ATM is a stand-alone machine or kiosk that serves as a portal for customers to deposit cash and receive bitcoins. some crypto ATMs only offer bitcoin, while others allow users to withdraw other cryptocurrencies as well.

Reading: How to buy bitcoin from atm

Across the US and around the world, bitcoin ATMs are popping up at gas stations, convenience stores, and other places. As of October 2020, there were more than 9,000 bitcoin ATMs, according to Coin ATM Radar. some estimates list a total of 14,000 bitcoin ATMs in the world. The companies that operate these ATMs sometimes require you to use their particular cryptocurrency trading platform or proprietary wallet. For this reason, some bitcoin ATMs only work for customers who have an account with a particular platform.

many bitcoin ATMs have strict minimums and maximums for each transaction. The Financial Crimes Enforcement Network (FINCEN) requires all Bitcoin ATM operators in the United States to observe and follow the anti-money laundering provisions of the Bank Secrecy Act (BSA). As a result, users making larger transactions at a bitcoin ATM may have to provide personal information. that information may include a mobile phone number to use for transaction verification. additionally, some users may need to scan a government-issued ID, such as a passport or driver’s license, to verify the identity of the person making the transaction.

A bitcoin ATM provides a quick and easy way to buy bitcoin with physical cash. otherwise, users would have to deposit the cash into a traditional account and then transfer it to a cryptocurrency exchange in order to complete the transaction.

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how do bitcoin ATMs work?

Despite the name, a bitcoin ATM does not work like a bank ATM. those traditional ATMs typically allow customers to withdraw cash, deposit cash and checks, or transfer money between accounts at the same bank.

Just like a traditional ATM, a bitcoin ATM is connected to the internet. But bitcoin ATMs, by contrast, receive hard fiat currency, like dollars, from the user, and give them bitcoin or other types of cryptocurrencies in return.

sends that cryptocurrency to the user’s crypto wallet, which the user identifies by scanning a unique quick response (qr) code at the machine. Most ATMs offer a real-time exchange rate, but also charge users a fee for the convenience of the bitcoin transaction.

the dollar to bitcoin rate changes from minute to minute. and the rate offered by a machine may have a greater financial impact on the transaction than the fees themselves. Therefore, investors planning to use a bitcoin ATM on a regular basis to convert cash into crypto may want to take a close look at the exchange rates offered by different bitcoin ATM providers, in addition to their fees, as these can be significantly higher than what you would see on a cryptocurrency exchange.

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While most machines do not deliver cash in exchange for a user’s bitcoin, some newer machines have begun to offer this capability. A user can confirm that the cash from him bought bitcoin or another form of crypto by checking his crypto wallet. but the transaction may take several minutes to appear.

For users who want to buy bitcoins at a bitcoin ATM but don’t have a crypto wallet, some bitcoin ATMs will generate a new wallet for them.

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how to use a bitcoin ATM

Using a bitcoin ATM requires several steps:

1. Get a crypto wallet. Before you use a bitcoin ATM, you’ll need a wallet in which to deposit the bitcoin you buy. those assets live on the blockchain, but the crypto wallet tracks your balance and allows you to access your cryptocurrency with an alphanumeric key. those wallets can be web-based or they can be hardware devices.

2. prepare the wallet. make a note of your wallet’s alphanumeric code or download a qr code to allow faster access.

3. Look for a bitcoin ATM. There are many guides, like this one, to help you find a bitcoin ATM near you. Many work like maps, where you simply enter your zip code to receive a list of addresses where you can find a bitcoin ATM and the company that operates the bitcoin ATM. they also list the company that operates the bitcoin ATM.

4. set up an account. To use a bitcoin ATM, set up an account with the ATM operator. this process will require you to enter some personal information.

5. enter your wallet information. at the ATM, a message will follow to indicate your wallet, through a qr code or an alphanumeric key.

6. insert cash. When you physically deposit cash, the bitcoin ATM operator transfers it to bitcoin or the other forms of crypto you requested. If you insert $200, for example, you will receive $200 worth of bitcoin at its current market price, minus the ATM provider’s operating fee. some ATMs also charge a miner fee, which is deducted from the deposit amount.

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7. confirm the purchase. This is your last chance to review and confirm your purchase and the fees you are paying before making the transaction.

bitcoin ATM fees

When users buy bitcoin or other forms of crypto at a bitcoin ATM, they must pay a fee. While you may be familiar with the single-digit withdrawal percentage fees charged by traditional ATMs, the fees are much higher for bitcoin ATMs.

Like the fees charged by cash ATMs, the fees charged by bitcoin ATMs are not a fixed dollar amount, but rather a percentage of the transaction. According to Coin ATM Radar, the average fee for buying crypto at a bitcoin ATM is 8.4%. Some research shows that some bitcoin ATMs charge fees of over 25%, while others typically charge 10-15%, so it’s worth shopping around.

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the future of bitcoin ATMs

Most bitcoin ATMs only allow users to deposit cash, often with very high fees. but there has been a move among some operators to make them more like traditional ATMs and allow cash withdrawals. some bitcoin ATMs are capable of both types of transactions.

The process for converting crypto to cash and withdrawing the cash will work like the current deposit process, but in reverse.

Given the high fees available to bitcoin ATM operators, it is likely that these machines will continue to appear more frequently, offer more features, and hopefully compete more aggressively on the prices they charge for their services.

the takeaway

Bitcoin ATMs are becoming more and more common. They offer convenience to some crypto investors, but they also often charge extremely high fees and require the user to have a crypto wallet.

One way to start investing in bitcoin without a wallet is to open an online brokerage account on the sofi invest® platform. sofi invest allows you to trade cryptocurrencies but also more traditional investments like stocks or exchange traded funds from the comfort of your phone or computer.

photo credit: istock/farakos

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