With all developments in Bitcoin area over last couple of years one thing became more prominent — regulation. Bitcoin ATM business is not an exception. In many jurisdictions you need to get special licenses like MSB or others in order to conduct such a business. Running a bitcoin ATM without complying with law might end up bad. So the main point to start investigating in case you would like to run a bitcoin ATM — is the legal framework for such activities in your region.
If you are in U.S. — the following article will give a good introduction to federal and state regulation of bitcoin ATM business in US. Legal framework really depends on your location, so consult with a local lawyer first.
While running a bitcoin ATM on your own might require a lot of investment in legal field, e.g. creating your KYC/AML compliance policy, obtaining proper legal licenses, there is still a cheaper way — find existing bitcoin ATM operator in your area, approach and suggest a collaboration, so that you work under their legal licenses umbrella. In order to find operators around you — check our bitcoin machine locations map, for majority of listings operator information is provided.
In order to operate a bitcoin ATM you need to have a bank account. There were some ideas to build an “unbanked” bitcoin ATM, however, it is more of a nice to have solution, but not practical nowadays (there are some bitcoin machines with bill recyclers, but no special software available which will dynamically define the buy/sell prices based on cash/bitcoin balances, also local demand is limited, and bitcoin ATM has a very small user-base compared to online services accessible everywhere, which might result in wrong price discovery at particular machine).
By having a buy only bitcoin machine — you definitely will need to organize cash delivery to the bank, and make wire transfers from bank account to exchange in order to replenish bitcoin balance. The reality is that not many banks wish to have customers related to any “bitcoin business”. So it is good to check available options in advance and the best practice to have several relationships to eliminate the potential risk of closing account by one bank. As an example, the bitcoin ATM operator in New Zealand had to close his business due to lack support from bank sector, although the company was compliant with all legal requirements.
If you are the owner of a brick-n-mortar business — this is not a question to consider as you probably would like to place it at your location. Placing a bitcoin ATM might increase foot-traffic to your store and this is additional revenue stream for the shop. According to information from other owners who installed a bitcoin ATM, it can increase sales up to 10-30% because of new customers, who come to use a bitcoin ATM.
If you are a local business owner who wants to have a bitcoin ATM, but don’t want to have all the hassle with running a machine — you can also approach operators close to you and suggest your location. From private discussions with operators — it is always hard to find a good bitcoin-friendly location, so highly probable you can find someone who will put a bitcoin ATM in your store.
However, if you plan to run a bitcoin ATM yourself, you need to find a good location for it. Important factors to consider are: traffic volume, availability/accessibility (easy way to find, public location), proximity to transport connection, good parking facility, open hours (the longer the better), business type.
Here is the list of top 5 bitcoin ATM location types according to the stats we collect on the site:
- Restaurant/pizzeria 12%
- Cafe/coffee shop/gelateria – 9%
- BTC embassy / company office – 7%
- Shopping mall – 7%
- Supermarket / food store / Deli – 6%
So all are mostly high-traffic businesses, where people go daily.
Bitcoin ATM type
The next question is which bitcoin ATM type to chose. There are broad categories like one-way or two-way, for example. So if you would like not only to allow customers to buy bitcoins, but also sell bitcoins then you need to look for a more expensive two-way solutions. According to the number of installations worldwide — 42% of all bitcoin machines are two-way, and 58% are one-way only.
According to information from operators, there is not an even split between buy and sell operations at the moment with pure dominance of buy operations (90% buy vs. 10% sell on average). However, during huge price swings, e.g. recent one in October 2015, the user behavior might change a lot. Many operators reported fall in volume of buy bitcoin operations, and sell operations increased drastically (making volume ratio of about 50/50). So not to lose opportunities on the volatile market it is better to provide both options, however, in “normal” times just a one-way bitcoin ATM can provide a steady income as well. We are still in the “enter bitcoin” phase for average customer.
Here is a list of top bitcoin ATM providers on the market at the moment, which can be recommend. All of the providers have a long tracked positive history on the market:
- Genesis Coin — provides one-way solution Satoshi1 for $6.8K and a two-way Satoshi2 machine for $2.1K on top of one-way price. There is also old Genesis1 for $14.5K.
- General Bytes — provides a one-way bitcoin ATM called BATMTwo for 2849 USD and two-way bitcoin ATM BATMThreeL (basic version) for $7K. There are several different variations of BATMThree models family depending on hardware you choose.
- Lamassu — provides one-way solution Douro ($6.5K), additionally Santo Tirso stand can be purchased to make it two-way for $5.5K making the total cost of two-way Lamassu solution of $12K.
- BitAccess — provides a two-way bitcoin ATM machine for $7K
Price-wise the cheapest are General Bytes for one-way solution and BitAccess for two-way machine. However, the features may vary and it is really required to look at all options to choose a proper one that will fit your needs.
Since beginning of 2017 and due to quite toxic scaling debate, which resulted in lower Bitcoin market dominance rates, many operators add altcoins support on their machines. For example at the moment (Feb 2018) 44% of all machines apart from Bitcoin also support at least one altcoin. If you plan to support altcoins buy / sell operations — it is important to choose manufacturer who provides a support for altcoin of your choice.
Volume and Fee size
In order to start new business one needs to do profitability calculation in advance and have at least rough business plan. CoinATMRadar provides a Bitcoin ATM profitability calculator by using which you can easily define approximate costs and calculate ROI with detailed report.
The following are average metrics on the market (based on discussion with operators):
- In order to reach planned volume it takes about 6 months with marketing and advertising of a location. So it is very important to keep machine at the same location. [Edit: based on infromation from operators the standard location volume is usually reached faster — 1-2 months from installation, for details read the article on Revenue, costs and profitability of a bitcoin ATM]
- Average normal monthly volume of a bitcoin ATM is about $30K. It may vary, but this figure is quite realistic in our opinion, which can be used as a basis for forecasts starting month 6.
- Average bitcoin ATM fees are now at 5.5% for sell operations and 7.5% for buy operations. Please keep in mind that these fees are biased to the extent that they are calculated based on information from operators who decide to report fees. Normally, those who charge on the high end — don’t report. We’ve seen the fees in the range of 15-25% becoming widely used, especially during periods of high demand (e.g. May 2017 or December 2017).
So to set it up probably some average values can be used initially. In order to attract users operators might suggest lower rates, sometimes even 0% commission. In this case you need to find a way to buy cheap bitcoins, e.g. directly from miners with discount.
Proper customer support services
When you run a bitcoin ATM it is very important to provide best services to customers. Operator has to monitor whether machine is operational and bitcoin funds are in place etc. Negative publicity spreads pretty quickly.
Both email and phone should be provided on the machine. We recommend to make it available also on our site’s listing.
Recently implemented bitcoin ATM voting functionality allows to track customers’ feedback. As an operator you can place a printed QR with link to your machine listing on our site (check link on bitcoin ATM page) in order to gather more reviews and monitor status of the machine closely.
These are the main questions one needs to investigate and answer before running a bitcoin ATM. If you have something we missed — please write in comments and we will update the article.
Check our twitter account @CoinATMRadar for more updates on bitcoin ATM topic.