What are Bitcoin ATMs: How to avoid illegal ATMs

There are over 38,000 crypto ATMs or crypto-focussed automated teller machines globally. Most of the ATMs are in the United States. The popularity of cryptocurrency, Bitcoin (BTC) in particular, contributes to the rise in the usage of Bitcoin ATMs also known as BTMs. The increasing adoption of these ATMs has also attracted malicious actors who�ve introduced illegal ATMs to cash in on the popularity. Before diving into ways to differentiate between legal and illegal crypto ATMs, let�s start by defining what are Bitcoin ATMs.

What are Bitcoin ATMs

To better understand Bitcoin ATMs (BTMs) think of conventional cash ATMs operated by banks like Bank of America, JPMorgan Chase, and Citi Bank. The Bank of America ATM, for example, makes it easy for the bank�s users to deposit and withdraw funds from their accounts. The bank�s ATMs are accessible 24 hours a day all year long, offering the bank�s customers the convenience they need to access their money.

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Back to Bitcoin ATMs. Bitcoin ATMs operate the same way as conventional bank ATMs with the only major difference being that BTMs deal with Bitcoin. BTMs offer services like buying and selling BTC using cash or debit cards. In other words, you can use a Bitcoin ATM to convert cash into BTC and Bitcoin to cash.

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Note that there are two types of BTMs, unidirectional and bidirectional. Unidirectional Bitcoin ATMs allow only one function. They either support buying OR selling. Bidirectional Bitcoin ATMs, on the other hand, support both buying AND selling BTC.

How do Bitcoin ATMs operate?

Although each Bitcoin ATM manufacturer has a unique way of operation, these ATMs has a similar flow. First, to use these machines, you need a Bitcoin wallet whether you are buying to selling BTC.�

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• To buy BTC using a Bitcoin ATM, you select the amount of money you wish to spend, conduct a quick know-your-customer verification, provide your wallet for the destination of the coins, provide the cash, and the transaction is complete.

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• The process of selling Bitcoin using a BTC ATM involves selecting the amount of crypto you want to sell. With some BTMs, you can choose the amount of cash you want to receive and it�ll automatically show you the amount of BTC you need to sell. Confirm the amount to receive the a receipt with a QR code that has the deposit address, send the BTC from your mobile Bitcoin wallet, and the ATM dispenses the cash.

The advantages and disadvantages of using a Bitcoin ATM

For the advantages, a Bitcoin ATM is convenient and easy to use. On the flip side, the ease of use and convenience comes with security risks and high transaction fees. Using a BTM can cost you up to 20% in fees compared to less than 5% when using a cryptocurrency exchange. Another disadvantage is that BTMs aren�t readily available.

Do we have illegal Bitcoin ATMs and what makes a Bitcoin ATM illegal?

To answer the first question, YES, we have illegal Bitcoin ATMs. On what makes a BTM illegal, let�s look at what makes it legal.

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A Bitcoin ATM is made legal by adhering to the financial laws of the jurisdiction in which it operates. The laws prevent ATMs from being used by malicious actors to launder money or finance terrorist activities.

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If a Bitcoin ATM doesn�t follow these rules, it becomes illegal. That is, its activities aren�t scrutinized by financial regulators like the Federal Reserve Board (FRB), the Federal Deposit Insurance Corp. (FDIC), and the Securities and Exchange Commission (SEC).

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Unregulated BTMs are ideal for individuals looking to move illicit funds such as those obtained through hacks and scams like pig butchering, romance, and investment scams. They are also used by individuals who want to evade paying taxes.

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Illegal Bitcoin ATMs present numerous risks to users putting them at the scrutiny of regulators in case the ATM or its operator engages in some dubious activity. These ATMs can also be operated by malicious actors meaning that they can be used to steal your funds under the guise of helping you to send, buy, or sell Bitcoin.

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It's easy to compromise illegal BTMs to reveal your personal information like phone number and home address. This information can be missued to, among other things, reset the security information of your traditional bank account or locate you physically.

How to tell an illegal Bitcoin ATM from a legal one

Unregulated BTMs are easy to spot. The first signs include

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• Its operator isn�t listed on reputable Bitcoin ATM tracking sites like LocalCoinATM and CoinATMRadar.

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• It lacks well-displayed operator information.

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• It�s located in suspicious places like dark alleys. Legal BTM operators put their machines in easy-to-find, highly populated places like shops and malls.

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• It doesn�t require you to conduct identity verification. Although some may argue that no KYC means honoring the crypto spirit, regulated BTMs need to conduct know-your-customer checks.

• Poor maintenance.

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• Charges exorbitant fees.

How to avoid illegal ATMs

Apart from avoiding using Bitcoin ATMs with the above characteristics: 

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• Use reputable sites to search for legal Bitcoin ATMs near you.

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• Avoid being rushed into using these machines by strangers or even friends and family that may be compromised by scammers.

Conclusion

Bitcoin ATMs can be legal or illegal depending on whether or not they operate within the law. To avoid illegal Bitcoin ATMs, first, search for them or their operators on known BTM tracking sites like CoinATMRadar. Also, check its maintenance, location, and whether it charges unreasonably high fees. Don�t fall for Bitcoin ATM scams, avoid making a hasty transaction using a Bitcoin ATM.