New Bitcoin ATMs that allow users to tap into cryptocurrencies easily and quickly are popping up all over, and cyber-criminals are taking note.

Cryptocurrency usage is skyrocketing, and it would only seem logical that the next wrinkle would include Bitcoin-based automated teller machines (BTMs), crypto kiosks, or crypto ATMs. In fact, chances are high you may have seen one — there are as many as 50,000 machines in the United State today and that number is growing.

But what exactly is a crypto ATM, and how do you use it? More importantly, how and why are criminal actors utilizing them for fraud, scams, and illicit schemes? Are the controls in place to know who is using the ATM — such as traditional banking’s Know Your Customer (KYC) rules — sufficient? And does a crypto ATM provide greater access to the underbanked, or is it an easy tool for nefarious actors?

Seth Sattler is Director of Compliance at DigitalMint, a Chicago-based bitcoin ATM operator with a presence in more than 40 states. Sattler’s team works to create a system of controls to better know who is using the machines by requiring basics identity verifications and more.

“More than half of the 36,000 BTMs in the United States do not require photo identification to conduct transactions ranging from $250 to over $1,000,” Sattler says.

Some in the industry say heightened identification verification is unnecessary, that simply requiring a phone number and matching it against a database is verification enough. Yet, as Sattler describes, this might be a very risky proposition and one that does not outweigh the reward.

What are crypto ATMs 

In its most basic form, crypto ATMs are a simple and familiar way for individuals to convert fiat currency (general government currency like dollars, Euros, or pounds) into cryptocurrency. A person simply walks up to a stand-alone kiosk to purchase crypto by inserting cash or their debit card and completing a few basic steps. They aren’t nearly as intimidating as going online, accessing a crypto exchange, and dealing with next gen concepts like crypto wallets. Indeed, these crypto ATMs may be more approachable for certain individuals who may not be as comfortable with technology or are distrustful of digital banking.

“Most people are familiar with crypto ATMs. You can probably find one in your local convenience store or gas station,” Sattler says. “Cryptocurrency kiosks are the Red Box of crypto transactions,” referring to the popular stand-alone DVD rental kiosks found in many convenience and grocery stores.

And, the more ubiquitous cryptocurrencies become, the more average citizens become comfortable using it, at least to an extent. Which is why a crypto ATM kiosk provides a happy medium for those who aren’t tech-savvy yet demand privacy for these types of financial activities.

Why crypto ATMs are attractive to criminal actors

Unfortunately, these are the same advantages that lure criminals — especially those who are always looking to innovate — toward crypto ATMs in the hope of yet another opportunity to launder funds or defraud unsuspecting victims. Sattler reminds us that crypto ATMs can be a boon to bad actors for a few reasons. First, the sheer number and accessibility of these ATMs makes it easier to facilitate illicit transactions; and second, because identification verification regulations are lacking or inconsistent across states, it’s much easier to instantly and anonymously convert fiat currency to Bitcoin. Further complicating anti-fraud attempts is the sheer quantity of crypto ATM operators.

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