Bitcoin ATMs Spread Despite Regulatory Murk
Lamassu Bitcoin Ventures is sending its Bitcoin ATMs to areas that may not be completely welcoming to digital currency, with its newest machine touching down today in the West Village of New York City, the birthplace of the "BitLicense" regulatory concept.
In July, The New York Department of Financial Services, headed by Superintendent Benjamin Lawsky, released a proposed framework for its state license for Bitcoin businesses. The proposal was considered strict by those who would fall under its requirements, but it has not yet become binding regulation.
"The BitLicense is something that's in transition," said Matt Russell, a Bitcoin entrepreneur who recently joined PYC Inc., a Bitcoin ATM services provider, as chief marketing officer. "Right now, were just complying with current laws."
Bitcoin ATM vendors and operators could fall under the BitLicense framework. Their machines allow people to insert cash to buy digital currency, and some also allow people to withdraw cash by selling their digital currency.
PYC is registered with the Financial Crimes Enforcement Network (Fincen) as a money service business in New York and Delaware. The company has also launched a Bitcoin ATM in Albany, N.Y.
Its New York City Bitcoin ATM is installed at Flat 128, a vintage boutique shop that already accepts Bitcoin for payment. To stay in compliance with Fincen rules, the machine does not allow users to purchase more than $1,000 worth of bitcoin.
In the future, PYC will allow for users to scan an ID at the machine, a step toward full know your customer and anti-money laundering compliance. PYC isn't ready for that yet, but when it is, this added level of identification will enable users to access larger sums of the digital currency.
PYC does not have a dedicated compliance officer, but it is closely monitoring New York's regulatory environment, Russell said. "We're prepared to abide by it; we're a company that wants to bring Bitcoin to the masses and we want to do it legally," he said.
Lamassu also recently sent a Bitcoin ATM to a suburb outside Johannesburg in South Africa. This is its first deployment in the continent of Africa, a region that many Bitcoin proponents say would benefit from the use of a decentralized digital currency.
"Our machines excel when cash is a better or the only option," said Zach Harvey, co-founder of Lamassu. "Africa is a very important market in general for Bitcoin because in developing countries there is a very large unbanked population."
Kenya has become a poster child for mobile payments adoption. More than 15 million Kenyas use the M-PESA mobile money platform provided by Vodafone and Safaricom.
Harvey said Lamassu is looking for ways to integrate its machines with M-PESA.
But many countries in Africa might be tough for cryptocurrency startups to operate in because of regulatory hurdles. South African regulators usually follow the lead of U.S. regulators, and the country's banks are wary about new entrants who might tarnish the industry's reputation.
But Rolf Deppe, who purchased the Bitcoin ATM for South Africa, said the Lamassu product could get around certain stringent regulations since it's more like a vending machine. Lamassu machines only allow cash-in, bitcoin-out transactions (the company also plans to offer a cash-dispensing floor stand called Santo Tirso).
"Of course we did not want to deal with issues such as being a money transmitter in the legal sense," Deppe said. However, "at the moment there is no proper legal guidance with regards to Bitcoin" in South Africa, he said.
The Lamassu Bitcoin ATM, which costs $6,500, is located in MetroMan, a men's salon. Salon owner Monre Botes is Deppe's business partner in Tremendis Learning, an IT training and recruitment company. "MetroMan accepts Bitcoin as payment for its services and we feel that [the Bitcoin ATM] would complete the loop," said Deppe.
The partners are using the machine more as an educational tool and proof of concept, rather than a way to make a profit, Deppe said.
"Lamassu has the best design, was reasonably priced and this pretty much sealed the deal for us," said Deppe.
While Deppe is happy with Lamassu's product, other clients haven't been impressed with the simple backend which, for instance, does not provide data on transaction volumes and totals.
"We're planning for the next few months to revamp some of our backend," said Harvey.
Lamassu's software is completely open source, meaning people interested in purchasing a machine can see what functionality is available and customize the software for themselves.
"If it's something small, we'll try to build it for the operator," Harvey said. "If it's more complex, we don't have the resources right now to build a custom system."
Recently Lamassu made a minor update to machines sold in Switzerland, enabling operators to comply with local regulations. The update added a screen that asks users to agree to buy bitcoin only for an account they own.
Lamassu has shipped 250 machines to 45 countries so far, with 70 to 80 of them in operation.
Others are possibly sitting unused in countries where the regulatory environment is too caustic to permit their use. For example, an operator in Ecuador received a Lamassu Bitcoin ATM two days before the country's Congress banned Bitcoin and other decentralized digital currencies.
While Lamassu won't take the machine back and refund the Ecuadorian operators, Harvey said, the company would help the operators find a buyer for their machine.