Experts define challenges, growth factors in bitcoin ATM market

Bitcoin ATMs have quickly become a ubiquitous staple in many retail spaces. You can find them in places ranging from gas stations to supermarkets. In fact, there are now more than 37,000 machines in operation worldwide, according to CoinATMRadar.

There are multiple factors driving this growth, including accessibility.

"Bitcoin ATMs are still a popular investing avenue for consumers because they offer accessibility in an industry that otherwise still has high barriers to entry," Gabriella Kusz, CEO of the Global Digital Asset and Cryptocurrency Association, said in an email interview. "As more people become interested in buying crypto with cash, the easy-to-use, familiar technology allows consumers to securely expand and diversify their portfolio. Bitcoin ATMs offer a safe alternative to buying cryptocurrency, taking various steps to mitigate fraud risk and implement safeguards for investors. As the demand for bitcoin ATMs continues to grow, we will likely continue to see them placed everywhere from bustling cities to quiet suburbs."

Bitcoin ATMs are also easier to use on the retailer's side as well, while also providing a profit.

"The regulatory environment for cryptocurrency varies from country to country, but in many places, there are few restrictions on bitcoin ATMs. This has made it easier for operators to set up new machines and expand their networks," Mark Fidelman, founder of SmartBlocks, said in an email interview. "Bitcoin ATMs can be a profitable business for operators, as they often charge a percentage fee on transactions. As more people use bitcoin ATMs, the potential for profits increases, which can encourage more investment in the market."

The security side is also important as users can more easily make transactions on bitcoin ATMs and ensure the cryptocurrency stays on their own wallets, rather than having to go through an online exchange.

"Some people prefer to use Bitcoin ATMs for the privacy they offer. Unlike some online exchanges, Bitcoin ATMs do not require users to provide personal information, which can be appealing to those who want to keep their transactions anonymous," Fidelman said.

However, there are also some issues within the bitcoin ATM industry. For one, the growth of bitcoin ATMs has slowed down significantly — in some cases many bitcoin ATMs being removed. On Feb. 28, for example, there was a net reduction of 1,061 bitcoin ATMs. In addition, the speed of installations has dropped, currently sitting at around three deployed per day, according to CoinATMRadar.

There have been several suggestions as to why the market is being held back. One is that despite it being simpler than some cryptocurrency companies, there is still a lack of regulatory clarity.

"While the regulatory environment for cryptocurrency is generally becoming more favorable, there is still a lack of clarity in some jurisdictions regarding the legality and regulation of Bitcoin ATMs. This can create uncertainty for operators and potential users of the machines," Fidelman said.

One example of this is the recent push by the Financial Conduct Authority of the U.K. to crack down on unregistered crypto ATMs. The authority is claiming cryptocurrency ATMs in the country are not registered, which can lead to money laundering. In the U.K., all cryptocurrency companies must register with the FCA.

Fidelman said other factors holding back the industry include limited acceptance of cryptocurrency, high transaction fees and security concerns.

There is also the issue of a major bankruptcy in the industry. Recently, Cash Cloud, the operator of Coin Cloud ATMs filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Nevada. The company was in debt for an amount between $100 million and $500 million.

"The recent bankruptcy of Coin Cloud, a Bitcoin ATM operator, has raised concerns about the overall health of the Bitcoin ATM industry. Some industry experts suggest that the bankruptcy of Coin Cloud may be an indicator of a larger issue in the Bitcoin ATM market," Fidelman said.

"The industry is relatively new and rapidly evolving, with many operators lacking the experience, financial backing, or business acumen needed to succeed in a competitive market. Furthermore, the regulatory environment surrounding cryptocurrency is often uncertain, presenting challenges to Bitcoin ATM operators. However, despite the challenges, the Bitcoin ATM market has continued to grow in recent years, with an increasing number of machines being deployed worldwide, and more people using them to buy and sell cryptocurrency. Thus, while the bankruptcy of Coin Cloud has raised concerns, some analysts view it as an isolated incident, rather than a reflection of broader issues in the industry."

Lastly, a major issue that needs to be addressed is educating the public on cryptocurrency. While it has become more mainstream, many businesses are unaware of the benefits of deploying a bitcoin ATM.

"Despite industry shakeups, investors are still interested in crypto but often don't know where to start," Kusz said. "Even though bitcoin ATMs employ simple to use technology, companies still need to offer guidance and education within the crypto space to ensure that new investors are making educated decisions that align with their financial goals. In providing two-way communication and trustworthy customer support, companies can encourage return customers and increase participation in the DeFi community."