You’d think the United States would be home to one of the first Bitcoin ATMs in the world, but things just haven’t turned out that way. America is supposed to be a bastion of freedom throughout the world, but that’s not actually how things work when it comes to setting up an ATM. The financial services industry in the United States is one of the most regulated markets in the world, and these regulations make it very expensive just to do something as simple as selling bitcoins to people who want to buy them. In the case of a Bitcoin ATM, you need to make sure that you’re registered as a money services business before you setup that machine. This also means you’ll need to following Know Your Customer and Anti-Money Laundering regulations. All of this compliance costs millions of dollars, which is one of the reasons it was easy for Jeff Berwick to walk away from BitcoinATM in early 2013. In other words, setting up a Bitcoin ATM in the United States has been rather impractical up to this point.
BitAccess ATM is Coming to New York
When I first heard a recent story about a Bitcoin ATM coming to New York, I was actually rather shocked. I was in the process of writing a story about how Bitcoin ATMs will probably not be around for quite some time in the United States right when I found out about BitAccess. I figured they must have found a loophole around the KYC and AML requirements, so I sent them an email in regards to how these Bitcoin ATMs are going to work in such a highly regulated market. Abdul Haseeb Awan from BitAccess was kind enough to respond, and here is the three step verification process he described for people who want to use the ATM:
1. SMS Verification
2. ID Scan
3. Facial Scan
It’s important to note that these verification requirements would only kick in for larger transaction sizes. The operators of these ATMs will also need to secure MSB licenses before they’ll be allowed to buy or sell bitcoins through the machine.
How Effective Would This Really Be?
I know BitAccess is doing their best just to help their operators comply with the insane regulatory requirements for Bitcoin exchanges, but it seems like this kind of system wouldn’t work very well when it came to actually preventing money laundering. This is not the fault of BitAccess, and it really has more to do with the general idea of attempting to prevent money laundering in the Bitcoin world. If someone wants to purchase bitcoins anonymously through one of these machines, all they’ll have to do is have someone else do it for them. It would be trivial for a person who wishes to remain anonymous to give another person some cash, have them go over to the Bitcoin ATM to buy those bitcoins, and then have those bitcoins sent to a bitcoin address owned by the anonymous individual. This is another example of how small regulations on Bitcoin exchanges aren’t going to work. If the US government wants to regulate Bitcoin efficiently, they’ll need to massively increase the amount of intrusion in the daily lives of Americans. With Bitcoin ATMs, we could be inching closer towards a regulatory breaking point.