Tuesday has brought the lowest day for the crypto-currency market this year and many are predicting further falls. Photo: iStock
Which countries will incorporate cryptocurrencies into their financial system, and which will instead simply pretend they don’t exist? Photo: iStock

As Bitcoin enjoys increasing mainstream adoption, different ways to access it are also in the spotlight. While the cryptocurrency was once reserved for the tech-savy and Wall Street powerhouses, a growing number of Bitcoin ATMs (BTMs) are serving as financial tools to empower Main Street investors.

Importantly, these machines enable those who have been neglected by the traditional banking system to manage and control their own finances without jumping through hoops, paying high fees, and exposing themselves to discriminatory banking policies.

A recent US-wide survey conducted by personal finance firm Bankrate showed that black and Hispanic bank customers reported being charged higher monthly fees than whites.

On average, white customers reported paying US$5 a month in bank fees, including overdraft penalties and ATM (automated teller machine) surcharges. Black customers, however, said they paid $12 a month and Hispanics $16 a month. The same survey also found that nearly 80% of white banking customers paid no fees, while 59% of Hispanics and 60% of black customers said they did.

The advantage that BTMs bring is that they democratize the banking system. This is because, unlike banks, these machines do not demand strenuous verification processes (often just a name and e-mail address suffice) and no minimum asset requirements exist. Importantly for many Americans, there is no need to have a credit score or bank account to transact.

CoinFlip, a Chicago-based Bitcoin ATM service provider, is one of the pioneering forces of democratizing the traditional banking system through Bitcoin.

In a recent interview with EventChain, the company’s chief operating officer, Ben Weiss, stated that “after seeing the unbanked and underbanked communities in the US that were being left out of this financial revolution that was supposed to be a democratizing force, CoinFlip decided to go with the ATMs.”

While this method is popularly touted as being far more democratic and accessible than the centralized banking system, Washington is slow to offer clear guidance on regulations for crypto ATMs and the crypto sector. The question is, why?

Unfortunately, a perception still exists that Bitcoin and blockchain technology is associated with anonymous entities that dabble in dark-web operations that fund terrorism and launder money.

While cryptocurrencies can still be used for nefarious reasons, sensible regulatory improvements can do much to curb criminal activity and the chances of consumers losing their money.

Examples of this include the UK’s Financial Conduct Authority’s banning of the sale of complex crypto derivatives to consumers, while still allowing the normal exchange (buying and selling) of cryptocurrencies.

Ultimately, Washington doesn’t appear to trust tech companies with data, as has been shown during congressional hearings involving top tech bosses from Facebook, Google, Amazon, Apple, and Google’s parent company, Alphabet. Members of the House Judiciary Committee’s antitrust subcommittee accused the tech giants of having too much power and “killing” the engines of the American economy.

A similar concern surrounds the cryptocurrency sector. Blockchain-based currencies do, after all, take power away from regulators and banks, as they removes their ability to track the end destination of fund deposits and transfers easily. Of course, banks and governments also lose money in the process as they are cut out of crypto transactions and therefore can’t charge fees or taxes.

Too much regulation can, however, stifle legitimate transactions and result in honest, law-abiding customers having no access to their funds or the ability to deposit crypto assets into accounts. It can reverse the progress made in giving everyone easy access to banking services. It can also result in low-income earners having to resort again to using fiat currency (hard cash), which can be easily lost or stolen.

The best way for regulators, the banking industry, and consumers to benefit equally is to create a regulatory balance. This would involve introducing rules that are mutually beneficial to all while ensuring that criminals find it hard to operate in the crypto environment.

If banks don’t become comfortable with the notion that cryptocurrencies (and the tech that enables them) are here to stay, there is a danger that they will be locked out by competing banks that do see digital currencies as more than just a fad.

It is important for rule-makers to take a holistic approach to regulating the crypto industry because, up to now, they have typically been reacting in a knee-jerk fashion without thinking of the long-term consequences.

Being sensibly cautious is a good thing, and even those that are heavily invested in the cryptocurrency industry believe this. CoinFlip’s Weiss recently mused that there is a justified skepticism of technology and that as digital assets are more complex than social media platforms it’s unsurprising that the US government has been slow to develop a clear framework.

However, Weiss argues that if the government offers more clarity on the rules and develops a straightforward framework, that will boost growth in the crypto sector while at the same time protecting American consumers. He agrees that strong consumer protections must be put in place to combat illicit entities.

Crypto operators have already proved that a balance can be struck. CoinFlip and other large operators have done much to ensure that they – and their BTMs – are fully compliant with the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) rules. 

This, along with an ever-increasing investor appetite for Bitcoin and other digital assets, has created soaring demand for BTMs. As the leading provider in the US with more than 1,000 machines across the country, CoinFlip seems to take on a trailblazing role to facilitate a strong cryptocurrency environment.

While other operators certainly exist, their lower machine rollout numbers and higher transaction fees mean they are still playing on the fringes. Nevertheless, the industry continues to do much to serve the underbanked and support less fortunate communities.

The crypto landscape is changing rapidly, and cross-border operators like Cryptospace and Spanish entity Bitnovo are trying to make cryptocurrencies available in their local markets and on an international scale as efficiently and hassle-free as possible.

As Bitcoin ATMs continue to grow in number, a clear legal framework from Washington would no doubt serve the economy and the blockchain industry. This would also help to create lucrative jobs while enabling previously disadvantaged communities to transact more efficiently through crypto markets.

But if US legislators continue to introduce confusing and conflicting regulations, there’s increasing danger that companies will move their businesses offshore to jurisdictions that are more open to the advantages of cryptocurrencies.

Such countries as China, Venezuela and several in Africa are already comfortable with digital payment technologies and, increasingly, digital currencies as well. It’s areas like these where digital currencies and crypto operators are likely to thrive.

Sean Goh

Sean Goh is a Singapore-based political analyst specializing in Asian politics. He works for the George & Tan Research Center, where he conducts research and analysis on Asian domestic and foreign policy.