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7 Things I wish I knew before starting a Bitcoin ATM Business.

November 24, 2018

 

More and more Bitcoin ATM businesses are opening all over the world, and a lot are failing very shortly after, or before they even start.

 

Companies like General Bytes are announcing more than 1670 units sold, while only 884 are in service at the moment. (source Coin ATM Radar)

 

Why is that? What are the struggles you will face?

 

Running a bitcoin ATM business seems like easy passive income. It might have been true at one point, but now, there are many struggles that I wish I knew before jumping head first.

 

In many business venture, people tell you, "just start and you'll figure things along the way". This might be true for many businesses, but not for Crypto ATMs.

 

Here are a few of the struggle categories:

 

Legal:

 

After figuring out which company structure will be the best for you, you first need to find a lawyer that knows about Crypto laws, and those are generally outrageously expensive. If you go the cheap route and go with a non specialized lawyer, you need to be ready to do a lot of researches on your own. In the states, the information is available, but in Europe good luck! If you look at businesses currently running, none of them have the same AML policy, and none of them the same limits, and that is because none of their lawyers were capable of figuring out what the legality really is.

 

Another good subject under legal will be auditing yourself and the machine for your AML compliance. You don't want to find out one of your client is abusing some undetected flaw of the machine by having the cops and a warrant show up to your door. Some ATM business owners have been abusing the law and have been arrested for money laundering, therefore everyone will suspect you first, before asking questions. You will need to be ready to prove that you are "clean" to anyone who asks, and many will.

 

Banks:

 

Once you have found your gem of a lawyer and opened your business, you go proudly to the bank with all your paperwork to open an account, but exit sadly with someone saying something like:

" Unfortunately we have to decline your bank account request. At this moment we don't accept companies that perform transactions in bitcoins and similar virtual currencies. This is mainly due to the risk inherent in bitcoins and other virtual currencies as they involve a high degree of anonymity. "

And no matter if your AML policy allows no anonymous transactions, they will not hear it. So you will try to open a bank account without telling them you work with Cryptos, and it will work for a few weeks, until they find you out and freeze your account and everything that is on it. If you use your personal accounts, they will close them and ban you from ever opening a new one.

 

No need to say that no bank, means no loan, personal or professional and no insurance which takes me to the second paragraph:

 

Insurance:

 

The impossible quest continues with the insurance, no one will accept to insure your machine, or the cash in transition. You will have to cover everything out of the pocket, no matter if your machine breaks down, gets vandalized, or worst, if you get robbed while servicing it.

 

Exchanges:

 

You will need a pro account with an exchange. This can take months to open, you will need to present a lot of paperwork, show you AML policy and answer all kind of questionnaires. The process is fairly normal, but really long due to the high demand, so you need to take that in consideration. Using a personal account can lead to a ban on the exchange.

 

ATM software:

 

To run an ATM business, you will need to know everything about Hot Wallets as you will need to have a wallet for each currency you want to carry. Loading each of those wallets with the appropriate amount of money means having a huge amount of liquidity.

Hot wallets reminds me of the french expression "watching it like a sauce pan full of milk on the stove."

If you thought the software was automated and you would have nothing to do, you are very wrong. You need to keep a constant eye on each transactions, and very often there will be an error and the client won't have receive their money, or the hot wallet won't be refilled and if you don't see it right away and the currency drops in price, you can loose a lot of money.

The ATM software out there are good but far from perfect, they have a lot of flaws, and you will be responsible of any problems to your clients so be aware of that.

 

Hardware:

 

If you do a quick search online, you will find that most ATMs are made of different parts put together quickly (even the cases are not original) Most of the ATM maker were not at all in the vending machine business and therefore, you will feel like you are running a constant Beta having to fix little flaws along the way yourself. You need to be ready to deal with people with no professional background and no customer service experience.

Also, your machine as some point, sometimes often, sometimes not, will need to be restated manually. Be ready to drive a lot to your machines, or have someone trained on site.

 

EU war against Bitcoin:

 

The EU Parliament decided to start a war on crypto and they are unfortunately winning slowly as no one is fighting it. (See article by the Bitcoinist: https://bitcoinist.com/eu-parliament-battle-banks-bitcoin/?fbclid=IwAR2t3FJUnYDQFrgvnL6hJn0lZLOyHaGfU5_UJqfi6j6UpiKGrnmlw3rq69k.)

This bad reputation that the media portraits is hurting you personally. People do not take you seriously. I find myself hiding the truth very often so I don't get this look or those questions that highly judge you.

 

Conclusion:


This is still a great business to get into and I do not regret any of it.In a year, I grew a profitable business that is able to provide food and shelter, but I did not get rich because of the obstacles put in place by lack of regulations in the EU.

 

If you have any questions, feel free to ask!

 

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