Bitcoin ATM machines make it easy for customers to securely buy or sell cryptocurrency. Since most Bitcoin ATMs resemble legacy ATM machines, people are familiar and comfortable with using them. They also have KYC software installed, which helps to verify the identity of users. No purchase on a Bitcoin ATM will be possible without identity verification.
Owning a Bitcoin ATM business simply means that you purchase a Bitcoin ATM and make it available for customers to use. It is a unique and separate business that requires registering as a Money Service Business (MSB) and has significant compliance requirements.
Typically, business owners will have extra space available and place a Bitcoin ATM where customers can easily access it. However, it’s also possible to rent out some space if you don’t have a suitable area for a Bitcoin ATM. The delivery and installation of Bitcoin ATM machines can be provided by the manufacturer, making the process extremely easy for anyone to get started.
Step #1 - Have a Good Location
The first step in starting a Bitcoin ATM business is finding a suitable location that allows for easy access. Without customers, you won’t have any transaction volume, so you won’t make any money. Nobody is going to pass by a BTM on the top floor of an office complex. Since the Bitcoin ATM would be unlikely to have lots of users. Bitcoin ATM machines placed near each other may not generate as much revenue either (though the opposite could also be the case, as legacy ATM terminals are often placed near each other to increase traffic).
Having a good location to place a Bitcoin ATM is one of the most important steps in terms of profitability. The area should have high levels of foot traffic but mainly be visited by younger generations who tend to be more optimistic about cryptocurrency. Shopping malls, cinemas, pizzerias, music festival areas, universities, coffee shops - these locations are ideal for Bitcoin ATM machines. Cryptocurrencies do not have the same uptake amongst older generations and many demographics won’t be interested in buying or selling from Bitcoin ATM machines.
Before you embark on a Bitcoin ATM business, it's best to ensure that your premises are in a high-traffic region. You can do everything else right, but people will simply not be around to make a transaction if you put it in a low-traffic area or an area lacking younger individuals.
Step #2 - Know the Laws
One of the biggest difficulties in terms of setting up a BTM business would have to be the rules surrounding regulation and compliance. Anything that has to do with finance is often covered in red tape and Bitcoin ATM machines are no exception.
In the USA (as per the Bank Secrecy Act), those who own Bitcoin ATM machines will have to register with the Financial Crimes Enforcement Network (FinCEN) as a Money Services Business (MSB).
Aside from the USA, practically all regions will require that you register with the financial regulator, whether it's the FCA in the UK or FINTRAC in Canada. You may also need a Money Transmitter License, but that depends on your state of operation. The rules go further than registration with FinCEN. You’ll have to:
- Hire a dedicated compliance officer (this can also be you)
- Maintain a set of internal AML/KYC procedures
- Maintain customer due diligence for high-risk transactions
- Train staff in compliance policies
- Provide an independent audit at least annually
- Test your transactional controls
Failure to comply with these procedures could result in multiple fines, which can add up quickly. Violation of the Bank Secrecy Act can result in a fine of $250,000 or five years in prison or both. However, most fines are in the region of $5,000 to $50,000, such as the $8,000 fine for failure to register as an MSB due to negligence or error.
While the rules are strict for non-compliance, the upside is that maintaining the procedures is not as complex as you might think (once you understand them). Most Bitcoin ATM machines have compliance software built into them, which makes AML and KYC record-keeping a lot easier.
Just be sure to check the rules and regulations in your state, as these also have to be complied with alongside Federal laws.
#3 - Make a Detailed Budget
Creating a detailed budget is a great way to calculate whether you want to start a Bitcoin ATM business or not. Before you embark on a business venture, you need to do some rough calculations to ensure that it could be profitable. But you don’t know for sure how many people will go to your BTM, so a lot of it will be your best estimate. Still, it’s much better to forecast than to go into a new business completely blind. At least you will then have an idea of numbers as opposed to being caught completely unaware of something.
When forecasting and budgeting, you’ll need to consider:
- Legal cost: FinCen registration, lawyers and consultants (if used), money transmitter license.
- Compliance cost: Third-party audits, dedicated compliance officer, cash collection.
- Maintenance cost: Rental cost, repairs, customer support, vandalism.
- Total BTM cost: Initial cost of hardware, additional/specialized software, Bitcoin manufacturer fees, delivery fees, installation fees, and potentially extra fees to the manufacturer.
The main costs are covered above, but there can be additional costs, such as promotions and marketing. Legal costs tend to be the most underestimated aspect of cost calculations. When you have an idea of the cost, you can then balance this against what you can reasonably expect to make. In terms of Bitcoin ATMs, 8% - 15% is industry standard. If you charge 12% for each transaction, you’ll make $120 out of every $1,000 in transaction volume.
While the initial costs might be higher than you expect, they should always be contrasted with what the potential return could be to provide more accurate context. A break-even analysis is essential to ensure that starting your new Bitcoin ATM business is commercially viable.
#4 - Choose Your Bitcoin ATM
If you have a location, know the cryptocurrency laws, and have completed a detailed budget, you’re almost ready to get started. The next step is choosing the right BTM to fulfill your specific needs. There are many different types of Bitcoin ATM machines. They can be classed into either Unidirectional or Bidirectional ATMs. With Unidirectional ATMs, you can only purchase crypto. However, with the Bidirectional ATMs, users can both buy and sell crypto.
It’s probably best to get a Bidirectional ATM, but don’t feel like you need a top-of-the-range BTM. There are plenty of high-quality BTMs that offer a good level of customer experience, intuitive interfaces, and compliance software. These can be purchased for amounts ranging between $4,000 - $8,000. But these amounts do not factor in the cost for delivery and installation. If you decide to order a BTM from abroad, you might also have to pay a large customs tax.
There are multiple manufacturers for Bitcoin ATM machines and each offers a number of models. You will have to do research into the many models and get an idea of what’s truly important. Look out for the cost, compliance software, support, manufacturer reputation, and added fees. But also keep in mind that a smooth, fast, and easy transaction process is required so that customers will return and so that the transaction is finalized, instead of abandoned.
It’s also a good idea to ensure that the Bitcoin ATM has been installed and configured correctly. It should be bolted down as there is potential for theft and vandalism. It is important to test the BTM out to ensure that it works correctly.
#5 - Market, Optimize, and Maintain
Once you have chosen the right ATM, you still need to think about ways to market and maintain it. Most people look for Bitcoin ATMs online before they make a purchase. So be sure to register at Coinatmradar and other BTM directories so people can find you. Anything that increases exposure (in the positive sense) is a good thing.
If you own a restaurant or coffee shop, there are a number of creative marketing methods that you can use. Perhaps you can discount crypto purchases or place a sign outside. You can sell people on the idea of crypto, and then suggest that you have a BTM to make the first transaction. A simple ‘Bitcoin Sold Here’ sign might do the trick.
The software has to be frequently updated, though this will most likely be taken care of by the provider automatically. The biggest step in ongoing maintenance is going to be compliance. Just because you started a Bitcoin business, does not mean everything is taken care of. You have to maintain an internal compliance policy, make sure the Bitcoin ATM is full of cash, keep an eye on costs, have an annual audit, train staff, and market to customers.
There is also the potential for new laws to come out that change your obligations regarding Bitcoin ATM machines - the world of cryptocurrency is certainly not static.
Are Bitcoin ATM Machines Right for You?
Provided you do the research, have a suitable location, and understand your AML duties, then there is no reason a Bitcoin ATM business won’t be profitable for you.
Keep in mind that this is not a saturated industry and you have not ‘missed the boat’. The majority of the population has still not invested in cryptocurrency. When it starts to really go mainstream, more and more people will want to store large amounts of their currency in crypto. The first point of entry is always one of the top 4 to 5 cryptocurrencies, and typically Bitcoin.
So if you’re interested in cryptocurrency, have a location, and want to make some money, starting a new Bitcoin ATM business could be a great decision. We’re only going to see more adoption of cryptocurrency in the years to come, and it helps to be well-positioned.