Bitcoin Is Coming to Your Bodega

By CHRIS CHAFIN

Want to pick up some Bitcoin with your beer? Cryptocurrency teller machines across the country are making that a reality.
At Manhattan bodega Grace News, there’s an unusual new machine sitting between a shelf of “tobacco use only” glass pipes and a cooler of soda. It looks like an ATM, but significantly more futuristic: taller, grayer, curvier, with a huge, bright screen. It’s also, for the moment, out of order.

“There was a software update this morning, I think,” says a man behind the counter who declined to give me his name. “Now—not working. But they pay a fee every month, whether it works or not,” he says, shrugging.

The new machine isn’t an ATM, but a BTM—a Bitcoin teller machine. There are now more than 80 in New York City, and dozens more around the country. But are they enough to make cryptocurrency a de facto choice?

This year, Bitcoin has increased in value more than a thousand percent, with the price of a single Bitcoin recently (albeit briefly) breaking $17,000. Entrepreneurs of all types have poured into the space (the Winklevoss twins, for example, now run Bitcoin exchange Gemini). Bitcoin has entered the public consciousness as something that’s mysterious, volatile, and most of all, extremely valuable. But where these benefits are going, and who really has access to them, is a murkier question.

There’s something vaguely lottery-like about them: Machines in your corner store slyly promising that you can put in a small amount of money and get out much more.
You’ll find BTMs in gas stations, liquor stores, and bodegas, often being used by people dealing with very small amounts of money who are looking for a simple way to get a little bit of the value supposedly there for the taking in the Bitcoin boom.

Unlike regular ATMs, which are primarily used as cash dispensers, BTM manufacturers pitch their machines as everything from an alternate banking system for the unbanked to a new way for immigrants to send remittances. But by far the most common use is the ease of access BTMs provide for people to begin investing in the opaque Bitcoin marketplace, with whatever cash they have on hand. There’s also something vaguely lottery-like about them: Machines in your corner store slyly promising that you can put in a small amount of money and get out much more.

In New York, just two companies are allowed to operate BTMs: Coinsource, and CoinBTM. Coinsource, started by entrepreneurs Sheffield Clark and Bobby Sharp, doesn’t look like a traditional banker or credit union. In 2014, Sharp owned restaurants in California and Texas; Clark owned an ATM business. They’d been thinking about doing something together, perhaps opening a car wash, but were having trouble securing funding. In researching alternatives, they started reading about Bitcoin and wondered if they couldn’t find a way to get in on the action.

“It was just this interesting phenomenon … and the plug-and-play aspect was pretty nice,” Sharp says. “You don’t have labor [costs]. Your labor is a machine.”

With the help of a third man, Travis Goff, they created Coinsource, placing their first machine in Las Vegas in the spring of 2015.

Bitcoin is accepted as payment at relatively few places for now—Reddit and Microsoft are the more notable e-commerce vendors, alongside some local vendors (a gun store in Texas, a funeral home in Minnesota). Still, for the unbanked, the ability to deposit money in a machine and buy anything online is a significant advancement, especially at a time that more and more businesses are going cashless. For people sending money to family abroad, Bitcoin can be a cheaper alternative to traditional companies such as Western Union and Moneygram.

Today, Coinsource has more than 160 machines around the country (including the one at Grace News), and bills itself as the nation’s largest and most secure BTM operator. According to figures provided by the company, Coinsource has seen 190 percent growth across the country in 2017, and 186 percent growth in New York City alone. They aim to have 1,000 machines in operation by the end of 2018.

Yet it may be some time before BTMs replace—or even compete significantly—with ATMs. The vast majority of BTMs don’t actually dispense money. Since Bitcoin is a virtual currency whose value is determined by the market—and since the value of each Bitcoin is now so high, around $15,700 as of this writing—BTMs function more like tiny stock vending machines, with each dollar deposited buying a minuscule fraction of a Bitcoin. While some Coinsource machines allow users to also sell portions of their Bitcoin and receive cash, no CoinBTM machines do (CoinBTM did not respond to multiple requests for comment).

The influx of BTMs is ostensibly intended to bring new users to the marketplace—though not without some hurdles. Customers new to Bitcoin can create a wallet through the machine, though CoinBTM writes on its website, “we strongly recommend that you immediately send the bitcoin from this paper address to another address you control (emphasis in the original warning).” Troublesome security warnings aside, doing this is a complicated and relatively technical process not facilitated by either company. I had to download three different apps, read a half dozen tutorials, and type a very long case-sensitive string of numbers into my phone before I was set up with my own wallet. This was a difficult process for me, let alone a user with limited English skills or technical experience.

Many BTMs also heavily penalize depositors with smaller amounts of cash on hand. CoinBTM machines have tiered pricing for customers depending on the amount of their deposit, working out to an 18 percent service charge. That’s similar to paying $3.60 to withdraw $20 from a traditional ATM.

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