Kansas Fed Huge Losses May Result from Purchasing Cryptocurrencies through Cryptocurrency ATMsKansas Fed may suffer significant losses from buying cryptocurrencies via cryptocurrency ATMs.
Author: Derek Andersen, Cointelegraph; Translation: Song Xue, LianGuai
A report released by the Federal Reserve Bank of Kansas City shows that despite criticism for illegal or predatory practices, the cryptocurrency ATM business is still thriving in the United States. The report concludes that the customer base for cryptocurrency ATMs continues to grow and can sometimes benefit from better cryptocurrency education.
Cryptocurrency ATMs can exchange Bitcoin
The report identifies four user groups for cryptocurrency ATMs. Some are cash users who may not have bank accounts, possibly out of preference. Another group consists of older people who are more familiar with ATM technology than cryptocurrency exchanges. Some users are motivated by the convenience of using ATMs, while others find that ATMs can offer greater relative anonymity.
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Cryptocurrency ATMs require identity verification (the report mentions “such as phone numbers”). Cryptocurrency ATMs are currency service businesses and are therefore subject to state and federal regulations, including anti-money laundering regulations. The report points out that although regulatory compliance in the industry is sometimes low, it may be a major source of operational management costs for operators.
Ethnic minorities and immigrants are important user groups for ATMs. Immigrants tend to purchase cryptocurrencies through ATMs for person-to-person transactions, such as remittances:
“One possible explanation for this use is that the cost of using cryptocurrencies obtained from BTMs [Bitcoin ATMs] in remittances may be comparable to the cost of using cash for third-party remittances, considering convenience, time savings, transaction certainty, and speed.”
The cryptocurrency ATM industry is often accused of being predatory and inclusive, as a “way to profit from financial investments for economically disadvantaged groups by disguising high-risk, high-cost services.” It adds, “Uneducated cryptocurrency investors who purchase volatile cryptocurrencies using BTMs may suffer significant losses.”
The report also cites data from Chainalysis, showing that fraud victims transferred $345 million through cryptocurrency ATMs in 2022. The report concludes, “The role that the industry plays in facilitating money laundering and fraud may pose significant risks to the public.”
The report states that industry statistics are scarce and unreliable, but after experiencing a downturn, industry statistics have clearly been growing. Operator Bitcoin Depot went public in July, with revenue increasing significantly.
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