Bitcoin ATM Startup Hoping to Plant Its Flag in Dallas
CASASCIUS An example of a bitcoin banknote.
Spencer Noon thinks bitcoin is going to change the world.
The cryptocurrency -- currently worth about $575 per unit -- was created as an anonymous, digital means to provide verifiable online transactions outside the realms of governments and regulations. Despite high profile setbacks like the Mt. Gox disaster, in which $460 million worth of bitcoin simply disappeared from the world's largest bitcoin exchange, Noon and his startup, BTCity, think that there's enough demand for brick-and-mortar purchases that it's planning to install a series of ATMs to dispense bitcoins around the United States.
BTCity plans to put one of its first machines in Dallas, making the city the second in Texas, after Austin, to have one.
"We narrowed in on Dallas after surveying the biggest cities in the country and ultimately decided the area was a perfect fit in terms of demographics and sentiment towards virtual currencies," Noon says.
Austin became the first city in the U.S. to get one of the machines in February and Texas has been at the forefront of establishing controls for bitcoin, which, to this point, has existed largely in a state of regulation-free flux.
In April, the Texas Department of Banking issued the first formal guidance for the operation of bitcoin ATMs. As long as operators follow those guidelines, they are not regulated as a bank and don't have to maintain a state money transmitting license.
Customers using BTCity's machines will be able to purchase bitcoins directly from the machines or exchange the bitcoins in their electronic wallets for cash. As long as a third-party exchange isn't involved, the state will stay out of the way. (Don't know what an electronic wallet is? The Internet is loaded with articles that attempt to explain bitcoin.)
Despite the currency's Wild West beginnings -- bitcoin was a primary means of payment on Silk Road, the infamous online market for illegal goods -- Noon says BTCity welcomes regulation and sees a different future for the cryptocurrency.
"With Mt. Gox, you had an unregulated exchange based in Japan that was taking many risks and wasn't transparent or compliant with American laws, and that's why it failed," he says.
Increased regulation in the United States will protect the growing American bitcoin market, Noon says, by granting bitcoin holders typical American consumer protections. The stability that results will create opportunities for bitcoin to help the economies of developing nations.
"Bitcoin is going to allow millions of people in underdeveloped countries who are too poor to have a checking and savings account become banked using only their cellphone, or provide a safe haven from inflation by their government," he says.
An early example of the unbanked using bitcoin technology is BitPesa, a Kenyan service that provides person-to-person money transfers at about a third of the usual rate.
For services like these to take off, bitcoins must be readily available for purchase. That's where the ATM comes in.
"At the moment, it's very difficult to acquire bitcoin," Noon says. "There are a few websites right now that allow you to do it, but they're largely based internationally and take a few days to complete a transaction."
The ATMs would provide a quick way for those who don't want to deal with an exchange, or who lack the access to financial instruments to use one, to purchase bitcoins. If a service like BitPesa were made available outside Kenya, those consumers would then have access to cheap, easy remittances.
"If you look at it in the context of the remittance market, where companies like Western Union charge customers substantial fees to simply send money to family members back home in a different country, suddenly bitcoin becomes an attractive alternative," Noon says.
Noon is still looking for the perfect Dallas site -- he says he needs one with high foot traffic and plenty of young professionals -- but he hopes to get the ATM up and running as soon as possible.