All the Bitcoin ATMs in Detroit are in low-income areas, and they represent uncharted ground for this new currency that exists only in cyberspace. Crypto commentators say the machines merely fill a financial void in areas that banks and traditional lending institutions largely ignore. Security analysts and law-enforcement officials say they are tools for small-time money-laundering.
The 23 Bitcoin automated-teller machines in Detroit are installed in places like the Big V Party Store on the northwest side. Signs outside the Big V prominently advertise its goods and services: check-cashing, money orders, liquor, Lotto tickets, and since last year, an ATM dedicated to cryptocurrencies.
“The truth is, it could be both scenarios,” said Yaya Fanusie, a former economic and counter-terrorism analyst for the Central Intelligence Agency. He now studies the impact of Bitcoin and other cryptocurrencies for a Washington, D.C.-based think tank.
Fanusie, who is director of analysis for the Center on Sanctions and Illicit Finance, which is part of the Foundation for Defense of Democracies said:
“It’s a guess because the technology is new. We need time to collect data. The fact (that Bitcoin ATMs) are in the kind of areas you describe, only says how much digital currency is growing worldwide.”
Bitcoin ATMs allow users to put cash into the machines, scan a QR barcode from their phone or tablet, and have that money converted into bitcoins. The teller machine deposits the virtual currency into users’ digital wallets. They can then use that bitcoin to pay someone else online by transferring it to that user’s account. ATM users also can convert bitcoins into other cryptocurrencies such as Ethereum or Litecoin.
Bitcoin ATM in Detroit – Timmy’s Market
In Detroit, Bitcoin ATMs are installed in neighbourhoods where empty houses and blighted buildings are common. Beyond the city limits, most of the estimated 80 machines in Metro Detroit are largely in low-income areas of Pontiac, Hamtramck, Highland Park, Taylor and Inkster.
Ayman Rida, who started a company in late 2016 called International Bitcoin that supplies machines to Metro Detroit stores said:
“My company installed 15 Bitcoin ATMs last year. Last year, the business grew very, very good at the locations.”
He said the average transaction is about $70 to $80.
Most of the Bitcoin ATMs in Detroit only allow customers make deposits — not convert it to hard currency, Rida said. However, there are machines that allow users to withdraw cash from their bitcoin accounts.
Advocates say cryptocurrencies will transform how money is exchanged because they allow users to transact with others directly — no bank account or credit card is needed. The entire worldwide network of Bitcoin is outside government control and no single entity regulates it. Bitcoin transactions are recorded in a public ledger run by an anonymous network of computers.
Bitcoin can be used to book hotels on Expedia, shop for furniture on Overstock and buy Xbox games from Microsoft, among other things.
The locations of the machines in Detroit didn’t surprise analyst Fanusie who said:
“Bitcoin has sort of grown as way to provide services to the unbanked and underbanked,”
In the past year, various countries, law-enforcement agencies and analysts began taking note of how bitcoin and other cryptocurrencies could be used for laundering money.
Tom Robinson, chief data officer and co-founder of Elliptic, a cryptocurrency forensics firm said:
“Criminals are often early adopters of new technologies,’’
Accounts for bitcoin and other cryptocurrencies can be set up under false names, and then those currencies can be transferred to accounts anywhere in the world, Robinson said. He contends that because of the use of the online public ledger, cryptocurrency can be easy to trace if the technology is understood by law-enforcement agencies and others.
Fanusie believes Bitcoin ATMs may be “too clunky” for depositing tens of thousands of dollars.
Fanusie said:
“That kind of money would essentially be noticed by federal regulators. But if you want to use them to pay a local drug dealer, say $50 to $100, then maybe it’s OK, effective.”
The Detroit Police Department and local offices of the Federal Bureau of Investigation and of Homeland Security wouldn’t comment on possible investigations involving Bitcoin ATMs. The only publicized criminal case involving local Bitcoin ATMs centers on one of the original suppliers of the machines, Andrew Konja.
Konja of Oakland County is one of three people accused of sabotaging dozens of Bitcoin ATMs operated by competitors in Detroit and Chicago, according to a lawsuit filed in December in the U.S. District Court for the North District of Illinois. The lawsuit accuses him and two others of using hammers to smash competitors’ machines.
Users of Bitcoin ATMs face the same obstacles that many Detroiters without bank accounts experience in other forms of non-traditional monetary transactions like check-cashing centers and pre-paid debit cards: high transaction fees. Bitcoin ATMs have an average transaction fee of 8.93 percent, according to the blog Coin ATM Radar.
Fanusie said:
“Managing money off the grid may sound like financial freedom. But the fees are reminders everything has a price.”
Comments are off this post!