Interview by David Berger, CEO of the Digital Currency Council, with Sam M. Ditzion, CEO of Tremont Capital Group – the nation’s leading provider of strategic planning and consulting, compliance, and mergers and acquisitions advisory services to the ATM and related industries.
David: Sam, you’re the world’s leading expert on ATM machines. Could you tell us more about what you do?
Sam: Thanks for inviting me to do this interview. I am an expert in the overall payments space but have a particular expertise in the ATM industry and cash payments. I primarily focus on providing clients with business strategy, compliance, and mergers and acquisitions advisory services. I am also an expert in the concept of Bitcoin ATMs and recently authored an Introduction to Bitcoin ATMs guide for the ATM Industry Association. — Available online at: www.TremontCapitalGroup.com
David: Recently, ATM machines that dispense Bitcoin in exchange for legal tender have been deployed across the US and in various countries across the globe. Who is behind this effort? What is their aim?
Sam: A wide range of companies have begun manufacturing so-called “Bitcoin ATMs,” which convert physical currency into digital currency. This concept emerged after many bitcoin enthusiasts concluded that the easiest way to exchange cash for bitcoin locally and instantly is to complete a transaction using an ATM-like device. Some of the machines that have been developed are also capable of the reverse: converting digital currency into physical currency. The devices are typically sold to individual operators who own and operate the machines in high-foot traffic retail locations in an effort to make money from conversion rate spreads.
David: How do Bitcoin ATMs work? They’re obviously connected to the internet, but are they affiliated with specific Merchant Service Providers?
Sam: While some of the machines are more complex, the simplest devices are essentially tablet computers with a cash accepter and a barcode scanner. Someone looking to convert his or her cash to Bitcoin simply scans his or her digital or paper wallet, inserts cash into the machine, and Bitcoin is added to his or her wallet in the amount according to the exchange rate listed on the device, which is typically set by the operator.
David: The first US state to receive a Bitcoin ATM was New Mexico. Why New Mexico? What is it about the environment there that made it conducive for the first Bitcoin ATM in the US?
Sam: The world’s first Bitcoin ATM was deployed in Vancouver, Canada in October 2013. In the United States, the first Bitcoin ATMs were installed in New Mexico and Massachusetts in February 2014. Many other devices followed quickly in other states. The State of New Mexico did not have licensing requirements for Money Transmitter Businesses, making New Mexico an easier place to test this business model at that time. Regulations regarding these devices, and digital currency more broadly, was initially quite murky.
David: So are providers of Bitcoin ATMs considered to be Money Services Businesses (MSBs)? What licenses do such providers need?
Sam: In the United States, the U.S. Department of the Treasury’s guidance last year provided that Bitcoin exchangers are subject to the Bank Secrecy Act and are therefore required to register with the FinCEN/Department of the Treasury as Money Service Businesses (MSBs) and are subject to the same reporting requirements as other financial institutions. In addition, deployers of Bitcoin ATMs are subject to all applicable state registration/licensing requirements and regulations.
David: The industry is clearly in nascent stages today and seems rather fragmented. Do you see consolidation in the future? Perhaps a large player buying up some of the smaller companies in the business?
Sam: Absolutely. If regulatory uncertainly is addressed in a way that results in a profitable business model for Bitcoin ATMs, I would expect rapid growth in ATM deployment quickly followed by consolidation through mergers and acquisitions.
David: ATMs make Bitcoin more visible to the community, potentially increasing adoption by regular consumers. Have any consumer protection organizations issued any statements about Bitcoin ATMs? Do you expect something like this to occur?
Sam: Bitcoin ATMs, at least so far, often serve newcomer consumers and enthusiasts who do not have extensive experience. These are often the demographics that regulators and consumer groups aim to protect from any form of speculative investments or opportunities. While there has been somewhat limited attention on this topic to date, I would fully expect far more scrutiny by both regulators and consumer groups should Bitcoin ATMs become mainstream in the future.
David: Could you share your predictions for Bitcoin ATM adoption over the next 3-5 years? Will we see continued growth? Which industries will this impact?
Sam: I definitely anticipate significant developments in the use of Bitcoin as well as the Bitcoin ATM industry during the next 3-5 years. To the extent that digital currency as a concept succeeds, ATM-like devices are an incredibly convenient and simple way for mainstream consumers to exchange cash for digital currency. The business and profitability models for ATMs both need to be refined and proven further. If there is more visibility in regards to the regulatory environment worldwide, and a business case exists for ATMs, I suspect we would see a wide range of new players quickly emerge followed by rapid consolidation.
David: Sam, thank you very much for your time, insight and support of the Digital Currency Council.
Sam: My pleasure.