Bitcoin, released to the world in 2009 by a person or people called Satoshi Nakamoto, is not backed by a central bank or a government and is seen as an alternative payment system. In February 2013, Bitcoin went into the mainstream as a monetary crisis threatened to bankrupt Cyprus, seen as a safer bet. Early adopters of Bitcoin have been richly rewarded as the price has soared – in one case, a young Norwegian bought a house from an $850,000 windfall on a US$22 investment.
Bitcoin users can buy and sell them at new ATM
Vancouver kiosk a sign the virtual currency is entering mainstream
A silver-and-blue ATM, perched up next to the espresso bar in a trendy Vancouver coffee shop, could launch a new era for the digital currency bitcoin, offering an almost instant way to exchange the world’s leading virtual money for cash.
The value of a bitcoin soared from US$13 in January to a high of US$266 in April as more businesses and consumers used it to buy and sell online.
Some investors are also treating bitcoins like gold, using them to hedge against currency fluctuations and speculating on their rise.
The kiosk, which looks like a normal ATM but with hand and barcode scanners, opened for business on Tuesday. By mid-morning, people were lined up to swap their bitcoins for cash or to deposit cash to buy more bitcoins.
“It’s as easy as walking up to a machine, scanning your hand, entering some cash and buying bitcoin,” said Jordan Kelley, chief executive of Las Vegas-based Robocoin, the company that builds the ATMs.
“With this, it’s a two-minute process. For any online exchange, it’s at least two days.”
Bitcoins, now worth about US$210 each, can be transferred without going through banks or clearing houses, thereby cutting fees. Users can buy products and services online or in a handful of stores, including the Waves coffee shop where the ATM is located.
With the bitcoin ATM, users scan their hand to confirm their identity, then funds move to or from a virtual wallet on their smartphone.
The system limits transfers to US$1,000 a day, in an effort to curb money laundering and other fraud.
Bitcoiniacs, the local dealer that operates the ATM, will roll out four other kiosks across Canada in December.
Robocoin said Canada was the ideal place to launch the kiosk owing to a critical mass of users and less stringent oversight than in the United States, where the bitcoin trade is monitored by anti-money-laundering regulators.
“We think the Vancouver market is enormous, and we’re excited to be here,” said Kelley.
“By the end of this year, we’ll be all over Canada. By the end of next year, we’ll be all over the world, including the United States.”
Bitcoin is not a recognised currency in Canada, so Ottawa’s anti-money-laundering watchdog, the Financial Transactions and Reports Analysis Centre, does not monitor its use.
Still Bitcoiniacs’ founders say they are working with the agency to be ready for when Canada does start regulating them.
“We’re already being proactive in our business,” said Bitcoiniacs co-founder Mitchell Demeter. “We abide by any guidelines they would impose – which includes the ‘know you customer’ laws and anti-money-laundering laws.”
Bitcoins were launched in 2008 and are traded within a global network of computers. They are not backed by a single company or government, but their release is tightly controlled, mimicking a central banking system’s control over the minting of money.
Bitcoins can be bought with near anonymity, which supporters say lowers fraud risk and increases privacy. But critics say that also makes bitcoins a magnet for drug transactions, money-laundering and other illegal activities.
The currency’s reputation took a hit this month, when US regulators shut down Silk Road, an online marketplace used to buy and sell illegal drugs, and seized US$3.6 million in bitcoins.
But the virtual currency is gaining hold among businesses and consumers, a key step to a bigger role.
“I think it’s definitely going mainstream,” said Demeter. “I think as things progress, and the infrastructure is built, it will become easier for people to buy and sell, and so more people will start using it.”
In Vancouver, for example, dozens of people attend weekly bitcoin meet-ups, and a member co-op is promoting the currency to a growing list of local retailers.
At Waves, Vancouver resident Chung Cheong used bitcoin to pay for his mug of tea and was happy to mull over the future of the digital currency.
“It’s been said that we’re at the stage where e-mail was in 1992,” he said.
“Is it risky? Sure. But look at how the internet and e-mail changed the world.”