A Bitcoin for Your Thoughts? Digital Currency Gets Physical with First ATM1
This week, an automated teller machine (ATM) was unveiled outside of a Vancouver coffee shop, but this is no ordinary ATM. This newly installed money machine represented an important shift from the digital to the physical. It doesn’t accept debit cards, but rather, Bitcoin. Bitcoin is a peer-to-peer digital currency that functions without the regulation of any centralized authority. Bitcoin uses vary, but they’re most notoriously known for involvement in online gambling, and drug and weapon purchases. Though these digital “coins” have existed exclusively on the web since 2008, Bitcoin transactions appear to have made their way offline with the emergence of physical ATMS. Will the presence of these machines further facilitate the seedy activity this virtual currency has become known for, or will it help to legitimize a growing market?
Bitcoin first emerged five years ago and has grown to an estimated 100,000 users. The official Bitcoin website champions the idea of decentralization as the basis for its security and freedom. But this lack of government regulation has also made it the payment form of choice for cybercriminals looking to engage in less than legal online transactions. Bitcoin recently came under heat when it was exposed as the only form of payment accepted by the online drug trafficking website The Silk Road, which was seized by the FBI earlier this month.
Despite its bad rap, Bitcoin proponents aren’t all cybercriminals looking for a way to skirt the law. While it remains a niche concept (100,000 users is, after all, a very small proportion of the global economy), a handful of legitimate online retailers and brick and mortar shops have begun accepting Bitcoin as an alternative to cash or credit. One of those shops is Waves Coffee House in Vancouver, BC—the site of the first ever Bitcoin ATM.
This ATM operates much like any other─you can either deposit Canadian dollars in exchange for Bitcoin credit, or retrieve Canadian dollars by cashing in on existing credits. The item that makes it distinct is the added layer of biometric security. In order to make any transactions on this Bitcoin ATM, a user must first place their palm on the machine’s touch screen. Their palm will be scanned and their identity verified─a security measure intended to prohibit transactions exceeding $3,000 per day. Last week, I wrote about the rise of biometric security, and this is yet another example of the increasing adoption by commercial manufacturers to capitalize on the trend.
It’s this added layer of security that makes one wonder whether the emergence of physical Bitcoin ATMs will encourage an increase in cybercriminal activity or hinder it. While the palm scans required during Bitcoin transactions won’t be shared with the Canadian government, they will be likely be stored somewhere─a deterrent for many who are using Bitcoin for primarily illegal means since this will decrease anonymity.
A wider spread adoption of this currency (one of the primary goals of these ATMs) may also act to displace cybercriminals─or entice them. As more vendors begin accepting Bitcoin, and more curious parties begin to invest, Bitcoin could easily become both a platform for and a target of cybercriminals. It’s too soon to know what kind of effects this concretization of a previously virtual good will have on consumer security. What we do know is that all transactions occurring on the new Bitcoin ATMs will take place over a secure virtual private network (VPN) connection. VPNs increase privacy by replacing your original Internet protocol address with another, so transactions occurring in Vancouver may look as though they’re originating in Poland or Chicago, IL. While this IP scramble is a barrier for cybercriminals looking to hack in and decipher the identity and financial information of Bitcoin users, it is not a foolproof system.
Due to an August ruling by a U.S. federal judge stating that Bitcoins are “a currency or form of money” and subject to U.S. laws, we’re still a ways away from seeing Bitcoin ATMs in the states. Regardless, there are some items you should know when dealing with digital currency on or offline:
- Bitcoin value is always in flux. Bitcoin is a notoriously unstable digital currency, so invest in it wisely. In a four-month period in 2013, Bitcoin value has fluctuated between $13 and $230. Just like in the real market, the slightest piece of news can send the value of the currency skyrocketing… or plummeting. That risk is especially high when hackers are involved.
- Learn the identity of the person you’re dealing with. Anonymity may have advantages at times, but it’s not worth risking your bank account over. It’s wise to obtain the true identity of any potential partners when making a digital transaction.
- Don’t share your banking information with strangers. There are ways to purchase Bitcoins that don’t involve directly connecting your bank account─and these are recommended. Cash transfers and PayPal are other viable options.
- Watch your back. If you do get the opportunity to experience a Bitcoin ATM first hand, be sure to note any suspicious activity. These ATMs are meant to process larger quantities of cash than a typical ATM, so they may have a higher risk of being targeted by street criminals. Also, be sure to double check that the ATM doesn’t have any loose buttons or appear to have been tampered with in any way. As always, be conscious of your surroundings.