More Bitcoin ATM machines are popping up most especially in developing continent like Africa to help the unbanked and underbank.
But this raises some security questions like Can you get cryptojacked while buying and selling crypto on bitcoin Atm? Can the ATM get hacked?. Read on to find out more.
A Bitcoin ATM (Automated Teller Machines), also known as BTMs, is a device, similar but smaller to conventional ATMs, through which customers can buy and sell Bitcoin using fiat currency. Using the Bitcoin ATM is one of the few ways to buy and sometimes to sell Bitcoin instantly. But the question remains, “how safe are Bitcoin ATM?”
Before we answer the question, it’s important to know how the Bitcoin ATM works. Unlike with the traditional ATM, where customers can make “cash” deposits or withdrawals using their cards, Bitcoin ATM only enables customers to primarily buy and sometimes sell Bitcoin* for paper currency.
Most Bitcoin ATMs do not allow the sales option for Bitcoin. Hence, they do not dispense cash but only accepts cash.
A Bitcoin ATM is not linked to a bank account. Instead, they are connected through the Internet to a digital currency exchange – while banks install ATMs, cryptocurrency exchanges install BTMs.
The crypto exchange enables customers to immediately purchase and sell Bitcoin on the frontend. While on the backend, there is software that makes the purchase and sales of Bitcoin fast, simple, and safe.
How to use Bitcoin ATM:
The first step involves registering and verifying your identity on the machine. While only a few BTMs allow you to make Bitcoin purchases without registering and verifying your ID, some require higher levels of verification such as using the scanner, a driver’s license, telephone number, One Time Password (OTP), and other details. Verification requirements depend on the device and the crypto exchange.
Bitcoin ATMs are specially designed to be secure and prevent fraudulent activities. They also save, scrutinize and report suspicious activity to the regulatory bodies. This is the major reason why the machine requests for personal details and carries out the Know Your Customer (KYC) or Anti Money Laundering (AMC) policy using your information.
Once these details are verified, Bitcoin transactions are then enabled on the machine.
If you’re purchasing Bitcoin, the BTM operator purchases Bitcoin from crypto exchanges and enables you to access Bitcoin. As many Bitcoin as the operator has can be purchased. To purchase Bitcoin, you will have to enter the dollar worth of Bitcoin that you wish to purchase. Also, you must enter and slip the amount into the specified deposit region.
Once you have deposited the cash, the ATM either prints an offline wallet for you or sends the Bitcoin to your Bitcoin wallet (through a QR code). Some Bitcoin ATM may also propose to email your Bitcoin.
Note that using the Bitcoin ATM can be more expensive than the online transactions. Transactions on Bitcoin ATM cost from 5% to 10% above the current exchange rate. This is due to the additional costs associated with the transaction, such as rental, maintenance of machinery, regulatory requirements, fees, volatility, etc.
Selling Bitcoin on the machine follows similar processes as buying Bitcoin. You have to enter the amount of Bitcoin to sell and send the same to the address displayed on the ATM screen to sell your Bitcoin. Once the process is verified and completed, your cash equivalent is dispensed.
Now, let’s go back to the question, “how safe are Bitcoin ATM?”
Just like with the traditional ATM, you must be aware of some suspicious characters lurking about. Just as criminals target ATM users, criminals may also target customers visiting BTMs, as they may be having some cash on.
More so, most Bitcoin ATMs have security cameras and are located in areas where guards and other security measures are present (side shops or malls). Operators don’t want their BTM machines to be stolen, vandalized, or broken into. That’s why they usually place them in areas they consider secure. Furthermore, most BTM operators install BTMs that sell Bitcoin only to customers and will usually empty their BTMs of cash regularly. In the same vein, Bitcoin is a virtual currency and no there’s no way to forcibly extract it from the ATM. This, therefore, reduces the attractiveness of Bitcoin ATMs to thieves.
However, being in a secure, sensible, or conspicuous area and having a low cash storage level doesn’t give a guarantee of BTM safety. One good rule of thumb to minimize the risk of using a Bitcoin ATM is not to carry or withdraw excess cash while using it.
You may also be concerned that the Bitcoin ATM may rob you of your cash by not dispensing Bitcoin once you’ve paid or not dispensing money once you’ve sent Bitcoin to the provided address. While this concern is understandable, it’s a fairly unlikely scenario with BTMs. More so, like the traditional ATMs, BTMs are operated by known parties, hence, any BTM that defrauded customers or that has a record of dispense error would be immediately reported.
To the best of our knowledge, there has not been any case of a Bitcoin ATM that deliberately defrauded customers. However, to reduce the risk of fraud and be on a safe side, you can carry transact a small amount of Bitcoin initially and then build up to larger trade values incrementally.
Mobile Wallet Security
Sometimes, nothing may be wrong Bitcoin ATM but with your Bitcoin wallet. Therefore, an important aspect you must consider when making use of a Bitcoin ATM is the safety of your Bitcoin wallet. In most cases, mobile wallets installed on your mobile devices are the best. Such wallets are appropriate for the convenient storage and usage of the small amounts of Bitcoin generally purchased from a Bitcoin ATM.
From the post above, it’s evident that Bitcoin ATMs are safe. The same safety steps as a traditional ATM are in place on the installation of Bitcoin ATMs. Therefore, if you have any BTM within your locality, you can carry out a safe Bitcoin transaction on them. But mind you, you will end up spending more when you use a Bitcoin ATM than making online Bitcoin transactions.