Since their inception, cryptocurrencies have continued to grow in popularity.
Unfortunately, while many in the world know what these digital assets are, these same currencies face a major adoption hurdle for first-time users looking to get started.
For this reason, simplified offerings such as Bitcoin ATMs are quickly gaining traction in Canada, with new machines being introduced on a regular basis.
While some believe these ATMs are one of the best ways to purchase and withdraw Bitcoin, others are still skeptical about the implications that come with their usage.
Below, we look at how these machines work and some of the benefits and drawbacks of using them.
What is a Bitcoin ATM?
A Bitcoin ATM (Automated Teller Machine) is essentially a kiosk that allows users to purchase or sell Bitcoin or other cryptocurrencies.
However, unlike a conventional automated teller machine (ATM) that allows a banker to withdraw or deposit funds into a bank account, a bitcoin ATM is not connected to a bank, credit union or other Interac network.
Instead, since Bitcoin exists separately from centralized institutions, using a Bitcoin ATM will give a user access to the Bitcoin network, allowing customers to conduct transactions with deposited cash.
Although not all ATMs will do this, some have been known to generate a paper wallet for users who don’t already have one.
The transaction record will then appear in the customer’s wallet, which will typically take a few minutes to process.
When using an ATM, customers are charged a service fee that will exist as a percentage of the transaction value instead of a fixed dollar amount.
It is worth noting that transaction fees and cryptocurrency exchange rates will vary, so if possible, it is worth looking around for the lowest possible rate.
While most ATMs only work for users who want to purchase Bitcoin, some models that dispense cash in exchange for cryptocurrency exist.
How to buy Bitcoin Using a Bitcoin ATM in Canada
Although the process of using a Bitcoin ATM will differ slightly depending on the machine you select, the proceeding steps are a good place to start.
1. Locate Your Nearest ATM
To begin using a bitcoin ATM in Canada, users must first locate a machine.
Users can find different websites and apps available, including coinatmradar.com, which allow users to enter a preferred location into the search field to display machines in the local area.
ATMs are often represented as a pin, which users may click for more details about fee schedules, ratings and more.
User reviews become increasingly important at this stage since fake machines exist.
Although more Bitcoin ATMs are being added regularly, most of them congregate in Canada’s three largest cities, Vancouver, Montreal and Toronto.
2. Pull Up Wallet Details (Optional)
The second step a user will have to take is determining where purchased funds will be kept.
Some users will already have a mobile wallet app handy.
If this is the case, the wallet holder will need to pinpoint their public address.
A public address is a code created with cryptography that allows users to receive cryptocurrencies into their accounts. We can liken the process of its use to an email you would give someone you are hoping to receive an e-transfer from.
Wallets will have a code that requires inputting so that the machine has some place to “send” the Bitcoin.
On most displays, this can be found by hitting a “receive” button or similar.
It is also worth noting that many wallets will support multiple currencies, so users should also verify that they have the right address for the right type of currency.
That said, this step is optional since users without a mobile wallet may also have the option to be issued a paper wallet with their private key on it.
Users can then transfer these funds to another wallet of their choice.
3. Input the Details of Your Purchase
After arriving at the physical ATM location with your wallet in hand (or are ready to accept the paper alternative) you will be ready to make your purchase.
On the touch screen of the kiosk itself, you will be presented with the “Buy” option for Bitcoin.
Although there are different models, this button will typically be easy to find.
Following this selection, users may be prompted to scan or input their wallet receiving address into the QR reader, effectively telling the machine where to send the purchased Bitcoin.
Bear in mind that verification may be needed for larger deposits and withdrawals.
Since this random string of letters and numbers representing your wallet address tends to be long, mistakes can easily be made if users input these values manually. Therefore, to avoid a permanent loss of their Bitcoins, users are encouraged to opt for a QR scanning option whenever possible.
4. Select the Miner Fee
One standard feature across Bitcoin ATMs is the requirement to set a miner fee that the purchaser is willing to pay for the transaction to be included in the block.
Choosing the fee becomes important since the higher the cost, the sooner the transaction is likely to be confirmed.
5. Place Your Payment
Last but not least, users can insert the required amount of cash for their deposit into the ATM’s slot, finalizing the transaction.
Bitcoin ATM users are often encouraged to hold onto their receipt if any issues arise down the road.
Benefits of Bitcoin ATMs
The standard ATM was introduced to deliver cash during extended hours.
Similarly, Bitcoin ATMs make a standard cryptocurrency exchange more convenient, as one of the key benefits for investors and everyday users alike.
No Identity Verification
Unlike other Bitcoin purchasing methods, Bitcoin ATMs are considered the easiest way to purchase this asset anonymously.
Their anonymity can be likened to the lack of Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations that are often a requirement for exchanges by the country of operation.
Bitcoin ATMs offer an added level of anonymity as compared to the credit card or banking details needed in a traditional payment.
Bitcoin ATMs do not store private keys.
In contrast, a cryptocurrency exchange will hold a user’s private keys, making it riskier for an investor who stores their assets on these platforms.
Consider the example of the QuadrigaCx exchange, where the CEO was the sole owner of the private keys.
When he passed, users quickly found that their funds were gone too.
A Bitcoin ATM is still considered one of the fastest and easiest ways to purchase Bitcoin since users do not need to deposit funds into a traditional account or transfer it to an exchange.
Instead, they can make their purchase directly with cash in minutes.
Access for Money Abroad
Bitcoin ATMs are said to improve the current process of foreign currency exchange by allowing everyday users to exchange a universal currency for fiat currencies, further reducing any friction that might otherwise exist.
Drawbacks of Bitcoin ATMs
Although Bitcoin ATMs excel in convenience, they are not a perfect solution for purchasing cryptocurrencies.
For this reason, it is also worth mentioning some of their drawbacks.
Bitcoin ATMs have been known to have much higher fees than cryptocurrency exchanges.
Therefore, their convenience is said to come at a price.
Bitcoin ATM fees typically average 10%, although, in some countries, they might be as high as 15%, which is significantly higher than online exchanges.
The infrastructure surrounding Bitcoin ATMs is still in the process of being built, meaning service reliability for these kiosks can vary.
Therefore, before using a Bitcoin ATM, investors are encouraged to read user reviews, which may indicate if a machine is functional.
Difficult to Find
It’s true that Bitcoin ATMs now exist in an increasing number of countries worldwide, but that doesn’t mean they are easy to find.
Still, to this day, most cannot locate their nearest Bitcoin ATM, which are dispersed less frequently than their fiat equivalent.
Alternatives to Bitcoin ATMs in Canada
Bitcoin ATMs are only one of the methods for easy cryptocurrency transactions.
Some of the others include centralized exchanges, Bitcoin ETFs and Peer to Peer (P2P) trading platforms.
Online platforms that enable users to buy and sell cryptocurrencies.
- Cryptocurrency exchanges offer convenience, with mobile applications that replicate the experience of traditional finance platforms.
- The second benefit is reliability which is key since a more reliable network enables users to transact across an existing centralized network.
- The only caveat is that centralized exchanges have attracted attention from cyber criminals, often making them hacking targets.
Like other managed funds, a Bitcoin ETF allows users to invest in a basket of assets that tracks the underlying index. Therefore, users can invest in Bitcoin without buying the asset itself.
- With a Bitcoin ETF, users gain exposure to the cryptocurrency market without worrying about the implications of storage or security.
- In general, the rules behind taxing cryptocurrencies are largely unclear, with many of the rules being adjusted as time goes on. Fortunately, tax laws on ETFs are more defined, making them easier to calculate.
- On the other side, Bitcoin ETFs, like other investment-grade funds, charge management fees, which at times may be higher than a standard ETF.
Peer-to-peer (P2P) marketplaces enable users to buy and sell cryptocurrencies without an intermediary.
- When investors trade directly in a P2P exchange, they typically don’t have to pay any fees, and even if they do, they are often less than a centralized exchange.
- Peer-to-peer trading is accessible globally, enabling people to trade anywhere regardless of location.
- Unfortunately, P2P exchanges are typically subject to lower liquidity than their centralized counterparts, making it potentially harder for orders to be fulfilled.
Frequently Asked Questions
- Where Can I Find Bitcoin ATMs in Canada?
Interested buyers can find a Bitcoin ATM location by using websites such as LocalcoinATM.com and coinatmradar.com. Although the number of ATMs in Canada is still figuratively small, it is worth noting that more locations continue to be added regularly. Currently, the most common business location to host an ATM is a convenience store, although it is not unusual to find an ATM located in a coffee shop, pub or bar.
- Are Bitcoin ATMs Legal in Canada?
Although digital currencies aren’t officially recognized as money in Canada, the use of Bitcoin is considered legal. According to the Government of Canada, all residents are free to buy, sell and trade Bitcoin, all of which is regulated under anti-money laundering and counter-terrorist financing laws. That said, with tightening regulations, Bitcoin ATMs may become subject to more restrictions that eliminate some of the anonymity that cryptocurrencies provide.