Coming soon to community banks in the US: bitcoin ATMs?

There are nearly 30,000 automatic teller machines (ATMs) in the U.S. that let users buy bitcoin. Most of these machines reside in gas stations, hotels, malls, and other retail locations. 

But in February, the Blue Ridge Bank — a Virginia-based community bank with branches in Charlottesville, Luray, Fredericksburg, and other locations along the U.S. East Coast — became what appears to be the first bank in the country to allow customers to purchase bitcoin from its ATMs. The bank has added the service to 19 of its ATM locations across Virginia. 

The sprawling and fast-growing bitcoin ATM industry features a variety of business models that can be tough to untangle. But getting Blue Ridge’s bitcoin ATM function up and running was a fairly straightforward deal between three parties: the bank, its ATM provider Blue Point ATM, and LibertyX, a company that offers bitcoin services for ATMs. 

“It feels a lot more complicated than it really is,” Blue Ridge CEO Brian Plum said in a recent interview. The decision to offer Bitcoin didn’t require any additional hardware costs — just a software upgrade on the current ATMs to provide access to bitcoin, he said. 

The main challenge was to ensure that the bank’s bitcoin ATM is fully compliant with the law. 

Now that the service is up and running, it could be a model that other crypto-curious community banks follow.

Identification, please

Plum said he had been looking for ways to take advantage of the freedom that smaller banks like Blue Ridge have to experiment with innovative products when Blue Point ATM’s CEO Wade Zirkle approached the bank in November with a pitch to install bitcoin services.

Plum was sold. Then the bank’s compliance team went to work. Most importantly, Blue Ridge’s compliance team had to ensure that it fully understood the process that LibertyX uses to comply with know-your-customer (KYC) rules and other anti-money laundering measures. 

“The biggest part for the bank was getting comfortable with LibertyX's verification process,” said Sean Harrigan, Blue Ridge’s director of fintech compliance. 

"Obviously the biggest concern from a bank perspective is: Do we know who's buying this and what they're doing with that?" he said. "The potential for money laundering and other illegal activities increases with crypto."

That position is shared by federal regulators. In 2019, the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) warned that criminals are using “convertible virtual currency kiosks” to launder money. More recently, a report from the Drug Enforcement Administration found that crypto ATMs were “increasingly” being used to launder money. 

FinCEN requires those who operate such machines to know exactly who is using them and to ensure they’re not doing so for illicit purposes. The agency has said that some bitcoin ATM operators have “operated in ways that suggest a willful effort to evade” KYC requirements.

Chris Yim, CEO of LibertyX, describes their KYC process as the following: customers must take a selfie, upload a picture of their driver’s license, and, in some cases, provide their social security number. 

Unless there’s a discrepancy in their information, Yim says customers get instant authentication for the ability to buy bitcoin.

Users can then use software developed by LibertyX to purchase bitcoin. “It’s completely segregated from any transaction from the bank's ATMs,” explained Harrigan. “So when a client comes up to the ATM, it's almost a separate compartment from the crypto transaction pop ups. You know this isn't a bank product.”

Blue Ridge will also not be holding custody of the bitcoin itself; that will be taken care of by LibertyX. 

Early results

According to Yim, there has been a “30% bump” in Virginia sign-ups for LibertyX thanks to the bitcoin service now available at Blue Ridge ATMs. Customers tend to purchase small amounts of Bitcoin, often between $50 and $100, then a few days or weeks later return and purchase more, said Yim. 

He adds that most of these transactions have taken place at drive-up ATMs. Users do not have to be Blue Ridge members to purchase Bitcoin from one of their ATMs.

Transaction volume has been relatively small thus far, according to Harrigan. However, he adds that the bank hasn’t begun to actively market its Bitcoin services to customers yet and expects the service to become more popular in the coming months. 

Meanwhile, Blue Ridge Bank has received “almost all positive feedback” regarding the bitcoin services at the ATMs, Plum said. Some have expressed skepticism about bitcoin or cryptocurrency, but “99%” of the conversations he had with customers, non-Blue Ridge member customers, community members, and others in the financial sector have suggested that people are “very excited” about the new offering, he said.

BluePoint ATM’s Zirkle is betting that Blue Ridge won’t be the only community bank to roll out crypto services in the near future.

“We're going to continue working with our current community bank customers who are new to crypto,” he said. Many of them want to be able to say “Hey, we’re the first bank to have this” in their respective states, he said.