The Cryptocurrency ATM No One Knows About
By Katelyn Perna on ALTCOIN MAGAZINE
Crypto ATMs have been the talk of the town when it comes to giving people more access to cryptocurrencies such as Bitcoin, Ethereum, and more. The biggest downside as of late has been their fees.
Who wants to pay 20% of their investment in order to buy and sell crypto just because they don’t have a bank account or want to remain anonymous? This doesn’t really align to the Bitcoin movement which is about giving people access to their money outside of central banking institutions. But is there another way?
This topic came about via Twitter (the greatest app of all time). Through discussions, it was noted that there is one other potential option in the market today, but no one is really talking about it. Let’s first cover off some of the basics and then get into the finesse needed to make this happen.
What Is A Cryptocurrency ATM?
A Bitcoin ATM is a kiosk that allows a person to purchase Bitcoin by using cash or a debit card. Some Bitcoin ATMs offer bi-directional functionality which enables both the buying and selling of Bitcoin with and for cash. There are now over 500 Bitcoin ATMs around the world. There is a more strong concentration of these in North America, but they can be found in 71 countries worldwide. Compared to fiat currency ATMs this is definitely a small amount, but we can expect to continue to see more of these appearing all over the world in the near future. You can think of this of a stationary exchange that allows you to anonymously exchange fiat currencies (USD, EUR) for cryptocurrencies like Bitcoin.
How To Find These
You can locate Bitcoin ATMs via Coin ATM Radar. This site also has other information on fees, limits, type (buy/sell) and other information.
How To Buy Crypto Through A Crypto ATM
Buying and selling crypto via these ATMs is pretty easy and seamless. The ATMs themselves come with instructions. You do need a paper or virtual wallet to store any purchased crypto. You can use a smartphone app for your initial deposits and then you, of course, have the option to move your crypto to a cold wallet or to another exchange. For more on cold/hard wallets, you can check out another article here. You select the amount of crypto you want to purchase on the ATM and add your wallet address and pay the amount by depositing cash or using your debit card to confirm the purchase. You will then receive your crypto on the entered wallet address once the transaction is confirmed on the blockchain. Some ATMs will require you to scan your ID as a part of the transaction, but usually only for very high amounts. You don’t need a bank account but you can definitely use one if preferred.
Fees
The major downside to using crypto ATMs and maintaining your anonymity is that it will cost you. The average buy fee on Bitcoin ATMs is close to 10% and the average sell order for your crypto at the ATM will cost an additional 8% over the market price. The target market for these ATMs are those without bank accounts and those who do not want to reveal their identity.
The One You Don’t Know About
PayPal has a service offering very few people know about in the market today called PayPal Digital Cash. Users can use their PayPal app on their phone to generate a barcode and add cash to their balance at select retail locations. No bank account is required for this. Here is how it works in minimal steps. You can also check out their website for additional information and disclaimers here.
First, log into the app and go to the More section, select Add Cash. Once you pick a retailer, PayPal will generate a custom barcode for you to present on your smartphone. From there, you bring your cash and barcode to the register at the retailer. A service fee of up to $3.95 will apply. This is a big fee reduction compared to those of 10% and 8% at crypto ATMs, but this is not the only fee that I share more information about below. Once completed, your money will automatically be added to your account, and you will receive an email confirmation.
User has the option to select from thousands of retailers and locations worldwide. Listed retailers include CVS, 7-Eleven, and Rite Aid. Cash amounts can be from $20-$500 per transaction. You can use up to three barcodes per day or add up to $1,500 total per day, whichever event comes first. PayPal limits your total amount of cash to $5,000 monthly, and after that limit is reached you will not be able to add any more cash until your limit resets.
PayPal And Crypto
As of today you can buy crypto on crypto exchanges using your PayPal account. This is not the easiest method, but it can be done. There are some additional fees, but these fees can be less than the crypto ATM fees. Many exchanges don’t directly offer PayPal due to a couple of reasons. While PayPal supports chargebacks, Bitcoin and other crypto transactions are irreversible. Because of this, it is easy for someone to buy Bitcoin with PayPal, complain that they never received the BTC they purchased and then ask for a chargeback. You can essentially keep your money and get Bitcoin for free. While this would likely have a limited life span, it is still possible. Only a handful of crypto trading platforms and exchanges accept PayPal deposits.
Platforms You Can Use
There are a few different options you can use if you want to use your PayPal account to buy cryptocurrency.
Peer-To-Peer Marketplace
You can buy crypto through a peer-to-peer marketplace such as LocalBitcoins or Paxful. These exchanges allow buyers and sellers to trade directly with another, giving the seller the freedom to set their own exchange rate and accepted payment methods. There are sellers on these marketplaces that will accept PayPal.
Crytpocurrency Exchanges
Most exchanges today will not accept PayPal payments, but you can use the VirWox platform to exchange fiat currency for SLL (Second Life Linden Dollars), which you can then use to acquire Bitcoin.
Peer-To-Peer Lending Platforms
Peer-to-peer lending platforms accept PayPal as a payment method for people wanting to access a “secured loan” of Bitcoin. xCoins is a popular platform that can be used.
Pros And Cons Of Using PayPal To Purchase Crypto
Pros:
If you already have a PayPal account, payment is quick and convenient
Safe and secure payment method
Allows you to buy crypto with USD
Cons:
Higher fees increasing the cost of your transaction and can be up to 10% of your transaction amount
If the platform doesn’t accept USD then conversion fees apply. These can be 3–4% above the exchange rate
Limited number of platforms support PayPal
PayPal Digital Cash Vs Crypto ATMs
So which option is better? Let’s look at the following example below.
Let’s say I have $1,000 cash I want to invest in crypto today. For simplicity, let’s assume I do not have a bank account.
I can take my $1,000 and go to a crypto ATM and pay my 10% fee off the top which is $100. I am left with $900 to buy Bitcoin with. Should I sell this Bitcoin, I would incur an 8% fee at that point in time. The cost for the crypto ATM will be about 20% of my investment.
So let’s try this with PayPal. I can take my $1000 and pay $3.95 to add that to my PayPal account. I am now left with $966.05. From here, I will need to use a peer-to-peer marketplace like Paxful to buy my crypto. On Paxful their buyer fees are listed at None and their seller fee is listed at 1%. The thing to watch here is that sellers can choose the exchange rates they want to offer you. You will have to compare them and choose the rate that is best for yours. VirWox lists their trading fees ranging from 2.5%-20%. These fees can vary for PayPal for deposits. For withdrawals, you would be looking at 1 USD plus 2% of the withdrawal.
If You Thought That Was Cool
In addition to PayPal digital cash, PayPal also has PayPal Cash Card, which is very similar to a debit card. This works in a similar manner to a debit card, but is not issued from a central bank. This is more of a re-loadable cash card, where people without bank accounts can have access to banking and card services via PayPal. You are required to have a PayPal Cash Plus account to use this. There is no monthly fee and no minimum balance required. This is a virtually no fee, no cost re-loadable card. The same fee mentioned above of $3.95 applies when loading cash using the PayPal app at supported stores, and a fee of $4.95 for loading cash to your PayPal balance at supported stores (not using the app). More information about this card is here. This is not a bank or a credit card and does not take deposits. This service does have KYC/AML in place so if you are looking to keep your identity a secret, this likely won’t be your option. Once you have PayPal cash card, you can directly link this to your Coinbase account the same way you would your debit card and begin to trade crypto as you please. This is also another way to easily trade crypto with cash and without a bank account and for a lesser cost than a crypto ATM.
PayPal's digital cash and cash card have the potential to be easier and more cost-efficient than a crypto ATM. This can give more people without bank accounts access to cryptocurrency than what we have today and for a lesser price. If there were more digital cash/cash card authorized retailers all over the world this has the potential to provide developing countries with access to crypto and control over their money.
This article was inspired by a conversation and the contributing thoughts of Stephen/Toshi Terrornova — @hodltergeist on Twitter. Feel free to give him a follow.
Interested in learning more about #blockchain and #crypto? Subscribe to my newsletter — https://mailchi.mp/d87f55cb0310/kpsgems
References: https://coincodex.com/article/1965/what-is-a-cryptocurrency-atm/, https://coinatmradar.com/, https://www.paypal.com/us/webapps/mpp/digitize-cash, https://www.finder.com/virwox-exchange-review, https://xcoins.io/?s=aw, https://www.paypal.com/us/webapps/mpp/cash-card
