A Bitcoin ATM his is shown at the Exxon station in Southfield.(Photo: Detroit News illustration)
The 23 Bitcoin automated-teller machines in Detroit are installed in places like the Big V Party Store on the northwest side. Signs outside the Big V prominently advertise its goods and services: check-cashing, money orders, liquor, Lotto tickets — and since last year, an ATM dedicated to the so-called future of money.
All the Bitcoin ATMs in Detroit are in low-income areas, and they represent uncharted ground for this new currency that exists only in cyberspace. Advocates say the machines merely fill a financial void in neighborhoods that banks and traditional lending institutions largely ignore. Security analysts and law-enforcement officials say they are tools for small-time money-laundering.
“The truth is, it could be both scenarios,” said Yaya Fanusie, a former economic and counter-terrorism analyst for the Central Intelligence Agency. He now studies the impact of Bitcoin and other cryptocurrencies for a Washington, D.C.-based think tank.
“It’s a guess because the technology is new. We need time to collect data,” said Fanusie, who is director of analysis for the Center on Sanctions and Illicit Finance, which is part of the Foundation for Defense of Democracies. “The fact (that Bitcoin ATMs) are in the kind of areas you describe, only says how much digital currency is growing worldwide.”
Bitcoin ATMs allow users to put cash into the machines, scan a QR barcode from their phone or tablet, and have that money converted into Bitcoins. The currency has no physical form. The teller machine deposits the virtual currency into users’ online accounts. They can then use that Bitcoin to pay someone else online by transferring it to that user’s account. ATM users also can convert Bitcoins into other cryptocurrencies such as Ethereum or Litecoin.
In Detroit, Bitcoin ATMs are installed in party stores, gas stations and cash-checking centers in neighborhoods where empty houses and blighted buildings are common. Beyond the city limits, most of the estimated 80 machines in Metro Detroit are largely in low-income areas of Pontiac, Hamtramck, Highland Park, Taylor and Inkster, according to information on various websites.
“My company installed 15 Bitcoin ATMs last year,” in Detroit, said Ayman Rida, who started a company in late 2016 called International Bitcoin that supplies machines to Metro Detroit stores. “Last year, the business grew very, very good at the locations.”
He said the average transaction is about $70 to $80.
Most of the Bitcoin ATMs in Detroit only allow customers make deposits — not convert it to hard currency, Rida said. However, there are machines that allow users to withdraw cash from their Bitcoin accounts.
Last year Bitcoins dramatically increased in value as investors bought in, skyrocketing from $967 in January for one Bitcoin to a high of more than $20,000 for one Bitcoin in December. Much of the rise came from investors looking to profit by buying the currency at one price and then selling when it rises in value.
While the value of one Bitcoin is in the thousands, users can buy a fraction of the currency unit.
Advocates say cryptocurrencies will transform how money is exchanged because they allow users to transact with others directly — no bank account or credit card is needed. The entire worldwide network of Bitcoin is outside government control and no single entity regulates it. Bitcoin transactions are recorded in a public ledger run by an anonymous network of computers.
Bitcoin can be used to book hotels on Expedia, shop for furniture on Overstock and buy Xbox games from Microsoft, among other things.
The Detroit News contacted 14 Detroit store owners with the automated teller machines. None wanted to be interviewed.
The locations of the machines in Detroit didn’t surprise analyst Fanusie. “Bitcoin has sort of grown as way to provide services to the unbanked and underbanked,” he said.
In the past year, various countries, law-enforcement agencies and analysts began taking note of how Bitcoin and other cryptocurrencies could be used for laundering money.
The Big V Party Store, 14111 Greenfield, Detroit, advertises its Bitcoin ATM along with check cashing, lottery machines and liquor. Nearly two dozen locations in Detroit have Bitcoin ATMs. (Photo: Louis Aguilar / The Detroit News)
“Criminals are often early adopters of new technologies,’’ said Tom Robinson, chief data officer and co-founder of Elliptic, a cryptocurrency forensics firm. The London firm helps law-enforcement agencies and businesses recognize the dangers of fraud and other illegal activity in digital money.
Accounts for Bitcoin and other cryptocurrencies can be set up under false names, and then those currencies can be transferred to accounts anywhere in the world, Robinson said.
He contends that because of the use of the online public ledger, cryptocurrency can be easy to…