The District’s first bitcoin ATM arrived quietly at the Diner, a 24-hour eatery in Adams Morgan, the week of Thanksgiving. Since then, about 10 transactions have taken place at the machine, which allows customers to buy or sell the virtual currency. The going rate is $310 per bitcoin. The value of the currency fluctuates frequently — and often wildly — but the machine sticks to a pre-determined flat rate.
The bitcoin ATM, one of only a handful in the country, is a last-ditch effort by John McKee to revive sales at his one-man ATM business in Fairfax. Revenue has been flagging in recent years as customers increasingly use credit cards, mobile apps and yes, bitcoin, to pay for purchases. Rising regulatory costs and increased competition have also taken their toll.
“The ATM is at the end of its cycle,” said McKee, 45. “You can see it going the way of the pay phone pretty soon.”
But he thinks there might be an opportunity for bitcoin machines that allow users to trade cash for the virtual currency. Purchasing bitcoin online requires users to use their bank accounts for purchases, which means transactions can easily take three to five days, sometimes longer if using two-step identification.
A transaction on the machine, however takes a matter of minutes. This is how it works: Users scan a government-issued ID or key in their mobile phone numbers to get started. The ATM checks the user’s name against a Treasury Department database of people who have been involved in fraudulent transactions or money laundering schemes. If they are cleared, users can begin making bitcoin purchases that range between $6 and $1,000 by inserting cash into the machine.
Bitcoins is a virtual currency—there are no physical coins— so users can download their purchases to digital wallets on their phones — essentially, apps that help them keep track of their bitcoins. They also can print out a “paper wallet” that includes a digitized QR code and URL with the online location of their bitcoin.
McKee is quick to point out that it is too early to tell how the bitcoin ATM will pan out. He’s not sure how many transactions to expect, or how much revenue he’ll be able to bring in. For now, it’s just an experiment — but if it works, it could be a lifeline for his ATM business.
“I wanted to get to the bottom line of, ‘Can I make money off of this?’” he said.
McKee founded Metro Payment Solutions in 2003 after he was laid off from a job at Teleglobe. His first ATM customer was the Clarendon Ballroom in Arlington. Today, he oversees about 150 cash machines in the Washington area, but he says annual revenue is steadily dropping.
“There are a lot of factors, but the biggest one is more competition,” said McKee, who founded Virtual ATM to oversee his bitcoin business. “I used to be the only guy on the block, whereas now there are three ATMs on every block.”
He heard about bitcoin ATMs late last year, when a Vancouver coffee shop set up the world’s first-ever machine of its kind. McKee got to work researching vendors. It took about eight months to get necessary approvals from the District government.
In all, McKee says he spent about $27,000 getting the bitcoin ATM up and running — nearly $15,000 for the machine, $4,000 each on bitcoin and cash to stock the ATM, and another $4,000 on regulatory paperwork. (A regular ATM, by comparison, costs about $2,400, McKee said.)
He charges a 7 percent fee for every transaction. McKee owns and maintains the machine, and pays the Diner $1 every time a customer uses the machine.
“The Diner was my first choice in Washington,” McKee said. “It’s open 24 hours a day and has the right demographic: college-educated young people who understand technology and are familiar with bitcoin.”
Constantine Stavropoulos, the owner of the Diner, says he wasn’t sure what to expect when McKee approached him with the idea. He wasn’t quite sure what bitcoin was and plus, the restaurant already had a regular ATM in the back.
“But the more I learned about bitcoin, I thought what better place to test this out than at the Diner?” he said. “We have such a great cross-section of people, 24 hours a day. Whether this thing is going to be successful or fail, this is probably a good testing ground.”
The Diner does not currently accept bitcoin, but Stavropoulos said he may consider it depending on local demand.
“Those who know about bitcoin are geeking out about it,” he said. “But then again, most people aren’t 100 percent sure what it is, including myself.”
A handful of local establishments, including the Dupont Circle bar Thomas Foolery and the Peruvian Brothers food truck, accept the digital currency. Nationally, Overstock.com and United Way are among organizations accepting bitcoin.
“A lot of this stuff is very, very new,” McKee said. “We’re all racing to try and figure it out.”