In this article we look at one of the most important problems bitcoin ATM operators have — finding bank relationships and opening a bank account.
At the end of the post there is a company mentioned that provides services as intermediary and connects bitcoin ATM operators directly with bitcoin friendly banks also providing additional services on the way.
Disclaimer: We are not affiliated with this company, please do your own due diligence before entering in relations. The material is posted and contacts are provided because in our opinion it brings a value for many operators who potentially need banking relationships, but struggle to find it.
Traditional banking industry non-friendliness towards bitcoin ATM operators
As Bitcoin continues to increase in popularity, the installation and use of bitcoin ATMs has surged in recent months with 5-7 popping up every day on average. Unsurprisingly, banks are not happy about being made obsolete and are trying to clamp down on cryptocurrencies after initially dismissing them out of hand. US banks now openly retaliate against the decentralization of the financial system by refusing services to cryptocurrency related businesses and many large banks have banned their customers from purchasing cryptocurrencies using their credit cards or even directly to wire funds to exchange.
The combination of the increased demand by consumers and denial of banking services for cryptocurrency businesses presents a complex problem that bitcoin ATM operators must solve in order to expand operations accordingly. One recent example is finish company Prasos, who also runs largest bitcoin ATM network in Finland under Bittimaatti brand. According to CEO of the company Henry Brade, four out of five banks the company had accounts with, closed the relationships with the company. This means there is only one bank left who still allows the company to process payments. By losing this account, the company will not be able to conduct business as before. Redundancy is very important, the company still runs business thanks to having 5 different accounts before, otherwise they would already be non-opertional.
Many operators approached us, when they try to establish a bitcoin ATM business, asking if we can suggest any known bitcoin friendly banks. This could be a deal-breaker if you can’t find a bank to open account. More painful the process is when you already run bitcoin machines and then bank closes your business accounts. If you can’t find another banking partner — you are basically stuck being unable to convert received cash from machines to cryptocurrency, which makes the business model much harder or even impossible.
Banks don’t like having businesses like bitcoin ATM operators as clients. Operators regularly deposit a lot of cash as this is what is received from their customers via machines (if mostly buy bitcoin operations are supported) and then operators wire funds externally (to bitcoin exchanges). The problem is to identify the origin of the cash coming from customers, and basically for banks need to rely on KYC/AML policy of operators and also how well it is obeyed. Also the cryptocurrency related businesses compete directly with traditional financial institutions, that definitely doesn’t bring any friendliness in above mentioned relationships.
So to summarize here — banks don’t like to have bitcoin ATM operators as clients. There are many cases when bitcoin ATM operators lost existing banking relationships due to large amounts of cash deposits.
How operating a bitcoin ATM works
As mentioned above the most optimal scheme is when operator has a bank account and deposits cash periodically from machines to bank, then funds are wired to bitcoin exchange or liquidity provider, where liquidity sits until it gets automatically converted to bitcoins or other cryptocurrency when customer initiates transaction at machine. For more details you can read the article on risks of running bitcoin ATM business and how to operate via liquidity provider.
Here are couple of diagrams from those posts to give a better overview (clickable):
So banks are needed to close the money turnover cycle for operator. If there is no bank account, you can not send funds to exchange, while you have cash at hand and exchanges on opposite await to receive a wire transfer. Some operators search for alternative ways to convert cash to bitcoin, e.g. finding a local miner, who steadily produces fresh bitcoins and who would like to accept cash in exchange for it. Other operators used localbitcoins as a way to exchange cash to bitcoins, however, this adds extra costs (e.g. exchange fees are usually 0.1-0.5% compared to localbitcoins’ ~10% as a normal rate) and also adds unreliability to the business continuity, in case supplier disappears when you need bitcoins. Exchanges are always there with a lot of liquidity to convert any reasonably large sum of money.
How to find a bank for running a bitcoin ATM
There are generally two options:
- Operator approaches various financial institutions, and find those who wish to open an account,
- Approaching a third-party company, who has a portfolio of friendly banks, that are ready to work with companies doing the proper compliance.
The first approach is quite tedious, however, this is the main model how it worked for quite a while. When it became hard to find banks, some operators needed to contact 50-70 banks / institutions to find 1-2 willing to work with (credit unions were more willing to work than banks). This information was confirmed by several operators in the past, now it is probably even harder.
Another way — is reaching bank partners via third-party companies, who work on establishing connections with banks and helping operators to get on board. We were approached by Bankline, a company providing such service. Contacts can be found at the end of the post.
For the moment we don’t know of any other similar company.
After exchanging several emails, the business proposition became more clear. Also we approached several existing operators whose contacts were provided and received only positive feedback about the company.
BankLine is a newly registered company (end of 2017), however, the business owners have more than 10 years of experience in the market (via National Check and Currency, licensed as a Part II Money Transmitter with Florida’s OFR and registered as such with FinCEN). Over the last decade, the team has provided access to redundant banking relationships for more than 100 MSBs, focusing on check cashers and money transmitters. A new company was formed to serve cryptocurrency related companies with similar banking services.
The company provides several main services to bitcoin ATM operators:
- connects operators with one or more crypto-friendly banks
- thoroughly vets each operator’s application and compliance program
- facilitates cash logistics and third party integrations on behalf of the financial institution
- provides customer service and support
Connection to bitcoin friendly banks
BankLine currently has two cryptocurrency friendly banks which have already approved and are accepting applications to onboard merchants (operators).
The company provides customer service, pre-vetting, onboarding, redundant monitoring, and administration for the financial institution. There is a “direct relationship” between each operator and their depository institution. Each bank account is opened in the operator’s business name, held under the operator’s EIN number and is exclusively for the operator’s deposit activity. BankLine is not a third party processor and never takes possession of funds during any stage of the settlement process.
Traditionally, banks are slow to adjust and do not have willingness to learn new lines of commercial business. Most banks don’t have the economic resources or support staff to enter into high-risk business. BankLine helps solve this problem by doing all of the “heavy lifting” for a bank by facilitating the selection process, compliance and cash logistics.
Compliance program assistance
BankLine helps operators adhere to the highest standards of compliance, by exceeding the regulatory requirements needed for maintaining a bank relationship. Company’s employees begin by working in collaboration with bank’s staff to develop a strong AML/BSA program. Having a robust compliance program helps the bank to ease any fears that may arise from the bank’s regulators or examiners.
Maintaining a culture of compliance allows businesses to operate without the fear of bank discontinuance. Additionally, BankLine maintains a portfolio of crypto-friendly banking relationships to further protect operators from the possibility of bank discontinuance.
Cash logistic services
Operators receive a Business Operating Account and access to nationwide cash logistics. The company has relationships with crypto-friendly independent armored couriers across the United States providing operators regional cash logistics support.
On a national level, banking partners are contracted for CIT services with GardaWorld, providing access to more than 150 vaults and 200 cash processing centers across the U.S.
Crypto-friendly banks from company’s portfolio provide a full line of services including Wire Transfer Accounts and ACH debit and credit facilities. BankLine is currently colaborating with Fiserv and the kiosk manufacturers to integrate CorPoint technology, to allow for “intraday” credit on “daily” sales activity. This integration will potenially accelerate the rotation of working capital and increase profitability.
The following video gives ans overview of company’s activities:
For further questions please contact BankLine directly:
Contact person: Andy Benjamin
Coverage area: All US states
Address: 2875 NE 191 Street, Suite 701, Aventura, FL 33180
Further reading material on banking bitcoin ATM business:
- Operating as a Money Service Business – The Bitcoin Banking Burden in the United States (Zachary Owens, June 2018)
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