In this podcast, you will hear Mike Townsend interviewing Chris McAlary, the CEO of Coin Cloud, which is the world’s largest Bitcoin ATM Company with over 800 machines (and growing), all of which allow two-way transactions of Bitcoin and 29 altcoins.
Being that Coin Cloud has a plan to overcome the 1000 ATMs margin in the next couple of months, it is logical that their plans are also related to expanding overseas. According to Chris, their next country will be Brazil. As he explains, it is especially suitable for Crypto ATM business because of its cash-intensive economy, where more than 50% of people get their income in cash, whereas in the United States that percentage is around 10%. Of course, the United States continues to be the priority of all Crypto ATM operators because of the extensive adoption of cryptocurrency by the customers and regulators as well.
Having in mind the extensive scale of the Company, Chris later explained how they took over the manufacturing process to keep up with the growth. In other words, they took the customer feedback that they had as an operator, and designed an appropriate machine that would suit both customer and company needs. By organizing an in-house production they are able to bypass the bottlenecks which are often present when ordering from an outside company where their supply cannot meet your demand. This allowed them to plan to introduce 1500 new machines in the next year only.
When it comes to regulatory compliance, Chris agrees that it is a process but on the other hand he states that the regulators are ready to listen and learn, because they also want more business in their country and it is in their interest to reach an agreement also. The main objective is to apply the existing rules to a product that they are not written for, and that can take some time. The entities he cites as the most difficult are the Banks, because they have their own regulator (the OCC), and they are not so big on dealing with a high volume of cash, because of all the money laundering laws.
Per Chris, the biggest thing that separates Coin Cloud from its competitors is their two-way machines. Yes, it requires a better cash flow and a bit more complicated hardware, but he assures us that it is worth it. He describes their business as a form of digital commerce that needs to go both ways.
Talking about security, Chris is convincing that the software is pretty secure and they haven’t had any breaches. As a matter of fact, the biggest threat, they faced is actually physical, where people would go to the location, attach a machine to the truck, and rip it out of the wall. But nowadays, the new models have a built-in GPS so they can track them and locate the perpetrator.
Chris agrees that the percentage that Coin Cloud charges their customers is quite steep. It comes from 9% to 18% depending on if you are buying or selling. Chris justifies that with the number of expenses needed to keep the business going, like customer support, maintenance, compliance, manufacturing, cash transport, etc. He states that he never thought that it would go that high, but that is the cost of scaling.
He later explained that their maintenance is in-house and it is separated from the cash transport which they are outsourcing. Chris emphasizes money transport as an important segment if your company is nation-wide. In that case, you need to create a good relationship between the armored car companies, banks, and federal vaults in order to transport and store money from all around the country.
Of course, Chris was asked about the COVID influence on their business, where he said that they noticed that the volume has gone up. More accurately, the volume declined by 20% during the lockdown, but as things reopened they started breaking their volume records day after day. They also noticed that the average transaction per customer has gone up by 50% after the lockdown which implies that the COVID outburst had a surprisingly positive impact on the cryptocurrency adoption.
To summarize, Chris is telling us that if you want to run a large scale Bitcoin ATM business, the best thing is to organize in-house manufacture so you can create the best possible machine and also satisfy your company’s demand. You will also need to establish and maintain a good relationship with the regulators on the one side and the banks, vaults, and money transfer companies on the other side if you want to operate on a global scale. The downside of this business model is that you need to keep your charges higher in order to keep up with all of the above.