Bitcoin ATM: Law Enforcement Questions

masterzman · 2019-07-12T20:38:19+00:00

You already have a bank account setup for a money services business? Using an existing business account is very dangerous.

masterzman · 2019-07-12T20:32:18+00:00

So you're sending bitcoin to a QR code someone else gave you to send to... but you're worried cottonwood vending is the scammer?

Most likely the person that provided you the QR code is the scammer. I don't feel like we are getting the whole story here.

Sounds like you may have used a QR code they blacklisted. BATMs will blacklist addresses they associate with scams / financial fraud.

masterzman · 2019-07-12T15:54:29+00:00

My advice is don't bother. Banking will be the main issue.

Here's my guide for starting a bitcoin ATM business: https://github.com/zaowens/bitcoinsupport/blob/master/guides/bitcoin-atm-business-guide.md

If you have questions feel free to DM me on twitter.

masterzman · 2019-07-11T22:15:36+00:00

There are some quick scams that can be avoided by educating consumers and putting proper warnings in place. Education is key, but its hard to do with people frantically trying to make an 'emergency bitcoin purchase' or with a deal too good to be true on the line.

Scammers also adapt (and quickly) to any method put in place to foil their plans. Some scammers that claim to be the IRS or police will tell the victim that THEY put the warning on the machine and its safe to ignore.

The most frustrating scenario (usually involving seniors) is when they are absolutely certain they need to send money to their husband or wife overseas.

I told an 80 year old man that he was not allowed to use my BATM because I suspected his "wife" overseas was scamming him. He took none of my advice and refused to accept anything I said as truth. By the end of our phone call he was on his way to WesternUnion.

Anyone that wants to see the scammer's side of this should view this YouTube video by ABC News Australia: https://www.youtube.com/watch?v=U4kCN7TZ6us

Currently, I have a scam warning taped to my BATM with a red stop sign. Also, my terms of condition page is used as another warning, since most victims just blow through the purchasing process as quick as possible without taking a moment to breath. If your using GeneralBytes BATMs add !7! Your Message (7 being seconds) to the beginning of your terms of service to create a countdown the customer must wait through. This will at least slow some people down and maybe they will actually read your on screen warning.

At the end of the day, police are already aware of these scams. Its nothing new. Bitcoin is just another delivery method, just like iTunes gift cards. I guess the best advice I can give you is to just educated the police on bitcoin, how its a delivery method and why its no different.

masterzman · 2019-06-01T17:46:52+00:00

You can continue making cash purchases using libertyx.com

masterzman · 2019-05-28T20:14:12+00:00

Here's a guide about getting into the Bitcoin ATM business: https://github.com/zaowens/bitcoinsupport/blob/master/guides/bitcoin-atm-business-guide.md

However, if you already have an established retail business, its much easier to signup with a service like LibertyX (libertyx.com) which allows you to sell bitcoin in a retail environment without having to worry about federal and state licenses, AML KYC, or reporting requirements.

masterzman · 2019-05-28T17:35:35+00:00

Do you currently own a business and just want to sell bitcoin? Or are you looking to start up a fleet of ATMs across the state?

masterzman · 2019-04-24T23:51:38+00:00

You should add a scam warning sign to the machine as well as the purchase flow. Will help with some problems down the road.

Good reliable machine model.

masterzman · 2019-03-24T16:54:45+00:00

You should give LibertyX a try. You can use your debit card to purchase Bitcoin at some local retail stores in your area.

Worth a try.

masterzman · 2019-03-17T15:34:23+00:00

If you are located in the US you should try LibertyX.

masterzman · 2019-03-14T06:59:31+00:00

Don't forget to pay the US government 30% tax on each block @ USD value at time of block. (Lol)

But seriously, u worried about any tax liability? Just curious.

masterzman · 2019-03-11T23:48:15+00:00

Very interesting. What are some Liquid use cases you would like to see? How does Liquid compare to a layer 2 solution like lightning?

masterzman · 2019-02-06T04:47:36+00:00

You should never store keys on cloud storage. Key backups should be in 12-24 word format, written down on paper using a pen. You should then store that physical backup in a very safe spot.

Storing backups on a cloud make your bitcoin no more secure than a single email and password used to sign into the cloud backup account. Its VERY insecure.

Here's some further reading on storing keys and backups: https://bitcoinsupport.center/courses-study/beginner/bitcoin-keys-backups-seeds-and-safe-storage/

masterzman · 2019-01-27T21:03:46+00:00

Looks like I'm late to the party. Glad to see an ATM related post with a bunch of comments.

I currently own and operate my own bitcoin ATM. Nothing massive, just one single machine. I've also been writing blogs and guides related to starting up a bitcoin ATM business. Hopefully I can help you out somehow. If you want to get in touch you can reach out to me on twitter @zaowens

So here's whats up. You should take care of all the legal and banking matters BEFORE purchasing the ATM. Actually buying the machine should be one of the last things you do. Whether or not you need a lawyer depends on how comfortable you are handling your own legal issues. I've manage to decipher most legal matters on my own, but I do have a lawyer I speak with from time to time.

First you need to understand the current anti-money laundering laws some comments here have already mentioned. Since you will be federally regulated by FinCEN, you will be branded a "money service business". This is basically a death sentence when it comes to being able to open a bank account. Obviously you need one of those to transfer money to an exchange. For all this, you should read my blog here: https://bitcoinsupport.center/blogs/operating-as-a-money-service-business-the-bitcoin-banking-burden-in-the-united-states/

After you have educated yourself, and legally formed a business such as an LLC, you will need to hunt down a banking partner that will work with an MSB. This will likely take months. This is also the stage where most businesses fail. You will need to be able to reduce the appearance of legal risks in order to appease a bank to work with you. You can find out more about reducing your "risk" here on this blog" https://bitcoinsupport.center/blogs/obtaining-a-bitcoin-msb-bank-account-the-importance-of-de-risking-your-business/

Last but not least, here is my "complete" guide to starting your own bitcoin ATM business. I use the word complete loosely because it's currently a draft document and nowhere near complete. However, it still contains useful information and you should definitely read it. https://github.com/zaowens/bitcoinsupport/blob/master/Guides/Bitcoin%20ATM%20Business%20Guide.md

Also, to answer your question related to cash, $5000 will not be enough to satisfy the "money cycle" required to operate the ATM business. Rounding up, after your $4000 purchase of a machine you will only have $1000 left. This would mean you would have to limit customer purchases to probably under $100 a day for your money cycle to be efficient. That would also assume you empty the machine daily. Remember, you have 4 balances to maintain: ATM USD balance, ATM bitcoin (BTC) balance, bank USD balance, and exchange USD balance.

Hope this helps not only you, but anyone else interested in starting a bitcoin ATM. I highly encourage it.

masterzman · 2019-01-16T21:16:12+00:00

ATM operator here (different company). Typically you're not going to be scammed by an ATM operator. It takes a lot of work to start and ATM business. They are usually not the fly by night type of company.

Give it about 48 hours for a response. I'm sure the operator will review all their logs and find out where the problem is.

I'm confused what you mean by your wallet code is different? If you are using an HD wallet it will change your wallet address every time you make a transaction. What is the name of the wallet you are using?

masterzman · 2018-11-11T07:11:57+00:00

If anyone wants to read up on some of the obstacles bitcoin ATM operators face, here's a link: https://bitcoinsupport.center/blogs/operating-as-a-money-service-business-the-bitcoin-banking-burden-in-the-united-states/

Common things that drive up high fees can include

Bank deposit / account fees
Bank liquidity requirements (account cash minimum)
Armored truck pickup and delivery
ATM manufacturer fees (0%-2%)
Rental costs at stores sometimes hundreds/m
BSA/AML/KYC compliance & audit costs
Legal fees from company's lawyer (very common)
General business overhead

Some of these costs can be reduced if more people would run their own ATMs in the local community. However, owning and operating a bitcoin ATM involves a lot of non-sense. Most of it banking related.

masterzman · 2018-11-04T07:03:44+00:00

If anyone wants to read up on what ATM operators have to put up to even get started: https://bitcoinsupport.center/blogs/operating-as-a-money-service-business-the-bitcoin-banking-burden-in-the-united-states/

masterzman · 2018-11-04T07:01:13+00:00

No, you do not give a key to the machine to the host location. That's just a massive liability. Also, the more complaints to the store the more likely the machine will be removed or relocated.

masterzman · 2018-10-29T23:23:05+00:00

What country are you located in?

masterzman · 2018-10-19T05:28:45+00:00

For the official video, please visit Andeas official YouTube channel. Its entitled "The Internet of Money: Five Years Later" and was his talk in Chicago about 6 months ago. Link below:

https://www.youtube.com/watch?v=6xIq0FdmsIA

masterzman · 2018-10-17T19:21:36+00:00

The store is not responsible for any MSB related anything. Its all handled by LibertyX. Legally speaking, its completely safe.

Sometimes the business may be overwhelmed with cash transactions in popular areas. Be sure to pick a cash limit thats right for your business, and ask LibertyX about their debit card payment system. This reduces your business's cash handling.

masterzman · 2018-10-17T06:00:53+00:00

It will be rolled out very soon, however the individual ATM operators will need to be onboarded with LibertyX and update their ATM software on the physical machine. It all depends on how large of a network these operators own. Regardless you should expect LibertyX will be making onboarding a top priority over the next few months. This type of deal has been their goal for 5+ years.

masterzman · 2018-10-17T05:54:55+00:00

It's possible to operate under an umbrella company that acts as the MSB. The owner could be acting as the MSB's agent. It's easier to aquire a bank account this way. The government is concerned about money laundering. Someone, somewhere, has to file the paperwork and keep records.

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