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Atlanta startup hopes to make buying the white hot digital currency Bitcoin ATMs

Atlanta startup plans Bitcoin ATMs

An Atlanta startup hopes to make buying the white hot digital currency Bitcoin as easy as walking up to an ATM.

Atlanta Bitcoin, launched in October, hopes to install kiosks in convenience stores and shopping malls to allow people to buy Bitcoins, founder Aaron Williams said.

Williams expects to have the first machine installed in February and have about 10 locations in the next 12 months.

Bitcoin is a digital currency that is not issued by a government or bank, but “mined” by high powered-computers. Of the up to 21 million Bitcoins that can be potentially mined, about 12 million are in circulation.

Bitcoins are stored in “digital wallets” and can be used to buy products and services from more than 20,000 merchants worldwide. Recently, a New York landlord offered to accept rent payments in Bitcoin.

The adoption of Bitcoin is expected to climb as more merchants accept the currency. Atlanta Bitcoin payment processor BitPay’s network had 14,000 merchants in November, up from 1,300 a year ago.

Most people don’t mine Bitcoins, instead they buy them from virtual exchanges such as Mt. Gox, or BTC China. The digital currency is extremely volatile with prices dropping and climbing by hundreds of dollars in a matter of hours. The value of Bitcoin has risen from about $13 to more than $1,000 in the past year. The digital currency is said to be popular with criminals and drug traffickers looking to launder money, and even to pay for assassinations.

Bitcoin kiosks are likely to boost adoption of the currency because it lowers the barrier to entry, BitPay CEO Anthony Gallippi said. The company has a Bitcoin kiosk that it plans to make available to the public in its headquarters inside Buckhead’s Atlanta Tech Village building.

“If you don’t want to buy $10,000 worth of Bitcoin, and don’t want to deal with a bank wire transfer, it’s actually very difficult to buy the currency,” Gallippi said. “The Bitcoin kiosks are like a vending machine, you feed it money and it reloads your digital wallet with Bitcoins.”

Selling Bitcoins online has a high risk of fraud and can be expensive.

It’s difficult to sell Bitcoins over the Internet because every method of payment (such as debit or credit cards) can be disputed, or reversed, Gallippi said. While bank wires are more secure, they are expensive — the average cost to do a wire transfer is about $50.

Demand for the Bitcoin dispensers is growing, especially outside the United States where the “regulatory environment isn’t as harsh,” said Zach Harvey, CEO of Lamassu, which makes the kiosks Atlanta Bitcoin plans to install.

“The growth of Bitcoin’s popularity has a lot to do with it, and with it the realization that even at this point, it’s still tough to just go out and get Bitcoins,” Harvey said.

Based on its configuration, the Lamassu dispenser would get Bitcoins from an exchange such as Mt. Gox, or from a digital wallet controlled by the machine operator. For first-time users, the kiosks can create a digital wallet into which purchased Bitcoins are deposited, he said.

Before accepting cash, the two-foot tall kiosk verifies the authenticity of the user and links to the user’s mobile wallet into which the Bitcoins can be deposited. The amount of Bitcoins that can be bought via the dispenser depends on the customer’s level of verification.

Atlanta Bitcoin makes money by charging a transaction fee, which can range from 2 percent to 3 percent.

The machines, which are made in Portugal and cost about $5,000, are equipped with anti-fraud technology.

“It will detect counterfeit bills,” Williams said. “If you try to put a bill in there with a string, it will chop the string off.”

Williams, who heard about Bitcoins on an NPR broadcast, spent more than a decade at WorldPay, an Atlanta payments processor. The senior product manager saw the business potential in the fledgling currency and tried to interest WorldPay in getting involved.

“I really felt like I was going to miss something if I didn’t pursue this,” Williams said.

Bitcoin’s price spike (the currency topped $1,000 in late November) and a rise in Bitcoin thefts by online criminals have not gone unnoticed by Congress and the Federal Reserve.

While digital currencies “may pose risks related to law enforcement and supervisory matters, there are also areas in which they may hold long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system,” Fed Chairman Ben Bernanke wrote in a letter to senators.

Gallippi brushes off concern about Bitcoin’s price volatility, which he attributes to low trading volumes and closed-exchanges which limit the Bitcoin supply.

As more merchants accept Bitcoin, and the currency exchanges collaborate or consolidate, it will increase demand and supply, Gallippi said. While Bitcoin’s prices continue to fluctuate, he said, the drops tend to be milder.

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