Are Crypto ATMs in Nigeria a Good Idea?

Crypto ATMs

There seems to be a crypto bull market forming. This is because all the traditional ways to buy cryptocurrencies are currently being explored by a new wave of adopters. The Bitcoin Automated Teller Machines was first introduced to the world in 2013 and there are now over 8000 Bitcoin ATMs around the world and their number keeps growing steadily.

Cryptocurrencies ATM bridge the gap between the legacy financial system and the world of cryptocurrencies. They do it by providing an understandable and similar machine to what everyone is accustomed to. This makes crypto ATMs a powerful tool for the general adoption of cryptocurrency.

This year saw the installation of the first Bitcoin ATMs in Nigeria in the capital city. This is the second country in West Africa to have these machines deployed for general use. The crypto business seems to be a success and more ATMs are planned to be installed in Lagos, as well as other major cities in Nigeria.

The existence of these ATM machines in the country opens up a new reason for Nigerians to acquire Bitcoin, but the question remains –

Is it a good idea?

Before we answer that question, let’s check out how a cryptocurrency ATM works.

How does a crypto Automated Teller Machine work?

Crypto ATM

There are about fifty-four manufactures of crypto ATMs in the world. Despite this relatively large number of sources, many of these machines share some common similarities which make them easy to use despite having different manufacturers.

As with many products in Blockchain, there are basically two things you can do with a crypto ATM – selling and buying cryptocurrencies.

However, not all ATMs allow for the purchase of cryptocurrency. In fact, less than half of the machines in circulation allow this option. Even so, it is an interesting feature and the most modern ATM all have this feature.

So, let us review how to sell crypto on an ATM.

  1. You have to register. Crypto ATMs are regulated, just like all Automated Teller Machines, so KYC is required. Once this is done, it is no longer necessary as long as the machines are of the same brand.
  2. Choose the amount to sell on the display screen.
  3. Third, send the amount to the ATM’s wallet using a mobile application. The wallet address to send the funds will be displayed on the screen plus a Qr code to scan.
  4. You’ll receive a ticket. As the network the ATM is using (Bitcoin, Ethereum, Litecoin, etc) is waiting for block confirmations, the machine provides a voucher for the money. The wait is usually for about ten to sixty minutes.
  5. Lastly, retrieve the money by depositing the ticket back into the machine.

As you can see, the process can be a little tiring. Especially with the waiting period which requires the ticket to be kept safe or risk losing the transaction completely.

Let’s check out the steps to buy crypto –

  1. Register (as usual).
  2. Scan the wallet address where you want the funds to appear.
  3. Select the amount to buy.
  4. Insert the equivalent FIAT money into the ATM.
  5. Wait for the crypto to arrive in your wallet. Most ATMs give you the transaction Id to track using a Blockchain explorer. So, wait for it and review that the transaction was created and it is in line for confirmation.

You can also check out this article on how to buy and sell Bitcoin on crypto exchanges in Nigeria written by Remitano.

The relative simplicity of this model has led to considerable growth over the past three years. As you can see in the graph below, since 2018, crypto ATM installation has grown considerably. It is important to note it hasn’t slowed down in 2020 despite the COVID-19 pandemic.

Crypto ATM Installations Growth

This is proof that a sizable portion of the crypto economy is using these ATM machines. Public adoption is also widespread, and in fact, crypto ATMs have seen most of their growth in developing nations, such as Nigeria and Argentina. One downside to using ATMs is that the transaction fees from ATMs tend to be higher than crypto exchanges. Despite this, many people still use them to buy small amounts of crypto due to their convenience and intuitive user interface.  

The market for crypto ATMs manufacturers is somewhat concentrated. As mentioned previously, there are 54 manufacturers registered for these machines. Yet, the market is divided between 9 large providers, of which two dominate a huge portion. The result is that basically two companies dictate the fee structure and basic design for crypto ATMs.

Crypro ATM share

It comes as no surprise that the most popular cryptocurrency for ATMs is Bitcoin. But having one machine per coin is not ideal. So, over 85% of ATMs support at least one additional asset for trade using the machine. The altcoin category in the chart below refers to any other cryptocurrency besides those listed on the chart.   

ATM Supported cryptocurrencies

As expected, most of them are located in North America. The United States dominates 74% of the installations in the world.

Crypto ATM distribution

Crypto ATMs is one trend that seems to be here to stay. It seems to be filling a need in the population by providing a service for a wide range of customers despite some of the problems with the business model.

The drawbacks of crypto ATMs

The transaction fee of crypto ATMs is high and this also varies widely. Generally speaking, the range goes from 5% to a staggering 20% commission per transaction. The average for North America is 8.33% which implies that in the biggest market for these machines, transaction fees are still high.

Another inconvenience is that in order to protect themselves from volatile prices, ATM networks charge a large price markup. The average premium for an ATM is 15% above the price charged on an exchange. So, on top of the expensive fees, users are paying a considerably inflated price.

This is doubly so for Nigeria. The few machines already installed in the country have one of the highest fees on the market. This, coupled with the exchange rate of the Nigerian Naira to BTC makes them an expensive proposition for anyone looking to buy some cryptocurrencies. 

This has led to some questions regarding the use of these machines. A regular crypto user would not pay such a high price when exchanges are readily available and easy to use. There have been some accusations that these machines are being used to launder money. There haven’t been any major criminal cases involving crypto ATMs, but it is hard to imagine who would use them on a regular basis for any transaction.

The crypto ATM is an interesting experiment. It seems to be serving a portion of the public who wants to deal with a physical machine. But its high transaction fees and price markup makes it a tough sell for a wider audience. Given its current cost of use and high price markups, it seems crypto ATMs are not a good choice for Nigerians.

For a more cost-efficient approach of buying and trading cryptocurrency, check out the articles listed below as posted by Remitano.    

How to Make Money Online with 1000 Naira in Nigeria

Complete Guide to Crypto Day Trading (Plus Tips)

Best Practices For Bitcoin Trading in Nigeria

Cryptocurrency Trading: Beginner’s Guide & Basic Strategies

Posted by Biodun

Passionate about Technology and everything concerning it. Avid Gamer and Music Lover. Loves Chelsea FC. Overall, a nice guy. Find me on Instagram and Twitter.

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