New report says bitcoin ATM industry at risk of "creative destruction"

According to a new report published by the ATM Industry Association (ATMIA), the rapidly growing bitcoin ATM industry is at risk of “creative destruction” unless self-governance structures are soon put in place. The ATMIA’s “position paper” notes that bitcoin ATMs represent a “genuine innovation in the payments space,” and hopes for an eventual “stabilization” of the system as ongoing issues are resolved.

The report cites several issues of concern, most notably the lack of data security standards and consumer protections. Without a reasonable set of standards in place, the ATMIA argues, bitcoin ATMs may become easy targets for hackers and money launderers. Should that happen, many potential users will likely shun the machines, seeing them as shady and unsafe, quickly turning a promising innovation into something needlessly stigmatized. To avoid this outcome, the trade group argues, bitcoin ATMs must begin a program of self-regulation.

The ATMIA recommends four broad steps for the bitcoin ATM industry to adopt in order to prevent such an outcome:

• clarification of conditions for a “license to operate” for BitCoin ATMs
• greater integration and relationship-building between BitCoin operators and exchanges and the wider payments industry, including stakeholders in the ATM industry
• the development of international security best practices for digital currencies to reduce the risk of cyber-crime attacks and money-laundering
• introduction of an international accreditation program for BitCoin ATM operators, including ongoing education and training programs for the BitCoin sector

The report also suggests that bitcoin ATM makers and operations create a registry of trusted exchanges, an auditing process, guarantees to protect customer deposits, as well as a licensing system to ensure that standards are being met. The ATMIA already has many of these structures in place, and the report could be viewed as an attempt to bring existing bitcoin ATM operators into the fold. As stated in the report: “ATMIA strives to develop innovative solutions to enhance consumer convenience, choice and security in payments and would welcome a professional peer relationship with BitCoin ATM operators.”