VANCOUVER – Bernd Petak recalls a time when, curious about how exchanging cash for the digital currency Bitcoin worked, he stood at Union Square in New York City and wandered among the sellers to try and get the most bang out of his buck.
“You meet at a certain time outside and there are people standing around with their hand up, and they’ll sell you Bitcoin, and you can shop with various people and you can see who has the best price,” he said.
Such transactions involve buyer and seller scanning each others’ smartphones to transfer the Bitcoins — a virtual currency that isn’t controlled by a central bank — to the buyer’s so-called digital wallet.
On Tuesday, however, the world saw the first Bitcoin automatic teller machine go live in a downtown Vancouver coffee shop, allowing people to exchange Canadian cash for the digital currency at a current rate of $211.79 per Bitcoin.
New users set up a digital wallet by scanning their palm on the machine, while others who already have a Bitcoin wallet select how much money they want to spend, insert the cash, and scan a complex square bar code on their phone to have the Bitcoins transferred to their wallet.
Petak, who came to check out the machine on behalf of his technology investment firm, said he enjoys using Bitcoin because it is can be used wherever merchants accept the currency.
“If you’ve ever dealt with your bank in an international context, you’re never quite sure whether your Visa card’s going to be taken, you’re never quite sure whether your ATM card is going to work where you are,” said Petak, who came to check out the machine on behalf of his technology investment firm.
“This basically gets around all of that.”
Bitcoins are transferred through a peer-to-peer network and transactions appear on a public ledger that is accessible to all who use the currency. Users must first set up a digital wallet, which gets managed through an app.
Bitcoins are typically bought through an exchange. The process involves setting up an account, waiting about a week for it to be verified, and then transferring funds to the account so that one can start buying Bitcoins.
Mitchell Demeter of Bitcoiniacs, a Bitcoin broker and the firm that installed the ATM in Vancouver, said Bitcoin transactions are much more convenient than other forms of payments because transactions are instant and there are no processing fees.
“Right now, if I wanted to send you $5,000, and say you’re in Toronto, it would take three to five days for a wire transfer to come through and it would cost me $35, and it would cost you a fee,” he said.
“With Bitcoin, I can send you that money instantly and it would cost pennies.”
Demeter said his firm plans to set up the kiosks, built by Las Vegas-based company RoboCoin, in other Canadian cities as well.
About 16 Vancouver-area merchants accept Bitcoin. Despite its rise in popularity, industry experts say consumers should still be aware of the risks associated with the digital dollars that some argue isn’t a currency at all.
Since Bitcoin is not backed by a mint, its transactions are not subject to the same regulations surrounding money laundering as other currencies, said Peter Lamey with the Financial Transactions and Reports Analysis Centre of Canada, or FINTRAC.
“If someone were to walk into a bank or a credit union with a duffle bag full of twenties, their deposit would require a paper trail for them to deposit it and they would have a report filed with FINTRAC and we would know about it,” he said. “(Bitcoin) is not subject to those requirements.”
Demeter argues Bitcoin transactions are safer than, say, online credit card payments because users are not required to attach any personal information to their digital wallets. Since the public ledger is accessible to “anybody and everybody,” network users can audit it any time, he said.
However, Catherine Johnston, president of ACT Canada, a non-profit that works to ensure safe online payments, says anonymity makes tracking fraud harder.
“One of the ways you deal with money laundering is to know who’s doing it,” she said. “If you provide complete anonymity in currency and something goes wrong, how do you track it back to the perpetrator?”
A U.S. judge has ruled that Bitcoin is a real currency, but earlier this month, authorities shut down the anonymous online marketplace Silk Road, whose users allegedly used Bitcoins to buy and sell drugs illegally.
Winnipeg native Katrina Caudle, who exchanged $60 for 0.27 Bitcoins at the ATM on Tuesday, said she understands skepticism surrounding the digital dollars, but she expects it will subside as more and more people use it.
“The only reason Bitcoin is worth anything is because people said, ‘Oh yeah, I’ll take your Bitcoin for something,'” she said.
“That’s how most currency works, but because with our current currency, we have our banking system, we have our government system, that gives us a sense of security with it. (Bitcoin) is essentially as safe as any currency, but it doesn’t have that social history yet.”