One of the questions that arise when it comes to Bitcoin is whether or not it can be used to launder money. According to mainstream media, Bitcoin is regularly associated with money laundering practices, pyramid schemes, and even terrorism. But can you actually use Bitcoin to launder cash by using a Bitcoin ATM?
The Short Answer: No
Let’s be brutally honest for a moment here: you can sue fiat currency to buy Bitcoin at any Bitcoin ATM, up to a certain limit. However, this limit is so low that it becomes unattractive to try even and launder cash through one of these ATM’s, as you will run into verification procedures sooner or later. And who wants to visit at least twenty or thirty ATM’s in rapid succession to launder less than US$20,000?
The Longer Answer: No, Because…
As I have just mentioned, Bitcoin ATM’s will only let you exchange so much fiat currency to Bitcoin without any identity verification. It has to be noted that this identity verification procedure comes in many forms, with the simplest one being a text message to verify your phone number. This can easily be circumvented by stocking up on pre-paid sim cards and swapping them out once you reach the transaction limit.
However, you will soon run into a different kind of limit, as most Bitcoin ATM’s will only accept so much fiat currency on a daily basis before they are “depleted”. This limit has been put in place in order to comply with money transmitting license requirements, and once you go above a certain daily threshold, you will need to apply for a specific – and expensive – license.
But there is another reason for having a daily deposit limit in fiat currency. All of these Bitcoin ATMs are equipped to only hold so many notes before they are “at capacity”. Once the maximum number of notes has been reached, the machines will stop accepting fiat currency deposits altogether. You have to keep in mind that these machines are not hooked up to some secret vault where bills can be transported to, but they store the bills in their cash drawer.
Last but not least, Bitcoin ATM owners all have to operate under strict KYC/AML [Know Your Customer/Anti-Money Laundering] guidelines. This means that, once you want to exchange a certain amount of fiat currency to Bitcoin, you will be required to submit an ID scan – usually taken with the built-in webcam – and sometimes even a fingerprint scan.
As you can see, exchanging small amounts of fiat currency to Bitcoin is never a problem and can usually be done without any form of verification. However, as the regulation surrounding Bitcoin becomes more strict, ATM owners will have to adapt, sooner rather than later. In fact, it may come as far as not being able to exchange any money to Bitcoin without verifying your identity first.
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