Coinsource's Derek Muhney: Bitcoin ATM buyers keep coming when prices rise or fall

Ashton Addison: What is Coinsource, and how did you get involved?▶ 00:22

Derek Muhney: We're a national Bitcoin ATM operator and software developer. We built our own proprietary operating software, as well as our KYC and AML compliance. We're a little over seven years old, approaching eight. I was one of the very first employees, number three. I knew the CEO, Sheffield Clark, from a previous venture, and what he wanted to bring to the market looked exciting: cash to crypto, and Bitcoin for the masses, whether they're banked, underbanked or unbanked.

Ashton: How has Coinsource grown over those eight years, and how big is it now?▶ 01:31

Derek: We started with one kiosk in Las Vegas roughly eight years ago. Now we have thousands across the country, in 46 states. We're the only operating Bitcoin ATM network with the BitLicense in New York, so you could say we have exclusivity there. Our model has always been founded on compliance and on the customer. Once people do one transaction with us, they realize how easy it is. We've always chosen high-quality locations and focused on national partnerships, to make it safe and efficient for people to go with cash and buy Bitcoin. It's never been about quantity, it's always been about quality.

Ashton: If someone has never bought Bitcoin, how would they use a Coinsource ATM?▶ 03:58

Derek: It's a very easy process. We're wallet agnostic: you don't need a Coinsource-specific or proprietary wallet, just whichever one you're most comfortable with. I encourage everyone to do their own research. First, download a Bitcoin wallet. You do have to create an account with us. We don't retarget, remarket or sell the information. It's just to verify identity, and in return we offer the lowest rates in the Bitcoin ATM industry. It's a one-time setup at coinsource.net and takes a few minutes. Then you find the closest location, enter your phone number, which acts as your account number, scan your wallet to say where the Bitcoin should go, and insert your cash. We offer limits up to $8,500 a day. It's pretty much instantaneous. You get a text message receipt and a printed receipt showing the amount you purchased and the blockchain link, so you can track the confirmations. Start to finish, it's less than 60 seconds.

Ashton: Has demand for Bitcoin ATMs slowed during the bear market?▶ 08:47

Derek: Given that there's a finite amount of Bitcoin, it's been interesting to see how people behave. When the price goes up, they have the fear of missing out and want to buy before it goes even higher. When the price goes down, they see a fire sale and a discount, so they also go to the ATM. We provide Bitcoin regardless of the price. Also, a third of the world's population is unbanked or underbanked, and many of our customers use Bitcoin for their day-to-day needs. So there's no pause in their buying patterns because of the price. It's been very consistent, and the growth rate has been very smooth.

Ashton: Will licensing hurdles like New York's BitLicense be an issue elsewhere as Bitcoin goes mainstream?▶ 06:10

Derek: I wouldn't call it an issue. We've encouraged more stringent, structured regulation from the very beginning, as mainstream adoption continues. There's no secret sauce to how we got the BitLicense or our national partnerships. We recently announced a partnership with Quick Trip in the Midwest, which has 811 locations. USA Today rated them the number one gas station convenience store in the country. It was an easy decision for them, and for the New York Department of Financial Services. It all boils down to compliance. We have the most robust compliance in the industry. Without confirming the identity of the individual, there's a lot of increased risk, and you don't know who you're dealing with. That's not scalable. From day one, we've led with compliance.

Ashton: How do you stop scammers from using Bitcoin ATMs to take advantage of first-time buyers?▶ 11:13

Derek: We have a lot of safety protocols for brand-new accounts. If there looks to be a very large initial purchase, our compliance and customer support team reach out to the individual before the transaction is complete, to make sure they're not falling victim to a scam. Unfortunately, we'll never run out of examples of bad people taking advantage of good things, and scams were going on long before Bitcoin was created. I'm a big advocate of continuing education for this industry, and it all boils down to common sense. If something sounds too good to be true, it typically is. It's buyer beware: never send Bitcoin to somebody you don't know. You wouldn't send an envelope full of cash to a stranger who's asking for it.

Ashton: The machines hold cash, so how do you handle the physical side, including theft and break-ins?▶ 13:30

Derek: There are multiple layers. Our cash logistics include tight armored car pickup services, often whenever there's a certain amount of cash in a kiosk, to reduce that risk. The manufacturers have also built newer, stronger, safer models that are much harder to get into, just like traditional ATMs. Placement matters too. You don't put a machine next to a glass wall where someone can back a truck into a gas station. With national retail partners like Quick Trip, the locations are open 24 hours, well lit, well known and well protected. A not-so-great area wouldn't be a good location. We want to place kiosks where you yourself would feel comfortable going in with cash.

Ashton: How is Coinsource preparing for the future, and how does it keep rates low?▶ 16:14

Derek: It's consistent with the business model we forged from the beginning: provide Bitcoin to the masses at the lowest possible rates. We can do that because we developed our own software, not just the operating software but the compliance side too. There's no middleman, and we don't pay a software provider to use their network. We're a single-source solution provider from start to finish. We also have bank accounts in all 50 states, which is exclusive to us, and vaults in all 50 states. That lets us manage cash effectively and efficiently and keep costs down. As demand for Bitcoin continues to grow, Coinsource will be there.

Ashton: Where do you see Bitcoin going over the next year, with the US economy looking uneasy?▶ 18:05

Derek: I'm not one to speculate on where Bitcoin is going, but I don't think it's going anywhere. I think that as economies around the world continue to fluctuate, it will be more attractive for people to diversify their financial portfolio. If they haven't already dived into crypto and Bitcoin, I think it will keep being very appealing to them. That's why we've strategically positioned ourselves to make it as easy as possible for those individuals.