Bitcoin virtual currency to come to cash-strapped Cyprus via ATM

Josh Peterson Tech Editor
Font Size:

As the Cypriot financial crisis continues, some are seeing a new opportunity for the popular Internet crypto-currency Bitcoin to gain broader acceptance.

Entrepreneur Jeff Berwick, founder of Canadian financial investment services company Stockhouse.com and CEO of TDV Media, announced earlier this week plans to open up an ATM in Cyprus to allow customers to exchange cash for Bitcoins, the popular decentralized Internet virtual currency.

Berwick is calling his new company BitcoinATM.

Fearing a bank run resulting from the panic caused by the EU and IMF’s initial €10 billion deal with Cyprus — which included a one-off 6.7 percent tax on deposits of up to €100,000, and a 9.9 percent tax on higher amounts— local banks froze bank accounts, cutting Cypriots off from their funds.

While the initial deal was rejected by the Cypriot parliament, Cyprus President Nicos Anastasiades, Eurozone finance ministers, and IMF officials agreed to a different deal on March 25 that impacted numerous uninsured bank accounts.

After the European Commission, European Central Bank and the IMF first announced their bailout deal with Cyprus, for example, the value of one Bitcoin has risen from $48 USD to its current value of more than $80 USD.

The surge in interest has exploded the overall value of the Bitcoin economy to beyond $800 million, reports Fox News.

BGR News reported last week Monday that several Bitcoin-related apps surged in popularity on the Spanish iPhone market. Also, an analysis of Google Trends also shows that worldwide search interest in the currency has risen significantly in the past month.

Bitcoin has been the subject of some controversy given its association with the sale of illicit drugs on the Internet.

It first emerged in 2009 as an online peer-to-peer crypto-currency. Users can exchange real currency for Bitcoins, and the transactions are encrypted and nearly anonymous, making it an attractive option for those looking to evade the ever-watchful eye of governments.

Its popularity and acceptance on the Internet, however, continues to grow as trust continues to erode in the world’s central banking institutions – acting as a kind of commodity similar to the way gold works.

Bitcoins are also accepted by numerous businesses on the Internet, including WordPress.

Since BitcoinATM’s technology would act as an intermediary between the Bitcoin world and the financial system, it would need to meet certain regulatory requirements.

In the U.S., for example, the Financial Crimes Enforcement Network (FinCEN) — a bureau of the U.S. Department of the Treasury — recently announced money-laundering rules with respect to virtual currencies.

While Bitcoin was not named specifically, the rules do address decentralized currencies.

Engaging in the transfer of a virtual currency for real currency, or facilitating that transfer through an exchange, classifies that person or company as a money services business (MSB) that has to be registered with FinCEN.

According to the rules, however, a person purchasing or creating Bitcoins simply to purchase real or virtual goods does not classify them as an MSB.

“We are taking all of the necessary steps to ensure BitcoinATM passes all EU regulatory criteria,” said Justin O’Connell, General Counsel for BitcoinATM, to The Daily Caller Tuesday.

“We are also aware of the latest publications from FinCEN and the ECB, and have a dedicated legal team assessing all of the implications for the operations of BitcoinATM,” said O’Connell.

The ECB, or European Central Bank, issued a report in October 2012 concluding that virtual currencies “could have a negative impact on the reputation of central banks, assuming the use of such systems grows considerably and in the event that an incident attracts press coverage, since the public may perceive the incident as being caused, in part, by a central bank not doing its job properly.”

O’Connell also told The Daily Caller that BitcoinATM’s software team has ensured that the “platform will be highly adaptable to meet the needs of a rapidly changing Bitcoin marketplace.”

“The key to adoption will be adaption, as technology evolves to make the transactional side of Bitcoin as streamlined and straightforward as possible,” he said.

The team at BitcoinATM is looking to be the providers of the world’s first Bitcoin ATM, but it appears that they already have some competition.

Zach Harvey and Matt Whitlock, partners at the venture firm Lamassau Bitcoin Ventures, debuted their own prototype of a Bitcoin ATM at the Free State Project’s annual Liberty Forum in February. The two are hoping to sell their machine to bars, restaurants and other retailers in the U.S.

Follow Josh on Twitter