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I tried to use a crypto ATM. Here's what happened and why I won't do it again.

Master your Crypto Presented by Matrixport
Master your Crypto Presented by Matrixport

Kazi Awal/Insider

Vape & Smoke Shop in West Palm Beach, Florida
The Vape & Smoke Shop in West Palm Beach, Florida, is adorned with neon signs and stickers that read "bitcoin ATM Cryptobase."Morgan Chittum
  • A Cryptobase ATM bills itself as a convenient way to deposit cash and invest in cryptocurrency.

  • I deposited $20 into the crypto ATM and later received $13.22 in bitcoin after fees.

  • This article is part of "Master Your Crypto", a series from Insider helping investors improve their skills in and knowledge of cryptocurrency.

A cryptocurrency ATM sits at the front of a vape shop in West Palm Beach, Florida.

The white kiosk, installed by Cryptobase ATM, bills itself as a quick, easy, and secure way to deposit cash and invest in bitcoin, bitcoin cash, litecoin, or ether, allowing customers to bypass putting in their banking information.

While reporting on the Blockworks Permissionless conference in South Florida, I stopped by to see how practical using a Cryptobase ATM would really be.

The whole process took about 40 minutes, and I ended up losing 33.9% of the $20 I deposited. I wasn't thrilled with the outcome, but it may make sense if you'd prefer using familiar technology like an ATM to an online crypto exchange.

The ATM was in Vape & Smoke Shop in West Palm Beach. Shelves are lined with hookah pipes, rolling papers, and nicotine cartridges. Storefront windows are covered in neon signs and stickers that read "bitcoin ATM Cryptobase," "CBD," "cigars," and "no loitering."

On a Thursday afternoon, the kiosk was unoccupied, so I had a zero-minute wait. A store employee told me that on a busy day about five people will use the machine, typically the same people.

The first crypto ATM sprouted up in 2013 at a coffee shop in Vancouver, British Columbia. According to Coin ATM Radar, there are about 38,000 crypto ATMs across more than 75 countries, with about 33,500 of those in the US.

Cryptobase's chief operating officer, Michael Telvi, told Insider in an email that it has 175 kiosks installed and plans to expand "rapidly throughout the US to most major cities." Telvi said the company has seven full-time employees and has outsourced much of its operations.

Cryptobase ATM
The Cryptobase ATM was unoccupied on a Thursday afternoon, so I had a zero-minute wait.Morgan Chittum

How it works

At the Cryptobase ATM, I entered my phone number to create an account, scanned the QR code for my digital wallet, deposited cash, and later received bitcoin.

Within seconds of entering my phone number, I received an SMS code to punch into the ATM to verify my identity and make an account.

A warning in capital letters appeared on the screen: "WE ARE NOT RESPONSIBLE FOR ANY LOSS OF FUNDS DUE TO SCAMS."

The message may be for good reason. On January 10, the Federal Trade Commission issued a warning about scammers impersonating officials and directing victims to send funds via QR code and a cryptocurrency ATM.

"Here's the main thing to know: Nobody from the government, law enforcement, utility company, or prize promoter will ever tell you to pay them with cryptocurrency. If someone does, it's a scam, every time," the agency said in a statement.

After the ATM's warning, I set a four-digit passcode for my account and selected a token I wanted to buy. The screen prompted me to deposit $20 to $16,000. This location did not offer cash back — so if a customer were to deposit $100, they'd have to invest that full amount.

Then I selected which way I wanted to receive my bitcoin. To do this with the Cryptobase ATM you must have a crypto wallet, many of which accept bitcoin. I pulled up my Coinbase Wallet app and scanned its barcode.

Like I would at a traditional ATM, I received a receipt detailing my purchase.

Would I do it again? Probably not

There are disadvantages to the Cryptobase ATM, including its exorbitant fees.

I paid a 20% exchange fee along with a $3 ATM cost. I deposited a $20 bill and received $13.22 worth of bitcoin in my wallet about 40 minutes later. Both flat fees apply regardless of the amount you deposit.

As someone who rarely carries cash, I felt that using the ATM is unnecessary when there are already major exchanges like Binance or Coinbase that I don't have to leave my apartment to invest with.

This kiosk also limited purchases to $16,000, whereas some exchanges have larger maximums — and I can connect my bank cards to those.

Critics of centralized exchanges, however, may prefer a Cryptobase ATM.

It doesn't require you to enter your banking information, only your phone number. The Cryptobase ATM was faster and easier to navigate than setting up an account with an online exchange. You don't have to be tech-savvy to use a crypto ATM because it parallels an experience most of us are already accustomed to.

So if you're someone who wants the accessibility and user interface of a regular ATM, doesn't mind 20% fees, and actually has cash, this may make a lot of sense for you.

Otherwise, you can use that money to buy a mandolin slicer, a travel steamer, or whatever else $20 can get you.

This article is intended to provide generalized information designed to educate a broad segment of the public; it does not give personalized investment, legal, or other business and professional advice. Before taking any action, you should always consult with your own financial, legal, tax, investment or other professional for advice on matters that affect you and/or your business.

Read the original article on Business Insider