As the founder and chairman at CoinFlip, Daniel Polotsky is keen on taking his startup to the next level.
The Chicago-based company grew from humble beginnings in a college dorm to become the largest network of Bitcoin ATMs by volume in the U.S.
But nearly a decade after it launched, the cryptocurrency industry looks completely different. For every bit of excitement, there’s scrutiny — especially in the kiosk business.
Still, the time is ripe for a global push, Polotsky says. Here’s what the 29-year-old entrepreneur told crypto.news about the next chapter in CoinFlip’s journey, which began in Evanston, Illinois but currently touts a presence in 49 states.
As we head into 2024, what’s different at CoinFlip?
Polotsky: At CoinFlip, we have always prioritized offering 24/7 live customer support and competitive fees, which have helped separate us from our competitors and position ourselves as the world’s largest kiosk operator by transaction volume.
In 2024, we are poised for substantial growth and innovation, and plan to continue expanding our product offerings outside the kiosk business. We look forward to growing our global footprint, enriching the CoinFlip ecosystem, and ensuring a seamless experience for our customers.
How did CoinFlip begin?
CoinFlip’s journey started in my dorm room at Northwestern University nine years ago. Before I started the company, I did everything from finance internships to selling Cutco knives. At the time, Bitcoin and other cryptocurrencies were in the news and were riding some all-time highs. For example, in 2013 bitcoin had just cracked $1,000 per coin, which was significant at the time.
However, buying crypto online in 2013 was a hassle, and took a long time to process. Face-to-face meetups to conduct transactions were not unusual. At that time, it became increasingly clear to me that there was a need for a safer, scalable, and more convenient option. The solution was a kiosk — a way to offer quick transactions, a cash onramp, 24/7 support, and replace the need to meet face-to-face. It was all about simplifying the crypto experience and giving folks a trustworthy alternative to traditional banking platforms.
The LA Times recently published a feature on how a fake lawyer directed an unsuspecting victim to an ATM where people can buy digital currency. With a code provided by the scammers, the victim transferred the money. This is an old trick. Still, it underscores how scammers are using Bitcoin ATMs to swindle victims out of thousands of dollars and, according to the Federal Trade Commission, it’s on the rise. How does CoinFlip react to this trend?
CoinFlip is a compliance-focused company. Consumer protection and adherence to regulation are built into our ethos. As a federally-registered money services business, we’re always on top of AML and KYC regulations and our kiosks have safeguards and disclosures to warn customers about potential common scams. Cryptocurrency transactions are also on an unchangeable and publicly available database known as the blockchain which allows law enforcement to be extremely effective in following the money, convicting bad actors, and recovering ill-gotten gains.
In addition, if you are ever unsure or have questions, our 24/7 live customer support team is always here to help our customers every step of the way.
Bitcoin ATMs are also attracting the attention of lawmakers, regulators, and consumer advocacy groups looking to protect people from fraud and exorbitant fees. Is this a good thing?
Regulation plays a crucial role in ensuring the safety of everyone involved. It’s encouraging to see lawmakers taking an interest in cryptocurrency education and showing genuine support for the industry’s success. I firmly believe education is key– we need to help them understand the benefits of digital assets and the importance of providing a safe on-ramp for cash transactions.
However, it is important to note that the space is regulated and that Bitcoin kiosks are not unique in the financial risks presented. As a result, it is important for regulators to properly understand how Bitcoin kiosks operate, and all the compliance efforts that we perform.
Lawmakers have made significant strides in crafting legislation, displaying proactivity and a growing understanding of the crypto landscape. It’s an ongoing journey, but the commitment to understanding and regulating the cryptocurrency space is a positive sign, providing a foundation for a secure and thriving environment.
Starting in January, California will limit cryptocurrency ATM transactions to $1,000 per day per person under Senate Bill 401, which Gov. Gavin Newsom signed into law. Some Bitcoin ATMs advertise limits as high as $50,000. The new law also bars Bitcoin ATM operators from collecting fees higher than $5 or 15% of the transaction, whichever is greater, starting in 2025. What’s your take on the new legislation?
I can understand and appreciate the efforts of the California legislature to protect consumers. Although the motives of this bill are in the right place, it unfortunately provides little protection to consumers and hinders innovation. The bill ignores federal reporting requirements, which will result in less information collected from the consumer and less information for law enforcement who are attempting to investigate fraud. As a crypto kiosk operator in California, we want to serve as an educational resource to lawmakers in a manner that encourages innovation while not sacrificing consumer protection.
What distinct advantages do crypto kiosks offer, particularly considering today’s cryptocurrency market environment?
They contribute to the mainstream adoption of cryptocurrencies by providing a physical, user-friendly interface that makes digital assets more accessible to a broader audience. Their 24/7 availability and instant transaction capabilities cater to the demand for quick and convenient cryptocurrency transactions. CoinFlip’s around-the-clock customer support allows our users to ask questions in real-time to make the process less intimidating, which is nearly impossible at an online exchange.
Additionally, crypto kiosks offer a bridge between traditional and digital finance, allowing users of a cash onramp to convert dollars to cryptocurrencies and vice versa. On a global scale, crypto kiosks help facilitate quick transactions to friends, relatives, or businesses overseas while avoiding delays and expensive exchange or wire fees.
Will the number of Bitcoin kiosks in the U.S. increase in the next 12 months?
In the U.S., crypto kiosks could see growth, but tighter regulations might pose challenges for smaller operators. However, we are seeing a growing demand for crypto kiosks internationally as more people are turning to alternative ways to send money overseas quickly, build wealth, and participate in the new digital economy.
Global inflation, especially in countries like Argentina, is likely to drive demand for stable transfer options, making crypto kiosks more relevant. Developing countries with faltering banking systems are expected to see a surge in these kiosks because they offer decentralized and stable transactions, especially in regions affected by conflict or lacking infrastructure.
Cryptocurrency regulations vary by state (i.e., California exempts crypto ATMs from licensing requirements for businesses engaged in money transmission). Does the state-by-state difference in terms of rules present such a huge challenge?
Navigating diverse rules across states can indeed pose challenges, but there’s a unique positive aspect to this decentralized approach. The beauty lies in the flexibility afforded to states, providing room for customization if a national consensus falls short.
