Why Detroit gas stations, party stores have them

Bitcoin, a cryptocurrency that had one incredible boom in 2017 and what's looking like one lingering bust in 2018.

Bitcoin is traded as high as nearly $ 20,000 in late 2017 – up from just $ 1,000 in early that year.

But it's down almost 70 percent in the past six months. Bitcoin's price was around $ 7,700 in trading June 5. And it was down to around $ 6,154 by June 22.

By July 3, bitcoin gained some ground back and was trading near $ 6,575.

Bits of bad news keep piling up. A financial regulator in Japan in late June ordered cryptocurrency exchanges to stop creating new accounts while improvements are made to stop money laundering and terrorist financing.

So why, exactly, would anyone want to get in the bitcoin frenzy at a local gas station? The bitcoin ATMs in Metro Detroit often show up in the oddest spots, including party stores, many in the neighborhoods.

Sign advertises the Bitcoin ATM in the "25 Hour Liquor" store in Inkster. (Photo: Maryann Struman)

Theoretically, one bitcoin should be able to cover fill-ups at the gas station for dozens of SUVs and all the chips and pop you want. But gas stations and party stores are not accepting bitcoins – just stocking up on ATMs that sell the cryptocurrency.

Nationwide, bitcoin ATMs are cropping up in communities like Union Gap, Washington; Fresno, California; Chicago; Washington, D.C .; Charlotte, North Carolina; Indianapolis, Indiana; Louisville, Kentucky and New York.

Gas stations, like this BP station in Harper Woods, have indoor ATM-like stands where consumers can use cash to buy bitcoins. (Photo: Susan Tompor)

Targeting the unbanked

Why would anyone anywhere – let alone live in a financially challenged community – walk into a gas station to buy bitcoins? Are people treating the bitcoins ATMs as quick way to make fast cash? Another lottery machine? In a high-crime area, could it be money-laundering haven?

Andy Attisha, the owner of the Shell station in Oak Park, said the bitcoin ATM at local stores offers financial convenience for some people.

"Attisha said."

ATM – run by Slon BTM – at his store in Oak Park and an Exxon station in Wixom. Slon BTM says it has the largest bitcoins ATM network in Michigan, with more than 32 terminals across lower Michigan.

Some people bring in to the bitcoins ATMs, Attisha says, speculating they may be using it as a place to store their money – and later withdraw it when they need to pay bills.

These are the reasons for the payment of the ATMs.

By means of financial services outside the traditional banking system – turning to check cashing stores and payday lenders. Some of the traditional banking services after a string of checks and other troubles.

Bitcoin to digital wallet is a way to convert cash into digital accounts.

Michael Barr, the dean of the Gerald R. Ford School of Public Policy at the University of Michigan in Ann Arbor, questions the validity of claims that bitcoins can help the unbanked.

"Barr said." That strikes me as a safe or sound way to provide financial services to low-income people.

Barrache, who has written extensively on the problems faced by low-income households, notes that bitcoin rises and falls dramatically in value quickly.

What happens if you take $ 500 in cash and buy bitcoins and the value drops to $ 300 in the next week?

"The idea of ​​investing in bitcoins as a strategy for helping poor people," Barr said.

"Bitcoin has very volatile price levels, asset levels – and the last thing people need more volatility, more uncertainty, in their lives."

Many do, of course, want more hope.

Quick way to grow cash

A bitcoin ATM at the Conant-Caniff Market in Hamtramck – a town ranked by one survey as the poorest in Michigan with a median household income of $ 23,609 – stands next to "The Lucky Spot" and the rack for air freshener tags.

My initial bet: We're looking for a quick way to spin the virtual coin machine.

"People may be viewing bitcoin as a ticket in and of itself," said John Sedunov, assistant professor of finance for Villanova University in Pennsylvania.

"In the lower-income areas,"

People in difficult economic situations may view the purchase of bitcoins as a chance to make money and capture some dramatic gains. But the incredible fall in recent months, clearly that bitcoin's rise is far from guaranteed.

But Joe Ciccolo, founder of BitAML, said the bitcoins ATM networks allow consumers to buy and instantaneously buy cryptocurrency, typically in smaller denominations.

A typical transaction

Consumers typically are not spending $ 7,000 or $ 8,000 or more upfront on one Bitcoin.

ATMs is around $ 200 or $ 300. Bitcoin of America claims its typical purchase is $ 100 at the ATMs – and claims volume is growing even in light of the fall in bitcoins.

Alice Gorodetsky, director of business development for Chicago-based Bitcoin of America, said people are using the bitcoins to invest, transferring money to others and wanting to complete their money (no middleman). "

Bitcoin of America, only accept cash at the ATMs. (Bitcoin of America also has an interest rate of $ 2,500 currently. It has plans to accept credit cards under $ 599 in the future but many credit card issuers, such as Bank of America and JPMorgan Chase, do not allow customers to buy bitcoins with their credit cards.)

"Ciccolo said" By and large, the majority of folks buying cryptocurrency are speculating.

Customers pay 7 percent or 8 percent to buy the bitcoins at the ATMs, although the fee can be double digits in some areas. The fees can reflect the competition in the area.

"Ciccolo said," From my perspective, "Ciccolo said," consumers are willing to pay the higher fee for the convenience of the transaction.

Ciccolo, who has a background in regulatory compliance, said bitcoin clientele at ATMs tends to be young.

And yes, some may be trying to make quick cash.

"A lot of people do day trading on it," Attisha said. "I see people coming in here every day messing with the machine."

The ATM network has proven to be advantageous, offering lower barriers for regulatory compliance in some states, including Michigan. Ciccolo said, "find it easy to set up a bitcoin ATM operation than selling bitcoins".

"You have to be very open to bitcoin," Ciccolo said.

In Michigan, for example, a money transmission license is not required to operate bitcoin ATMs. But an administrator or exchanger should be registered as a money services business.

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Barr said he was unaware that bitcoin ATMs were popping up throughout Detroit Metro. When he went online, he said "pretty stunning" to see where some of the ATMs were located.

After all, most landlords and utility companies are not accepting bitcoins to pay the bills. Most business owners and companies will not accept bitcoins now for payment due to the volatility. If they accept $ 35 in bitcoins for a tank of gas, what happens when the value drops to $ 15 or $ 20?

Hype grabs attention

Why does Barr think the bitcoins ATMs are growing?

"Barr said." It's a bit of people taking advantage of bitcoins to invest in something that does not make sense.

He said bitcoin should not be seen as a way to build wealth.

"Barr said," Bitcoin and other currencies as investment is exceedingly unwise.

"The value of these cryptocurrencies fluctuates wildly and is not based on any real relationship to a real economy." And I do not think they're an asset that people should be investing in. "

Barr and others warn that bitcoin is a lot like speculative mania – similar to other hot investments.

"I think it's a bubble, and like the tulip bubble in Holland in the 1600s, people will wake up one morning and realize it's just a flower. And then, you're out of luck. "

Is 2018 the start of that downturn?

More frequently, we're hearing allegations about virtual currency manipulation.

Investigators watching

The U.S. Justice Department has reportedly opened a criminal investigation into a potential price manipulation of bitcoins – which might include a flooding of the market, according to a report by Bloomberg.

The outstanding price increase in 2017 is being heavily studied to drive up those prices.

The North American Securities Administrators Association – a group of state securities regulators who work to protect investors – said that 70 investigations have opened up to initial coin offerings and cryptocurrency programs. There are 35 pending and completed actions nationwide since the beginning of May.

Millennials are viewed as potential targets, as are consumers who are embracing products related to financial technology, or commonly known as FinTech.

The unique, anonymous nature of cryptocurrency – a currency without a country – has raised concerns about the potential for fraud and abuse, too.

Easy access to bitcoin ATMs could increase the amount of bitcoin-related scams. Some of the producers send bitcoins via an ATM as part of phony sales or fake job opportunities.

A bitcoin ATM at Mobil gas station at 10 Mile and Telegraph, for example.

"Do not send bitcoin to anyone you know how to buy", "the screen on the ATM reads.

And what about the possibility for money laundering?

Kieran Beer, chief analyst for the Association of Certified Anti-Money Laundering Specialists, said "real questions need to be addressed" when it comes to making sure that bitcoins are properly regulated.

"Who's responsible for knowing the customer? "Who's responsible for raising red flags about suspicious activity", "Beer said.

A spot to launder cash? Think again

As many transactions can be legitimate, Beer said, there are concerns about drug dealers and others who might deliberately structure buying and selling bitcoins to conceal money earned through illegal transactions by using bitcoins ATMs.

Anyone can download a digital wallet, which is essentially a software program, to use for storing bitcoins. Wallet addresses without providing your name or address.

But Ciccolo maintains that it's a myth to say it's impossible to track transactions.

Law enforcement officials, including the Internal Revenue Service, the digital ledger for bitcoins and other cryptocurrencies.

Ciccolo said bitcoin ATMs are considered "money transmitters" by the Financial Crimes Enforcement Network, a bureau of the U.S. Department of Treasury, for regulatory purposes.

Ciccolo noted that the software that comes with the ATMs enables operators to obtain customer information. The ATM is also able to enforce transaction controls such as daily limits for individuals and caps on transaction denominations.

The transaction records maintained by the ATMs' software help check for suspicious activity, such as a customer having several different phone numbers or attempts to get around regulators by "structuring" transactions within certain limits, Ciccolo added.

The Financial Crimes Enforcement Network requires cryptocurrency entrepreneurs to have anti-money laundering programs in place.

Policies to report suspicious activity.

Some people can be aggressively reporting money laundering activity.

"Are they truly regulating the industry?" Asked Douglas Richards, a Denver-based lawyer at Denver-based Richards Carrington.

The installation of cryptocurrency ATMs in low-income and high-crime districts, he said, is similar to the strategy used by companies that sold so-called "burner phones" in the same neighborhoods, quickly replaced, to avoid being tracked by law enforcement.

Others have questioned why many bitcoins would be located in lower-income neighborhoods and some higher-crime areas.

"Why they're in these funky neighborhoods is beyond me," Beer said. "It looks very suspicious. It does not quite make sense. "

ATM scene does not make sense.

Traffic waning

A bitcoin ATM – run by Slon BTM – sits near to Subway and some stores at the store at the BP station at Vernier and Harper in Harper Woods.

Pick up a Meatball Marinara sub – and buy some bitcoin?

A clerk at the Subway says the traffic is fairly steady, some days for the bitcoin, especially among younger buyers.

Not surprisingly, at the bitcoin ATM at the Shell and Exxon stations in Oak Park and Wixom was riding late last year. Now, there's traffic but not as much as bitcoin's value fallen so much, according to Attisha.

Attisha, 25, said he invested about $ 4,200 in some bitcoin last summer. He stayed with a couple of months because he was too upsetting. He declined to say he made a profit.

"It just gave me a headache towards the end of it," Attisha said. "The volatility was just driving me crazy – so I just had to get out. I thank God I got out because it just kept going down. "