Crypto ATMs have been consistently popping up across the world for years. In 2021, the market experienced its biggest growth rate — but in a crippling year for crypto, ATM installations have stalled while the number of transactions have plummeted, Bloomberg reports.

At the start of 2021, there were just over 14,000 crypto ATMs globally, according to Coin ATM Radar. At the top of 2022, it had jumped 146% to 34,400.

Since then, growth has comparatively plateaued. For the first time since 2018, numbers even dropped between August and September this year, by 440 ATMs.

Data shows that 796 crypto ATMs were removed during August, many in the United States. Europe and Canada bumped up the change by installing locally, resulting in a loss of 440. Since then, numbers have increased ever so slightly — the growth of bitcoin ATM installations have remained below 1%.

Transactions — the dollar amounts received by crypto ATMs — began to sharply fall in October 2021, from $329 million to $226 million by February 2022. Transactions then surged to $290 million in just a month, but consistently fell since June, back down to $230 million as of October 1. This reflects a major drop in value for business owners who host a crypto ATM, especially since some are paid a percentage of the revenue a unit generates.

Crypto ATM data suggests that transactions have dropped this year on par with a major decline in the crypto market. Yet regional factors and regulatory concerns are also at play — Singapore shut down all Bitcoin ATMs in January while Japan did a 180 and re-embraced them just two months ago. 

Read more: It’s a strange time for Japan to okay crypto ATMs but it has anyway

US crypto ATM market struggles

The US remains leader of the pack when it comes to crypto ATM distribution. It’s currently home to 87% of ATMs, just shy of 34,000 across the country. However, as noted by Bloomberg, many in the US get little or no use. One operator in the country, CoinCloud, owns about 5,000 ATMs. In November, it told Bloomberg it faced $125 million of debt racked up by aggressive expansion plans.

Its larger competitor Bitcoin Depot, which owns around 7,000, remains optimistic in the face of stagnating installations and nosediving transactions. It slowed down installations and is instead attempting to move machines to high-traffic spots.

“A lot of people are just trying to be conservative,” Brandon Mintz, its founder and chief exec, assured the outlet. “The company has remained unaffected by the fluctuations in the industry,” he added.

Bitcoin Depot plans to go public in the first quarter of 2023. The founder says he’s “comfortable” with its ability to repay debt.

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Bitcoin ATM users have reported having more $16,000 stolen by hackers who used a zero-day vulnerability in General Bytes’ Bitcoin ATM servers.

Users reported last weekend that crypto was being drained from their wallets when they attempted to deposit or withdraw funds. The crypto was then siphoned into the hackers’ wallets.

ATM manufacturer General Bytes flagged the vulnerability on Thursday, saying that it’s “concluded multiple security audits since 2020, and none of them identified this vulnerability.”

The company told Protos that it knows of 13 users who were hacked and six that lost money.

The company also speculated that the attack, which originated in Georgia, may have been carried out by a Russian IT specialist in retaliation for General Bytes adding a button to its website that allows users to donate to Ukraine’s anti-Russia defense efforts. The donation button was added to the ATM screens just a few days before the attack.

The company said via email that it’s not obliged to repay any of the stolen funds but due to the relatively small amount stolen and the fact that it might still “mean a lot for small individual ATM operators targeted,” it’s considering reimbursing all affected customers.

Read more: Bitcoin ATM company sues cybersecurity unit over $400K crypto hack

“We want to express that we are deeply sorry for the security issue we have caused, and none of our security protocols caught it,” General Bytes told Protos.

“We are also sorry we didn’t push operators harder to hide their ATM sever CAS instance from authorized public access behind VPN. We expect to release more information on how to secure their servers behind VPNs and more this week,” (our emphasis).

Bitcoin ATM hacker abused admin privileges

A “zero day” hack is the term used when a hacker manages to exploit a vulnerability before developers are able to fix the problem.

In this particular case, hackers took advantage of a vulnerability that allowed them to create a new admin user, organization, and terminal within the firm’s software. 

After renaming the new admin user to ‘gb,’ the attacker then altered the crypto settings to include their wallet address while also changing the ‘invalid payment address’ settings. From here the machine began to send any deposited/withdrawn crypto to the newly listed wallet address. 

Bleeping Computer reported that the Bitcoin ATM hacks wouldn’t have happened if appropriate firewalls were in place that allowed users accessing its server software to only connect via trusted IP addresses such as the location of an ATM or a customer’s workplace. 

Read more: It’s a strange time for Japan to okay crypto ATMs but it has anyway

General Bytes has advised any owners of its Bitcoin ATMs to update their terminals and follow 11 steps listed on their site.

Data from Coin ATM Radar (CAR) says there are 38,681 Bitcoin ATM machines in the world. Of that figure, CAR claims that General Bytes own 23% of them (8,828 machines).

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Japanese crypto holders will soon be able to convert their assets into hard cash and withdraw it on the spot after it was announced that crypto ATMs would be returning to the country after a four-year hiatus.

As reported by local news outlet Mainichi Shimbun, once the terminals, created by Osaka-based crypto exchange Gaia, are up and running, users will be able to convert and withdraw bitcoin, ether, bitcoin cash, and litecoin using an app.

Over the next 12 months, Gaia has plans to install 50 of the machines (known locally as ‘BTMs’) in Osaka and the country’s capital Tokyo. This number will rise to 130 over the next three years.

To use the service, users need to register to get their hands on a special card. They then send their crypto to the machine using their phone and withdraw the funds in yen.

It’s hoped the terminals will make the process of withdrawing crypto funds quicker – it currently can take a few days for funds to move from an exchange to a bank account.

According to a Gaia press release, the new machines will operate with a number of anti-fraud measures built in.

These include a withdrawal limit per transaction of 10,000 yen (around $750), topping out at 300,000 yen per day, careful verification screening at the time of user registration, and close monitoring with cameras.

Regulatory chaos is threatening Japan’s crypto future

Even with the proposed security measures, this is a curious time for Japan to be giving the green light to crypto ATMs.

The country is currently undergoing something of a crisis where virtual currencies are concerned, unsure about how exactly they should be regulated.

As reported by the Financial Times, the country’s leading crypto regulator, the Japan Virtual Currency Exchange Association (JVCEA), has seen “a stand-off with regulators, corrosive infighting and a chronic lack of resources.”

These issues threaten not only the organization itself but Japan’s very status as a global crypto hub.

Read more: Japan central bank tells G7 to figure out how to regulate crypto — fast

Established in 2018, the JVCEA was intended to take the lead on crypto self-regulation in Japan. However, the country’s financial service agency has since criticized the way the organization does things, specifically highlighting the conduct witnessed in two JVCEA meetings last year.

According to FT, the JFSA became concerned about “delays to crucial anti-money laundering regulation” and the fact that during the meetings, it “was not clear what kind of deliberations the body was having, what the decision-making process was, why the situation was the way it was, and what the responsibility of the board members were.”

The FSA also highlighted a lack of communication between high-level JVCEA members, resulting in overall poor management.

JVCEA members have also criticized the organization, claiming that it’s not equipped to move quickly on issues such as defining new anti-money laundering (AML) measures. There are also concerns that, even if it did put these new rules in place, it would be difficult for exchanges to implement them due to them being “small operators” (via FT).

Finally, there are worries about the professional background of those making the decisions.

According to a source quoted by FT, “office staff mostly consisted of retired people from banks, brokerages and government departments rather than secondees from member companies,” (our emphasis).

This, they said, is why “no one there really understands blockchain and cryptocurrencies. The whole mess shows it is not a simple problem of governance. The FSA is very angry about the whole management.”

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Chicago’s largest Bitcoin ATM company has accused a former executive of sabotaging business relationships in El Salvador, reported Law360 last week.

Athena Bitcoin Global, which trades on over-the-counter markets, is now suing its former chief technology officer (CTO) Shaun Overton in Illinois court.

Overton was named CTO when Athena agreed to acquire Texas-based software company ROI Developers last year.

Overton was ROI Developers’ director and president at the time, back when the company conducted business under “Accruvia.”

Athena runs back-end systems for El Salvador’s state-sponsored Chivo ATMs. Last June, the company signed a contract to install 1,500 Bitcoin ATMs throughout the country.

The company’s stock surged nearly 1,200% in that month — from $0.13 to $1.90 — while it quickly began installing its first tranche of approximately 200 Bitcoin ATMs in El Salvador.

But the rollout turned sour from there. Athena alleges that Overton, ROI Developers, and Accruvia breached confidentiality agreements by disclosing software flaws in Athena’s ATMs.

Athena says Overton offered to fix the bugs only if El Salvador signed another contract with Accruvia.

Overall, the company claims that Overton’s actions prompted El Salvador to reduce its purchases of Athena’s Bitcoin ATMs.

Athena reckons Overton harmed its ability to hire the best possible personnel and comply with US anti-discriminatory hiring laws.

Overton allegedly sent an email to another executive in which he stated his refusal to work with “Indians.”

The company also claims its former CTO went out of his way to hire incompetent personnel, forcing Athena to fire them and incur various HR expenses.

Bitcoin ATMs won’t help El Salvador’s credit rating

El Salvador adopted Bitcoin as legal tender last year. First, a bill was passed in June which then became law in September.

Yet El Salvador is heavily indebted and it must repay its creditors with US dollars.

But the small Central American nation’s creditworthiness has deteriorated steadily since the announcement despite attempts to raise money with exotic Bitcoin bond offerings through Bitfinex.

• El Salvador’s sovereign creditworthiness was recently downgraded to “Junk” by ‘Big Three’ credit rating agency Fitch.
• The nation’s most important creditor, the International Monetary Fund (IMF), has repeatedly warned the country to undo its dual legal tender policy.
• The World Bank also objected to its adoption of Bitcoin as legal tender.

Throwing caution to the wind, El Salvador Finance Minister Alejandro Zelaya rejected IMF’s advice. President Nayib Bukele responded: “El Salvador DGAF,” short for “don’t give a fuck.”

Looking back, flaws in El Salvador’s Chivo wallet put a quick dampener on Bukele’s Bitcoin-related efforts. Residents reported many complaints and protested the adoption of Bitcoin, with activists destroying at least one Bitcoin ATM.

El Salvador relaunched the wallet with an AlphaPoint integration to resolve issues with local Bitcoin transfers. It also hired a new developer to resolve complaints of identity theft and missing funds.

El Salvador’s government has sponsored the installation of some 30 Bitcoin ATMs in the US; in Atlanta, Chicago, Houston, and Los Angeles for the El Salvadoran diaspora to use for remittances.

In 2019, over 2.3 million Salvadorans lived in the United States — roughly one-third of El Salvador’s 6.4 million population. International remittances famously made up 24% of El Salvador’s GDP last year.

Read more: [Will El Salvador default on its debt because of Bitcoin? Markets say yes]

As for Athena’s share price, markets promptly rejected the stock after Bukele and El Salvador tapered their orders.

Athena stock hit $33 at its peak last September, having surged more than 30,000% on its price at the start of 2021.

It now trades for just $2.19, down more than 90% from its September highs with no relief in sight. Still, it’s up nearly 2,000% over the past year, outperforming Bitcoin and Ether considerably.

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