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Bitcoin ATM a game-changer?

Reports in the media suggest that an Australian operator is planning to roll out Bitcoin ATMs and at least one machine will be headed our way.

To date, Bitcoin has been a currency regarded with some suspicion by the great unwashed.

Relying on some clever number-crunching rather than a mint and central issuing authority, Bitcoin's value has varied widely during its short life -- making it more of a speculative currency than a reliable one. This fact alone probably scares away the vast majority of folk who, although they've become used to making electronic payments, are still very wary of this trading alternative.

The fact that you may soon be able to easily (and perhaps even anonymously) convert your magical Bitcoin into real hard cash might suddenly change the public's perception and give Bitcoin the boost it needs to jump into the mainstream.

Of course the operator of these ATMs will likely face a number of unique problems.

The IRD and other authorities will undoubtedly be interested in just who is making cash withdrawals -- since the potential for money laundering and tax evasion are enormous.

Unfortunately, one of the most attractive aspects of Bitcoin (for some) is the anonymity the currency offers its users. If use of an ATM eliminates that freedom and, as I suspect would be the case, actually requires the customer to use some form of ID that has been verified by government, the utility of the service is diminished.

Another problem for the ATM operator is fraud.

Any system that dispenses cash makes a great target for fraudsters and hi-tech thieves.

How long before such ATMs attract the attention of would-be cyber-robbers?

The ATM operator would need to be eternally vigilant so as to ensure that some clever sod didn't discover and exploit some vulnerability -- and as we all know, *everything* reliant on software has vulnerabilities.

Of course if Bitcoin continues to grow and gain street-cred, the need for ATMs will actually fall. Why bother cashing-out of a currency that offers all the benefits that are on offer?

The most interesting thing about Bitcoin however, is exactly how governments will track, control, tax and restrict its use if it becomes a truly viable alternative to official currencies.

Will it be made illegal?

Will possession or trading in Bitcoin become a criminal offense?

The only real hope that governments have of tracking Bitcoin transactions might be to require all traders to report all sales, purchases and trades involving the currency -- providing key data such as the buyer, seller, trader's IRD number and other details. The compliance costs associated with this level of reporting would be outrageously high and might succeed only in ensuring that Bitcoin transactions forever remain part of the black economy.

Interesting times ahead for the Revenue Minister perhaps?

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