Peter McCormack: Chris, how are you doing?
Chris Yim: I’m doing great, Peter. Thanks for having me.
Peter McCormack: Must be morning for you there, right?
Chris Yim: Yeah, it’s 9:00 AM so not too early, but I’m just getting started.
Peter McCormack: Well, thanks for getting up early to do this for me, this is great. So obviously you’re aware, I’m doing a week of shows dedicated to the ATM industry. I’ve been learning a lot about it myself, so it’s great to have you guys on because you are one of the oldest firms in this part of the crypto industry, right?
Chris Yim: Yeah, we actually launched America’s first Bitcoin ATM in early 2014 here in Boston south station.
Peter McCormack: Wow, was that a Bitcoin only ATM or one of the ATMs, which is a traditional ATM as well?
Chris Yim: Back then we tried to go straight to traditional ATMs, but it didn’t have too much luck since a lot of people didn’t really think Bitcoin had legs in late 2013, early 2014. So what we ended up doing is we worked with Lamassu, bought one of their machines, which was really a bank vault, with a tablet and an Internet connection and put that in in South Station.
Actually it was so novel at the time, what we had to do was, there was an old Redbox DVD rental machine that was just sitting around. So we ended up buying out their machine, replacing it with ours. So for a while we had a hybrid Bitcoin ATM and DVD kiosk business!
Peter McCormack: Well, do you know what, you say people didn’t think it had legs back then. There’s still people who don’t think this has legs right now!
Chris Yim: Yeah it’s crazy. You have people also that are thinking about launching their own Bitcoin ATM operation even today, five years later, which is great.
Peter McCormack: Okay, so you’ve launched the first one. What was that like? Tell me a couple of things. Firstly, why did you do it? Secondly, what kind of demand did you see early on? Also what kind of regulatory framework did you have to follow back then? Because essentially if you’re doing the first one, there was no regulatory framework for these specific machines, I’m guessing?
Chris Yim: Sure, so really back then, it really stemmed from Kyle and my own Bitcoin purchasing experiences. So we had met in middle of 2013 and we both kind of fell down the Bitcoin rabbit hole, but at the same time learned about the technology. For me, I was always interested in public equities. My dad worked in the Biopharma industry and we were always watching and analyzing the stock market.
In that space, you’re always looking for misunderstood small and mid cap sized companies that are adversely affected by either positive or negative news. I think Bitcoin had a lot of those elements. So I first came across it, it was like, “okay, well how do I get some of this?” This was really before Coinbase or any of the other exchanges existed at scale. So as you probably know, there’s this site called LocalBitcoins.
Peter McCormack: Yeah, that was the first site I ever bought Bitcoin on.
Chris Yim: I’m sure you have some good stories there as well. So when I started at Wharton, I was talking about Bitcoin to everybody I knew, the only other person that it even registered with was Kyle. We’re like, “okay, well first things first, let’s buy some!” So we loaded up LocalBitcoins, did a lot of screening, ended up finding a person that was willing to meet us in West Philadelphia.
We did a bunch of back and forth, emails, phone screens, and we got confident enough to do the in person meet. I convinced Kyle to come along with me to be my muscle, in case things went south and then we went to that cafe and it ended up being perfectly fine. 20 minutes later we had some Bitcoin and it was extremely exciting, but that was kind of the “a-ha” moment where it was like, if this has any chance of getting off the ground, we have to dramatically fix this because we love being trailblazers, but we didn’t think anyone else was going to even entertain something like that.
So we took a step back and thought about what if this model existed in the legacy world and decided that the ATM Kiosk is something that makes a lot of sense. At the end of the day, you don’t need that much to facilitate a Bitcoin transaction. If you’re exchanging fiat, a way to get that money and then you just need a connection to the Internet.
So there was a company, Lamassu at the time that we reached out to and ended up working with, that had this really nice sleek looking machine that we purchased. To be honest, we thought there was a huge demand for it. So we were like, “no matter where we put it, it’s going to do well.” Well South Station gets tens of millions of passengers and walk through traffic every year, so we thought that made a lot of sense.
Peter McCormack: How were you providing the liquidity back then?
Chris Yim: Back then it was provided by Kyle and myself. So there were some early OTC desks and also our own personal Bitcoin stash. Fortunately, we both came from more traditional backgrounds. Myself, I was coming from investment banking and venture capital and Kyle, consulting and private equity.
So we had a little savings and back then Bitcoin wasn’t $10,000, so it was pretty easy as people were buying smaller amounts, which was very, very encouraging because people were coming into Boston from Logan and they were making a point to come all the way to our machine to use it and to meet us, which was very exciting.
Peter McCormack: But I guess even at that stage there is a risk that your buying it and the price has changed. So you’re having to then sell it at a lower price that you’ve purchased it. How did you manage that?
Chris Yim: In the early days it wasn’t really managed so much. We knew that there was a real cost to buying Bitcoin, holding it, dealing with the cash logistics, but it was really more of proving that there was product market fit and proving that there were people out there that wanted this. So we just added 5% to our purchase price and it is sold like hotcakes.
Peter McCormack: So what kind of volumes were you doing early on?
Chris Yim: I think the stat that we were really proud of was that we did a thousand transactions in a little over the first month and just the fact that people had to find the machine we were located, I don’t know if you’ve been to South Station at all, but essentially there’s this like staging area for the Amtrak trains.
So we were between tracks 5 and 6 on the way out. So there was a ton of foot traffic, but a lot of the times, especially during trains, it’s just people with a mad dash. So we found out that it wasn’t necessarily the best to be right in the middle of all the foot traffic, but during off hours, people were coming all times a day.
Peter McCormack: Interesting! Were there any KYC/AML requirements back then?
Chris Yim: Well, so Kyle and I actually, because we were not allowed to bolt the machine down, we were standing next to the machine pretty much all day! So it was great in that we got to know our customer base really well. If people did have any questions, you are happy to talk to them and I think that that’s something that has served us really well. A lot of people, especially running online businesses, you spend a lot of time trying to verify the person is who they say they are.
Whereas for us, it’s a little weird to ask someone for their ID in person when they’re about to use your machine, but it was necessary friction at the time. We’ve always been very conservative when it comes to KYC. So yeah, we were talking to them, getting a feel for what they were trying to do and back then, it was really people just trying to dabble. It the easiest way to buy a Bitcoin and that’s really the stepping stone for everything else that follows.
Peter McCormack: Okay, so let’s talk about what follows and I’m not sure how lengthy this answer will be, but you’ve gone there from one machine, up until today where you’ve got quite a significant business. You don’t just have ATMs, you also have the cashiers and the debit kiosks. So can you just take me through the kind of history of the company from that one machine, how you initially expanded and then just walk me through to where we are today. I’ll probably keep some notes!
Chris Yim: So yeah, off the success of that first machine, we were like, “this is awesome! We found something that people want. So let’s continue to press it.” We eventually added three more of those same BTMs at Harvard, MIT, Cambridge and Boston. Similarly we had to go to each one, manage it, deal with the operational issues. Very quickly, we understood that the concept of the Bitcoin ATM was still very new.
We had people that were shoving business cards, pieces of plastic into the bill acceptor, which would take the machine out! In terms of marketing and visibility, it was great because you had a big sign, you had this machine that people were standing around, talking about. But four was actually when we started to hit a lot of growing pains. The machines are not really cheap and part of that is it’s actually a bank grade vault.
You had to deal with the cash logistics. The more you sell, the more you have to go take the money out of the machine, deposit at a bank. We were like, “okay, well we had people coming from all over the country, all over the world. There has to be a better way to capitalize on this market to make a more efficient transaction.”
Especially, to my earlier point, all you’re really doing is transmitting this transaction on the Internet. So we decided ultimately to move to a software only model and we ended up building our own web POS. So all that really was was a nice little platform that let anybody who wanted to sell Bitcoin and store, essentially handle that part of the process in this web app. So the way our platform predominantly works today is you download our app, you create an account with us, it’s all free.
You find a location that you want to purchase from, when you select a location, you provide us your Bitcoin address and in return we give you a six-digit order number and then that’s what you give to the cashier and that’s what you enter on the ATM. I’ll talk about that in a little bit.
The reason we do that is, the Bitcoin address is very long, prone to transcription errors, so what we’ve done is replaced it with a very simple temporary order number, so that you can give it to the cashier easily, that you can enter at a machine easily. Then once you complete the payment at the cashier or in the ATM, we immediately send you the Bitcoin.
Peter McCormack: Okay, that sounds pretty efficient!
Chris Yim: Yeah and I think that that was really off the insight that we had, that everybody wants, at some point it seems like to become a Bitcoin ATM operator, to have one of these machines, to sell to customers, to become part of the ecosystem. So what we did and what we thought made a lot of sense was like, “okay, well how can we lower the friction for them?”
Not everyone’s going to have $10,000 to buy a machine or tens of thousands of dollars to supply float. But what they can do is they can become a cashier for us or if they already have an ATM, which there are a hundred thousand plus out there in the US, they can have this loaded on the machine and they’ll be a part of that Bitcoin on ramp ecosystem.
Peter McCormack: Okay, so it really is about just providing a range of different options and the best ways for people to buy in-person?
Chris Yim: Yeah, it’s a funny thing, Bitcoin is so new! I mean it’s been around 10 plus years now, but for a lot of people, they’ve heard about it, they’re starting to contemplate buying some, trying it out themselves, but there’s just a lot of friction in it. Some of that is as simple as, we hear this a lot, “oh, I want to buy some Bitcoin, but am I not going to get anything physical back?”
Peter McCormack: Yeah, I guess a piece of paper?
Chris Yim: Exactly, they feel like the traditional transaction process, they feel like they’re being gypped in a little ways. So it’s funny, but having a legacy part of the transaction, whether it’s going and buying from a cashier or human in front of you or going from a traditional ATM, that they have been going to for years to take out cash, helps alleviate some of that friction.
Even though you’re not getting anything physical, you’re transacting with something in front of you and I think that that provides this level of trust that for a lot of the incremental customer is just really helpful to get them over the hump.
Peter McCormack: Can you give me any kind of numbers or any kind of data on the volumes of transaction, say on an ATM versus a cashier versus the debit kiosk?
Chris Yim: That’s a good question. I would say that for the debit kiosk we’re actually seeing a lot of people initially purchase smaller amounts. So think something on the order of $5 to $20 and then as they come back they buy more and more and very often will purchase $1,000 to $3,000 a day.
We see this evolution of the first transaction, probably similar to your first transaction, it’s about trust. It’s about making sure it works, it’s about understanding how long it takes after I make my payment, before it’s in my account and I can actually use and transact it.
Peter McCormack: Well it’s quite addictive Chris! When you do that first purchase, I remember mine again, it was probably like $50 worth, because you’re just like “what is this? I want to get my head around it” and you purchase it and you move it somewhere to some wallet or something. Then it becomes quite addictive, so you buy a bit more and like you say, you end up… I mean I remember the second time I got into it, I bought like $50 worth and then I think in the space of a week, I bought like 6 or 7 Bitcoin. You get the addiction.
Chris Yim: Awesome! I think the first cycle, when you actually receive it to send it out and everything’s confirmed, that’s a big sigh of relief.
Peter McCormack: Yeah, massive sigh! Okay, so let’s find out a bit more about the business. So firstly, I’ve spoken to Gil from Athena and they’re obviously Bitcoin only ATMs. But again, as we spoke, you’ve gone down this route of having traditional ATMs, which allow for the purchase of Bitcoin. How does that work in terms of, firstly acquiring the machines to do this? Because there are specific manufacturers for Bitcoin ATMS. Have you had to manufacture your own or have you had to go to a traditional ATM and ask them to merge in Bitcoin as well?
Chris Yim: We’ve kind of played all that stuff and five years ago, the route it seemed like you had to take, was to do everything yourself, which is always dangerous because it’s very expensive and any cost that the company bears, you have to pass through to the customer or you have to raise tremendous amounts of venture capital. So the reason that we initially moved from the physical Bitcoin ATM to the web POS software, was because software can be free.
It runs in a browser. It was very, very efficient to scale. So for the cashier model, nothing was really required. I think that was actually an integral step to get the traditional ATM partnership, because you need to show that you’re capable of supporting volumes, that this Bitcoin business is actually real. Obviously anytime you work with a legacy partner, they have competing priorities, namely the traditional ATM model, dispensing cash, adding other value added features.
So when we got to a certain scale, we started reaching out to all these partners and just learning more about exactly what goes on in the ATM transaction and it’s actually pretty complicated, but it just made a lot of sense, right? You enter your debit card, you enter your pin number and a bunch of stuff goes on behind the scenes and cash is dispensed. We have thought like, “okay, well what if you do that same thing, except instead of dispensing cash, you do this Bitcoin transaction” and then we started talking with a bunch of parties.
We eventually worked with a company called Genmega. They sell about half of the non-bank retail ATMs out there. What that means is the majority of ATMs are Bank of America, Citi, JPMorgan, all the big banks, but there’s actually a hundred thousand plus of these non-bank, that are in convenience stores, gas stations, bowling alleys, what have you, probably the place that you grew up and went to, has one of these machines.
We worked with Genmega on developing the software, to the point where it actually is as simple as a software update, were now a setting, in the default ATM setup, where you can activate LibertyX. We provide a few configuration settings and before you know it, now you have LibertyX on your ATM. From the company’s side, then we list you on our store locator, we do a bunch of marketing promotional campaigns to send customers your way.
What we’ve found is the more machines, the better. Our goal is to put Bitcoin on every block, because I think that’s what’s required to make it real, to make it easy to use and transact. From there, it’ll be really exciting to see where things go. But every single location that we’ve placed, does volume, it has reliable and steady users and I think that that’s the market that is really missing from a lot of the traditional financial services.
Especially the rural areas may never be able to have the economics to justify putting down a $10,000 machine. But certainly it can justify having a few cashiers or a few ATMs loaded with our software to sell to customers.
Peter McCormack: That’s a great marketing line you just said there. I don’t know if you even meant it, but you said your goal is to put Bitcoin on every block.
Chris Yim: Yeah, it is!
Peter McCormack: Did you mean the pun?
Chris Yim: No, I didn’t! Maybe we can figure out how to share the rights!
Peter McCormack: So what happens, is it up to therefore the store to choose if they’ve got an ATM, if they want to allow Bitcoin to be part of it?
Chris Yim: Yeah, it’s always opt in. For new technology, ultimately you want to do your best to educate the partners because you don’t want them to be roadblocks. But what we found is, a store or any owner generally wants two things.
They want foot traffic and they want alternative revenue streams to their core business. Fortunately, our value proposition is pretty simple and we do both those things. We bring a millennial population into your stores or ATM operators get a cut of every transaction. It’s in our opinion, a pretty simple win-win.
Peter McCormack: Okay, so they take a cut of the transaction. Does a cut also go to the machine provider?
Chris Yim: No, so the machine providers, their core business is selling to the operators and just really focusing on that. So if they can sell more machines, which actually a lot of people have been switching over to the Genmega because they want this. The other interesting thing is a Bitcoin ATM, call it somewhere between $10,000 and $15,000. A traditional ATM is only about $2,000 to $3,000.
So for a lot of these traditional ATM operators, they had been thinking about entering the Bitcoin ATM space, though we are able to offer something that is actually cheaper. It doesn’t require that they do all that specialized research and purchasing for a Bitcoin only machine and instead they save both physical footprint space and some dollars, which is great for everyone.
Peter McCormack: Does the store itself have any KYC/AML requirements or is it all baked into the software?
Chris Yim: So we handle all that and that’s a big reason why we have our own app. A lot of people, if you use a regular Bitcoin ATM, you just go, you can create the account on the machine, scan your wallet. For us, we staged the transaction and that’s really twofold. One is so that we can do the KYC, we can make the process very simple, while you’re downloading the app and also to minimize the actual friction and time when you’re making the payment.
So you’re not standing in front of the ATM for 10 minutes or standing in front of the cashier for 10 minutes. You’re actually, when you go to the cashier or ATM, you’re just providing that code that is generated only when you have an account and provided a Bitcoin address to us.
Peter McCormack: So when you say first time go to the machine and if you try and withdrawal to Bitcoin, it’s going to ask you to provide your code and if you haven’t got one, it’s going to tell you to download the app?
Chris Yim: Exactly, yeah. We live in a world today where not that everyone has a LibertyX app yet. Obviously that will change as we go forward. But yeah, it’s really a dual flow. If you have a LibertyX app and you have a code, then you go straight to the finish line. Otherwise you need to just take a step to the side, download the app and create your LibertyX account.
Peter McCormack: And the LibertyX app is also a wallet?
Chris Yim: It is not. That’s a good point. So since the beginning, we were very intentional about trying to be very open and work with all the companies out there. Obviously building a wallet should be a full time business. So our ethos has always been “BYO wallet.” You can use any wallet out there.
We actually just announced an integration with Edge wallet, where one of the options where you can select to buy Bitcoin and that flow, you don’t even have to provide your wallet address, it automatically pulls it in. So we’re working on partnerships there. It’s still an area of friction, you have to have your own wallet. But we found that customers prefer it, because they can specify whatever they want and they don’t need to change their own wallet behavior.
Peter McCormack: Okay, so following on from that. With the traditional business, when I spoke to Gil, he talked to me a lot about the KYC/AML requirements. How burdensome has that been for you?
Chris Yim: I would say not particularly since that’s always been something that we’ve done. Obviously that was a area of a lot of research before we even launched the first machine and part of it is back then, there was very, very little clarity. We just spent a lot of time reading every state’s regulations, reading federal regulations. Now I think it’s a little easier in that there are plenty of other fiat to Bitcoin exchanges out there, mostly online, but you can kind of see what is possible and what you should be doing.
So for us, we’re pretty conservative. So we may ask for more information than some of the other Bitcoin ATM operators out there, but we try to stage it so that you’re able to get that first transaction, trust us and be comfortable with providing more information. So for us, we have a $200 a day limit and that’s just with a verified phone number.
So with that, you can’t buy that much, but you can go through the experience, you can purchase from an ATM, see that it works, see that we actually do send the Bitcoin instantly, which actually is quite novel in itself because a lot of the guys out there, they’ll batch transactions. They might wait to do it manually. For us, it’s literally instant. As soon as you complete that payment, it’s sent.
I think that it’s things like that, that just make consumers a little more comfortable and then at the end, they’re actually okay with some of the KYC burden. It’s just the price to pay. I think because of the new technology, because we’re a software company, we’ve just tried to be very, very proactive around that and try to get ahead of what might be coming. I think that that attitude was very helpful for us, as we got the New York BitLicense earlier this year…
Peter McCormack: How was that?
Chris Yim: It was a process! I think it’s obviously a huge market for us. Since we got it, we haven’t re-entered back into the space. So when we do, it’ll be a really, really exciting opportunity for us. Obviously, financial capital of the country, if not the world and it’s just something that you have to be really, really careful about. I think for better or for worse, because Bitcoin and Crypto is so exciting, you get a ton of bad actors. You really saw that during the ICO craze. These days, fortunately a little bit less so.
But we don’t worry too much about that, we just worry about what we’re doing and I think that as long as we can keep doing that, there’s a ton of people out there that still don’t own Bitcoin, that at some point will be interested in trying it out. We just want to be there for them when they do that and try to make that experience as easy and simple as possible, so that they have a good experience and they end up telling their friends about how it works, because that’s really how you spread it, is through word of mouth.
It’s not through marketing, it’s not through these splashy campaigns, too good to be true giveaways. It’s through trusted intermediaries and deciding that you want to buy it, when you want to buy it.
Peter McCormack: So earlier on you were talking about the original experience of trying to buy Bitcoin, say with LocalBitcoins. I mean mine was an online transaction, but I had to provide all this proof. I remember I used to have to take photos of myself holding like a written statement that they told me to send and various IDs and then I’ll do a bank transfer of the money.
Then I’d obviously have to wait for them and this process just wasn’t great. I can understand why in those days, the ATM would’ve been a much smoother experience. But now obviously there’s a lot of exchanges out there. There’s other services like Cash app that have made it a lot easier to buy Bitcoin. What is the use case today versus say Cash app?
Why would somebody use an ATM versus an exchange or something on their phone? Because really with something like the Cash app, you don’t have to go anywhere, but with an ATM, you still have to go to a physical location. So what is the use case you are finding?
Chris Yim: Sure, I’d say it’s really two things. One is trust and the other is settlement and funding. So with Cash app, yes, you’re right, you can do it from the comfort of your couch, but you do have to load your account and there is some delay there before you can actually withdraw the Bitcoin. So for some people, especially when they’re trying their first transaction, it’s that first end to end time period, right?
It’s like until you can actually move the Bitcoin off the exchange or if you’re using it to buy something online, you’re kind of nervous and not really sure if your experience is going to end well. For us it’s instant. As soon as you make that payment to us at a store, we can send you that Bitcoin instantly and part of it is just due to the way the legacy payment structure works in the US, cash is instant and irreversible. A Bitcoin transaction is instant and irreversible.
You can’t accept a reversible payment like an ACH for something that’s irreversible, otherwise you’re going to very quickly find yourself out of business. So that’s this new interesting paradigm where cash actually can provide something unique that bank transfers cannot and that’s the instant and irreversible functionality. Same with debit card transactions at ATMs. The second thing is the trust point that I think I mentioned a little bit earlier.
You already know these stores, they’re in your neighborhood, they’ve been around for years. That provides this level of comfort that when you go, you’re talking to a person, you’re interfacing with the machine that isn’t new, that’s been around for a while. I think that together, that provides a level of comfort that will attract and convince a certain population that this is something they want to transact in and try out.
Peter McCormack: But could you provide instant Bitcoin settlement with debit cards via the LibertyX app? Is that something you could do?
Chris Yim: Hopefully one day. Today, the way online debit card not present, which means the card is not physically being presented at the point of sale, the charge back risk goes to the merchant. So then similarly to if you do a reversible bank transfer, a lot of people would like to get free Bitcoin and charge back their purchase or maybe the price of the Bitcoin goes down and they decide they don’t want it anymore.
Unfortunately, the way the system is set up right now, we can’t offer that yet. But I agree, I think what we’re seeing is this emergence of physical retail being a great avenue to acquire and onboard users. Similarly, with the convenience of Cash app, Robinhood Coinbase, I think it’s likely that they may want to move downstream into physical as well.
We’re seeing it with retail with Warby Parker, a lot of these online services, they’re actually going and opening their own retail stores. So it wouldn’t surprise me if there’s like a nice marriage to be had with the physical BTM operators and the online players.
Peter McCormack: Yeah, I saw that recently when I was out in LA. I went to one of the physical Amazon stores, which at first I was like, “this is weird that Amazon have a store”, but actually what a great experience. You can have your collections there, so you don’t have to have something sent to your house. But while you’re there, you’ve obviously got the point of sale option for buying other things.
I thought it was a great marriage of the two actually, so you’re probably right. Also with that, what are the main challenges that you’ve had in growing the business? I spoke to Gil about various challenges that they’ve had. What are the main challenges that you’ve had and also, have you had challenges with getting banking services yourself?
Chris Yim: To your first question, I think it’s all about enterprise relationships and scaling. So we’re at the point where we’re quite large. We have several thousand locations around the country. We’re operational in 43 states. So for us, we’re not thinking about adding, 1, 5, 10 machines at a time. That is great for the ecosystem, but it doesn’t move the needle for us. So now we’re talking about and working with bigger operators, larger legacy partners and for them, they’re still relatively skeptical.
They have their own core business that they need to worry about shareholders that they need to satisfy there, so we need to essentially paint them a case that explains that this is very low risk, great way to grow their customer base, bringing new customers in and essentially provide a nice revenue stream for them and that takes time. Obviously a lot of people learn or hear about Bitcoin in the news and during bear markets.
During the “Blockchain, not Bitcoin” phase, a lot of companies were kind of on the sidelines waiting and were unsure that this was really for them. I think fortunately for once we actually have a lot of positive catalysts, everything is aligned right now, especially going into the halvening. So we’re seeing a lot of those partners that we talked to 3, 4 years ago come back and say, “oh, let’s finally do something here.”
But as you can imagine, it’s very hard when you have to wait for somebody else to act. So I would say that that’s a challenge. It’s staying focused, being patient, continuing to provide updates, working to build that very, very simple case for a partner that makes them want to try it, without worrying about risking their legacy business.
Peter McCormack: So I guess if you could get a company like Bank of America, that would significantly move the needle forward?
Chris Yim: Yeah, well Bank of America has a lot of branches. I forget the name of the service. I remember there was one where you could go and deposit cash into Bank of America branch to buy Bitcoin. That would be probably the simplest process, as everyone knows how to do that. Unfortunately I think that, I was talking about moving the needle, for them, they are a very, very big company. I cannot see that really happening anytime soon, as much as I would love it.
Peter McCormack: Okay, so you talked then about the halvening. By the way, I keep getting criticized for saying “halvening”, is meant to be halving, I don’t know if you’ve had the same? I actually prefer halvening, it feels a bit more epic. So you’re talking about that coming. So can you talk to me about your experience of running the business through a bear market? What was the impact on volumes and now are you starting to see things pick up and is that your expectation, that it is because of the halving next year?
Chris Yim: So part of it is that we have been growing very, very rapidly. So even during the bear markets we have grown, but it’s been a much more modest growth. The other part is we don’t really have very much speculative trading volume, because we’re buy only and the fees probably don’t make it such that you can really do arbitrage and anything like that. So during periods of low volatility, during bear markets, a lot of the online exchanges, their volumes drop 80, 90%. For us it’s been flat or maybe maybe slightly down.
I think for us, it’s really attracting new users that drives that growth engine and what we’ve seen is during periods of price appreciation, everyone’s running in, probably not the best strategy right to buy when the price goes up. When the price goes down, we see a little slow down. We haven’t seen too much of the value investor, like when the price went from $18,000 to $4,000, it was pretty flat. But now as start to rise back up, we’re seeing a lot of interest.
I think a big part of it is attributable to now we have locations that are very, very densely located in markets that we previously weren’t, by piggybacking off existing ATM routes. So we’re able to address new incremental customers there.
I think a lot of it is now we’re at the point where the average consumer looking to buy crypto has a lot more awareness, is educated, they understand the supply cap, they understand that maybe mining isn’t the way to play that and they are trying to think about how they want to add a position ahead of the halving.
Peter McCormack: So why don’t you offer a cell service, because that gives you the opportunity to make a percentage on both sides?
Chris Yim: Yeah, it’s something that we’ve certainly thought about and I think probably we will inevitably add at some point. It really comes down to just doing one thing. I think one reason we’ve been able to succeed and do so well, especially through two bear markets, is we’ve only focused on this one thing, which is getting Bitcoin on every block and making it super simple for consumers to buy Bitcoin easily and through a trustworthy manner.
Part of that is, we were the first company to provide phone and live chat customer support, which really doesn’t scale at all and is a cost center. But it’s really important for somebody who is trying it out for the first time, that has a simple question like, “oh, why do you do this?” Or “what do I need to buy this door?” It solves that friction point and now you’ve offered something that, for a long time, nobody else offered.
So to do all that stuff we had to build this core infrastructure and I think as we get to having locations on every block, we can think about, “okay well how can we add additional services to monetize and build off what we already have?” I think to do that historically, would have been been a little too early. For a long time, the buy volume far outpaced the cell volume. It’s much harder to buy a Bitcoin than it is to sell it to somebody who wants it.
So in terms of just supporting both flows, buy made a lot more sense. I think we’re getting to the point now where it definitely is interesting to add and I think we will add it at some point.
Peter McCormack: So you said then about other services, what other kinds of services can you offer?
Chris Yim: So part of the beauty of building an on ramp that interfaces the legacy payment system, is really any transaction you can power and enable, whether it’s a bill payment, topping up minutes, adding other tokens, really any way to turn physical fiat into digital value, we can theoretically support with our platform because that’s really what it’s built for.
Peter McCormack: Oh right, so a bit similar to Bitrefill’s services?
Chris Yim: Sure.
Peter McCormack: Have you looked at offering support for Lightning yet?
Chris Yim: We have and it’s something that also is on our list. I think it’s extremely exciting. Once again, this balance of building something that is really interesting versus what our customers are asking for and just making sure that we have everything, all our ducks are in a row before we support something like that.
Peter McCormack: That’s fair enough. Do you support any other coins or are you Bitcoin only at the moment?
Chris Yim: Bitcoin only at the moment. That’s probably in addition to people wanting us to have a wallet, having a way to sell back the Bitcoin to us, that’s probably up there in the top three. “Why don’t you offer Ethereum or Litecoin” or insert whatever coin and once again it comes down to making sure that we can offer that same great experience, in really instant settlement, as soon as you make the purchase of whatever cryptocurrency.
I think it’s increasingly easier to go back and forth between different digital tokens. So part of our thinking is well, once you buy Bitcoin, you’ve already done the hardest part. It’s pretty easy to go from one token to another now. We are always thinking about, are we the best position to do something like that? If so, how can we roll it out and then scale. I think that that’s something that depending on how the rollout, depending on how we get to 100,000 locations around the country, will heavily influence how we prioritize that.
Peter McCormack: I have a feeling, and you might not admit it, but I have a feeling you are either a maximalist or very close to a maximalist anyway.
Chris Yim: I have been told that!
Peter McCormack: Yeah, I have that feeling because I don’t think it would have been that challenging for you to add say Litecoin. But the other thing is, I guess when the machines are there, if somebody has the Bitcoin facility switched on, it will advertise on the machine Bitcoin I guess. Bitcoin is so dominant within the industry, I think that you potentially risk diluting the proposition by the machine saying you could buy anything.
Chris Yim: Yeah, so one thing that’s great is there’s a lot of customization available. So at the operator level they can choose whether or not they want to show certain screens. Some operators, they want to focus on their cash cow, which is making it really easy for people to withdraw their cash to pay for their bar tab or whatever they’re selling. So I think it is dilutive. I think that anyone that’s interested in buying one of these alt coins, probably knows about Bitcoin.
You could always slap another logo on the same screen, one token becomes two, becomes three and at the end of the day, we come from traditional finance. We understand that the more locations out there, the better for everyone and likely the lower the fees and the onboarding friction. So I think today, Bitcoin is that one that has a lot of the value propositions that everyone was excited about, when you’re talking about digital currencies and the promise that it brings.
So from that sense, I think, yeah, maybe more of a Bitcoin maximalist attitude, but we try not to be very political when it comes to offering this and that. It really comes down to what we can be confident that we can support in a trusted manner.
Peter McCormack: Okay. What are the risks that you carry in the business? What are the most risky parts for you?
Chris Yim: I would say, these days, it doesn’t really feel too risky. Especially in the early days when we were moving, carrying, pushing machines around into storage and security that had tens of thousands of dollars in it! I think the risk is that we can’t continue to scale and execute.
I mean I think the game plan has been laid out for us. We need to get to a 100,000 machines and then after we do that in the US, continue expanding, we’ve got a lot of interest from overseas partners, but we are pretty conservative and making sure that we want to finish what we started here, before even entertaining anything like that.
Peter McCormack: Well it’s quite different as well. So I notice it, because I go to the US a lot, as you know. So in the UK we don’t have as big a culture for these machines that are in gas stations and stores. You tend to find a lot, say in gas stations, you still tend to have what we call the hole in the wall, which is a ATM built into the wall and it’s usually provided by the bank, so you get free withdrawals.
Whereas when I’m out in the US, it tends to be a lot more, you can go down a street and almost every single store has an ATM and you pay anything from $2 to $5 to make that withdrawal. So culturally, I know it’s very different say in the UK to the US, but there must be a variety of challenges when going into different markets?
Chris Yim: Sure, absolutely and part of that is, we think a lot of the market will come to us. There’s a lot of partners or potential partners out there, that are knowledgeable about the current country jurisdiction regulations and the payments systems. To your point, a lot of Europe and a lot of the world actually does offer same day or next day bank transfers.
So the US is a little unique in that, the ACH transfer can take 3, 7, 10 days, especially for your first transaction, like Coinbase for example. That is unique just to the way the legacy banking is built here. So you’re right in that the value proposition as it stands today might be a little bit different for the UK or Europe or somewhere else and we’d have to adapt or figure out, what the angle to enter the market is.
What is universal though is kiosks, ATMs, that at the end of the day taking cash or take a debit card and dispense cash or deliver some service. That at the end of the day is our core specialty. It’s building software, it’s working with legacy companies to really add additional capabilities and functionalities for them to interact, set payments, collect commissions and become part of this new digital economy.
Peter McCormack: Okay, down to my last couple of questions. Firstly, across the business, can you give me any kind of interesting stats on volumes, average purchase price or are there specific locations that work much better than others? Any kind of interesting stats you’ve got from doing this business?
Chris Yim: I think probably the one we’re most proud of is every single location that we’ve added, even if it’s a town of 10,000 people, has done transactions and typically has done a lot more than a few transactions. I think this is something that gets lost very often, is that America is extremely spread out and that the people in the rural markets are very disadvantaged when it comes to core financial services, especially ones where they have to go in person.
There’s probably not very many bank branches, if any, in certain towns and I think that that’s an area where today, we can provide a way for them to buy Bitcoin. It’s not everything certainly, but it’s a stepping stone to providing some of the additional core services in the future. In terms of average transaction volumes, things like that, $300 keeps on popping up as the blended average, which is pretty interesting.
I don’t think there’s any real science behind that, but I think it’s a nice stick in the ground in terms of, okay, it’s a core amount of exposure. If it goes 10x, it becomes a pretty significant amount of money. If not, it’s maybe a part of a paycheck. So it’s interesting to track. Even over the bull and bear markets, that number has stayed the same.
Peter McCormack: Okay, so listen, you’ve obviously been in the industry for a while. I consider you a phase two. I think of the industry as there’s three phases that people have come in. There’s the early adopters who discover Bitcoin very early on. I always considered like 2013, 2014 kind of phase two and then for me like 2017 was phase three.
Most people seem to be one of those blocks. So you’ve been in the industry for a while, what’s your view on it all now? How do you kind of take it all in? Because you will have seen significant changes between say 2013 and now. We’ve gone from it just being a nerdy toy to the President tweeting about it, to having David Marcus talking about Libra in front of both the House and the Senate and therefore Bitcoin being talked about. How do you process it all? What do you make of it all?
Chris Yim: I would say at the same time, a lot of the stuff has been unsurprising as much as it has been surprising. In terms of Bitcoin becoming more and more part of the mainstream narrative, I think we all expected it back in 2013. I think in some ways it happened a lot sooner than we did. I would have imagined it to be a little more positive than Donald Trump’s tweets.
A lot of the focus historically, but I think what you’re seeing is at the government levels, very, very strong education knowledge of what crypto is and they’re trying to figure out, how they should play in space. In terms of, as a business, I’m a little surprised that a lot of the on ramp frictions still exist. I think a lot of companies, a lot of startups, they’re going straight to Bitcoin 2.0.
They’re going straight to the world where everyone already has digital assets and we just see this increasing friction that exists out there, which is why we’re so passionate about building that bridge because yeah, Bitcoin 2.0 stuff, all this digital token marketplace, lending, things like that, that’s great, but you need a way for people to turn their fiat into crypto first. Only then, we know with a positive experience, will they really be serious about the next leg.
Peter McCormack: Okay, brilliant. Then looking forward to the future, what do you think needs to happen in the industry? What do you think are the most important things that can happen, like internally in the industry to move everything forward, but also in terms of regulators because they’re obviously a big part of this right now?
Chris Yim: Yeah, I think you’re going to see an increasing number of partnerships with large legacy companies. Partially because those are the ones that have navigated the regulatory waters historically and also we’re entering a phase where you can’t just raise a bunch of money and pray that your business is going to succeed off… You actually have to deliver a product.
I think that companies that have core competencies, specifically in software and unique user bases and business models, will be able to bring that to the legacy partners out there, scale in a very, very efficient way and hopefully provide a continued and trusted way for people to interact with digital currencies.
Peter McCormack: Well listen, this has been great and fascinating. Thank you for coming on Chris. This is your opportunity to tell people how to find out more about LibertyX and also how to follow you and if anyone wants to get in touch, who do you want to hear from?
Chris Yim: Sure! We’re really big believers in Bitcoin and the Bitcoin ecosystem. If you have anything that you want to talk about, please reach out to to me, our company Twitter is @libertyx. We actually have an Instagram, which is very exciting! We post photos of our storefronts, of our ATMs, it’s very sexy in a different way! So it’s LibertyX on Instagram and my email is [email protected]. Happy to talk to everyone in the space and very excited to hopefully meet a lot of you.
Peter McCormack: All right, well next time I’m your way up in Boston, I’ll make sure we go and grab a beer, maybe go out to Fenway and go watch the sox.
Chris Yim: I would love that!
Peter McCormack: All right, thank you. Thanks for coming on Chris.