Technology

CoinFlip’s Bitcoin ATM’s Are Empowering Those Stuck in the Cash Economy

Although technological advancements have made it easier than ever to transact online, the humble brick-and-mortar bank branch is still regarded as an indispensable hub for personal and community-level banking. However, an alarming number of communities have limited or nonexistent access to traditional brick-and-mortar banking systems. Just as food deserts limit access to affordable and nutritious food, banking deserts make it near impossible for large swathes of people to access mainstream banking infrastructure.

It is this divide that many cryptocurrency operators see themselves as bridging. Bitcoin ATM provider, CoinFlip, is leading the charge in the US to provide cryptocurrency services to those unbanked communities shut out of the traditional banking system. The company has rolled out nearly one thousand ATM’s across the country, allowing for those people stuck in the cash economy to participate in valuable cryptocurrency markets. Out of the public eye, the company is also advocating for more concise regulations that can help these unbanked communities better adopt cryptocurrency tools.

Despite the burgeoning growth in online financial institutions, proximity to in-branch banking continues to be one of the most accurate predictors for personal employability, capital accumulation, social mobility, and access to credit. And it’s not hard to see why: without consistent access to mainstream financial systems, communities in banking deserts are unable to reap the wealth-creating benefits of stocks, bonds, term deposits, and perhaps most importantly, affordable, income-verified loans.

Banking Deserts in the U.S.

While the term was first coined in the 1870s, the emergence of banking deserts in the U.S. is actually a relatively recent phenomenon. In fact, prior to 2010, the U.S. bank branch network was going on 15 years of uninterrupted expansion. However, even as mainstream banks consolidated their rural branch networks, powerful stakeholders in the financial sector were lobbying federal policymakers to slash regulations related to financial inclusion services and equitable availability for banking products.

Beginning in the 1990s, federal requirements and regulatory oversight in the financial services industry were discarded. This tidal wave of deregulation culminated in the Great Recession, a watershed event that pushed retail and investment banks to the brink. Facing illiquidity or insolvency, mainstream banks rushed to plug the holes in their balance sheets, closing branches in lower-income communities and pivoting towards bespoke service offerings in more affluent cities and states.

Between 2012 and 2017, at least 6,764 bank branches were closed in the U.S., with the geographical distribution overwhelming concentrated in rural regions of the country. Unsurprisingly, a 2017 accessibility survey by the FDIC found that 25% of U.S. households were unbanked or underbanked. Taking a more granular look at the data, a study from the New York Fed found that banking deserts disproportionately affect lower-income households and communities of color.

In some cases, rural demand for traditional banking has been met by high-cost alternative financial institutions (think check-cashing organizations or payday lenders). However, en lieu of these ‘alternatives’, debranched communities have had virtually no recourse for keeping banking deserts at bay.

Fortunately, solutions like CoinFlip’s ATM’s exist for those shut out of the banking system. Even as U.S. banks continue to rollback service offerings and shutter rural branches, communities in banking deserts are leveraging cryptocurrencies and blockchain technology to both store value, generate interest and revive local economies. 

Bringing Cryptocurrency Out of the Shadows

Once associated with the dark web and Silk Road-style illicit sites, Bitcoin and other cryptocurrencies are now a mainstay of the financial world. After years of being mocked as a fad investment and fake currency, Bitcoin and the broader cryptocurrency market have experienced spectacular price action over the last 12 months, an especially impressive feat given the volatile performance of traditional assets over the same period.

Lured in by the potential for huge returns, top hedge funds and high-profile Wall Street traders are rushing to stake a position in Bitcoin and other blue chip cryptocurrencies. The recent cascade of institutional money was partially triggered after legendary investor and CEO of Tudor Investment Corp, Paul Tudor Jones, announced that he would be building a “low single-digits” allocation in Bitcoin. While that may not sound like much, it’s significant when you consider that the Tudor BVI fund holds approximately $5 billion in assets under management.

In another eye-watering example of institutional support for crypto, MicroStrategy, a U.S. software giant and the world’s largest business intelligence company, recently announced that it had purchased roughly $250 million worth of Bitcoin.

But Wall Street’s unequivocal acceptance of Bitcoin does little to help underbanked communities. It’s well past time to reappraise the way we think about banks. In addition to stripping rural or low-income communities of financial access, mainstream banks have time and time again been found guilty of discriminating against marginalized communities and taking advantage of certain communities. Even as Bitcoin is hailed as the currency of the people, unaffected by inflation or quantitative easing, those without bank accounts are shut out of the process. 

However, debranched Americans can begin to rebuild their physical banking routine by visiting a regulated Bitcoin ATM. Spurred on by the surge in institutional investment in the crypto market, licensed ATM companies like CoinFlip have already installed close to a critical mass of ATMs across the U.S and plan to rollout hundreds more.

But the company has become particularly effective behind-the-scenes in lobbying authorities to create a stronger regulatory environment for the unbanked. It recently advocated to California’s Assembly Bill 2150 – a bill to help better define cryptocurrencies and encourage stateside entrepreneurship.

“Because the federal government has yet to provide a clear taxonomy of digital assets, regulatory uncertainty has caused many businesses to leave the United States, taking jobs and innovation with them,” says CoinFlip COO, Ben Weiss.

With Bitcoin ATMs rolling out across the country, ordinary investors, many of whom have been left marooned in a cash economy, will have the option to invest directly in the booming cryptocurrency market. With the right portfolio structure, some investors will be able to grow their capital while simultaneously earning interest on their principal — all without ever having to walk to a bank. That, along with clarified regulations, may just help lift the tens of millions of underbanked Americans participate the modern financial system.

As Bitcoin and other decentralized finance tools step out of the shadows and thrust themselves into the mainstream, licensed and compliant Bitcoin ATM operators are well-positioned to provide an oasis for those stranded in the banking deserts.

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