Bitcoin: Greece’s new euro workaround?

July 10, 2015, 6:38 PM UTC
A Bitchain bitcoin ATM
A Bitchain bitcoin ATM
Courtesy of Bitchain

Joaquin Fenoy was wandering the streets of Athens Friday, doing his bit to ease Greece’s currency restrictions. He wasn’t handing out cash, but rather installing an ATM with a withdrawal limit of €1,000 (about $1,100). That’s €940 above the €60 daily ATM withdrawal limit the Greek government put in place to stop a bank run as its creditors decide the country’s financial fate.

There is one catch, though: You need to have the virtual currency bitcoin to use it.

Fenoy, 36, is the CTO of Bitchain, a four-month-old startup based in the Barcelona suburb of Sant Cugat del Vallés. He and his co-founders—Jordi Alcaraz, 39, and Miguel Alcaraz, 44—launched the company in March to build an international network of bitcoin-based ATMs manufactured by BTCPoint, a Barcelona/Silicon Valley company (and Fenoy’s former employer).

Bitcoin ATMs are a fast-growing offshoot of the six-year old bitcoin currency. The first one was opened in a Vancouver coffee shop in October 2013, and there are now 429 worldwide. To buy bitcoins at an ATM, a user inserts money, and the equivalent in bitcoins are put into his virtual wallet. To turn bitcoins into cash and withdraw it (which is more likely in cash-strapped Greece), users send bitcoins to a virtual address supplied by the ATM; they are then given a QR code that they scan to receive cash.

Free of ties to government financial systems, bitcoin appeals to people looking to hedge against unstable currencies and banking systems. Demand for bitcoin has picked up in recent days, especially in Europe (Greece’s bitcoin use has risen 500% in the last four weeks), suggesting that Greece’s travails may even be inspiring people in other southern European nations to shift into bitcoin in case their countries ever have similar problems.

“The suspicion is Spanish, Portuguese, Italians, and others worried about going down this route are buying in speculation,” says Michael Casey, senior advisor of MIT Media Lab’s Digital Currency Initiative and co-author of The Age of Cryptocurrency: How Bitcoin and Digital Money Are Challenging the Global Economic Order.

“You buy a bitcoin now because you think sometime in the future you’ll have your banks shut and your currency reintroduced,” he adds. “Gold was the old hedge against this sort of thing. Bitcoin is the new one.” Usage is still low, Casey notes, so big growth numbers have to be taken with a grain of salt.

Fenoy frames building an international bitcoin ATM network as a way to help people easily move money around the globe without paying the high fees of traditional money transferring services.

“It’s very good for people in the Third World, who are now dependent on Western Union and services like that,” he says. “Someone in one part of the world could put in money, and a family member could take it out in Africa, for example. That is one of the objectives: remittances.”

In Greece’s case, worried relatives in London could buy bitcoins and transfer them to the digital wallet of a family member in Athens, who could then withdraw the bitcoins as euros from Bitchain’s ATM. Similarly, tourists could also buy bitcoins with dollars in New York and then take them out of a Barcelona bitcoin ATM in euros.

Bitchain ATMs charge a 4% commission on transactions, a bit below the worldwide average of 5.61%, according to industry site Coin ATM Radar; the ATM in Athens will offer a zero commission rate to start. Fenoy says that for someone exchanging currencies, that 4% commission represents an 80 to 85% savings when compared with a physical moneychanger.

Sending money the old-fashioned way is certainly more expensive: On a transfer from the U.S. to Greece, Western Union takes a cut on the conversion (€1,000 would cost $1,180 from Western Union, compared with $1,120 at the current exchange rate) and charges $81 on top of that to put the transfer on a credit card and deliver it immediately.

Fenoy and his partners will soon find out how many Greeks (and visitors to Greece) have access to bitcoins. Their ATM, based at a downtown Athens co-working space called The Cube, is slated to open Saturday. The two ATMs Bitchain installed in Barcelona a few weeks ago see about 20 transactions a day each, he says, split 60/40 between buying bitcoins and withdrawing cash.

The company plans to have 40 ATMs installed worldwide by the end of the year, including in other countries with the kind of currency problems and byzantine money transfer regulations that make them prime for bitcoin usage, like Argentina and Venezuela.

Each machine costs about €8,500 and according to Fenoy, between six and nine months worth of commissions are needed to pay off each one. So far, he and his partners have put in about €100,000 to bootstrap the company.

“The situation [in Greece] is a lot calmer than I’d envisioned from what I’d seen in the media. The lines at ATMs are just one or two people,” Fenoy says, talking from Athens on his cell phone. “Tourism is normal. People are in a better mood than I expected.”

A Greek exit from the euro would no doubt change that—and make Bitchain’s ATM much more popular. After all, bitcoins are not any weirder than other alternatives being tried out in Greece right now: Some stores are taking neighboring Bulgaria’s currency, the lev, while a small Greek island, Agistri, is trying out a gold-backed digital currency, the Nautiluscoin.

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