Vancouver company Bitcoiniacs has installed the world’s first permanent Bitcoin ATM in a Waves coffee shop at the intersection of Howe and Smithe. The machine will begin dispensing real live money on Tuesday.

Waves coffee shop is one of several Vancouver businesses that accept payment by Bitcoin. For merchants, Bitcoin is attractive because the currency lacks transaction fees, unlike the hefty charges imposed by credit card companies.

Bitcoiniacs has purchased five ATM machines from Nevada-based Robocoin, and will be installing the other four in other Canadian cities during the coming year.

This arrival into the physical world moves Bitcoin one step closer to reality, both for its enthusiasts and for its skeptics who have trouble accepting Bitcoin as currency, much less as actual money.

The reason Canada will be seeing a Bitcoin ATM before the United States is that the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is less stringent than its U.S. counterpart.

While skeptics paint Bitcoin as an illegitimate and perhaps even dangerous phenomenon, its legitimacy was affirmed by a U.S. judge in August. And last year, the European exchange Bitcoin-Central was authorized to operate as a bank.

The reason Canada will be seeing Bitcoin ATMs before the United States is that the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is less stringent than its U.S. counterpart.

Bitcoin came into being four years ago, introduced by a person, or group, using the pseudonym Satoshi Nakamoto. Like currency speculation in general, trading in Bitcoin is not for the weak of heart. Aside from the legal element (will authorities even accept its existence?), there’s the volatility. Its value dropped 33% last month after the seizure of the Silk Road website, which traded mainly in illegal goods facilitated by digital transactions.

Last Friday, federal U.S. authorities released court documents revealing that they had seized the equivalent of $29 million in virtual currency from Silk Road proprietor Ross Ulbricht, as well as charging him with narcotics trafficking, money laundering, computer hacking and soliciting murder-for-hire. The murder is alleged to have been a hit on a Canadian Silk Road user who threatened to expose thousands of the contraband service’s users in exchange for $500,000.

Given the aura of illegality and its association with evangelists from both the sovereign citizen movement and canned good-hoarding doomsday preppers, Bitcoin will not become a legitimate or perhaps even useful currency for most people until you can either pay your taxes with it or keep it in a proper bank account, by which point it will have lost its appeal for the people who pushed its adoption in the first place. And given that the primary use of Bitcoin is virtual, it remains to be seen whether physical kiosks even make sense, except for PR purposes.

Bitcoiniacs plans to recoup its investment on the Bitcoin exchange machines, which cost $18,500 each, by charging a 3% fee on each transaction. The identification verification process for using the ATM machine will involve a palm print.

It’s not as though regulatory authorities and governments are ignoring the move towards digital wallets. Last April, the Royal Canadian Mint issued a challenge to developers to help them come up with a digital payments application called MintChip. No word yet on an app for Canadian Tire money.

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