TRANSCRIPTION

Peter McCormack: Morning Gil, morning Eric! It's the second time I've met up with you Gil, right?

Gil Valentine: Yeah, we met, I think in March, when we came through Chicago.

Peter McCormack: Eric, this is the first time I've met you?

E. Gravengaard: Yeah, that's right.

Peter McCormack: You're Gill's co-founder?

E. Gravengaard: I am. We've been business partners for the last five years.

Peter McCormack: Okay, so I'm about to put together a series about ATMs, somebody asked me to and it was only right that the first company I speak to is Athena because I met Gil a while back. He bought me a few whiskey sours, so it's only right that I speak to you guys first! I don't know a lot about the industry, so we're going to do this with a completely open book. So firstly it'd be great to hear about why and how you formed Athena. That would be a great start and then we'll go from there.

Gil Valentine: I will start. This is Gil Valentine. Eric and I met about five years ago and were fascinated by Bitcoin. I think we're both like Bitcoin class of 2013. So when Eric and I met, we were kicking around some ideas on how to do some business together and the thing that we noticed in the marketplace was, other than speculating and arbitraging, there were very few ways to get into the money flow.

At the time this different kind of machine was starting to come into the marketplace, which is a Bitcoin ATM. We wanted to get into the money flow and the Bitcoin ATM seemed like a reasonable bet, so to speak. So we started in late 2014 and immediately saw demand. We installed four of the first eight ATMs here in the Chicagoland area, which now has over 220 in the Chicagoland area.

So here in Chicago is the largest urban concentration of Bitcoin ATMs. We quickly went to other cities here in the United States and have grown the business to 65 ATMs in the United States, in eight different states and 22 in Colombia, 11 in Argentina and we're starting to making an incursion into Mexico.

Peter McCormack: And what challenges come with the ATM business? Are there certain regulations and laws that you have to specifically follow?

Gil Valentine: So I'll take that again as the Chief Compliance Officer. We are regulated by FinCEN on a national level, so we have to follow the bank secrecy act to combat anti-terrorist financing and money laundering. Then we are regulated by three different states on a money transmission level, which is basically consumer protection.

Then the other five states that we operate in, do not require money transmission license or an MTL. Then as we go into foreign jurisdictions, we follow our own United States Bank Secrecy Act, which is slightly less stringent than in Colombia and Argentina, although the limits of how much cryptocurrency a person can purchase per day, is lower than here in the United States.

Peter McCormack: So when people are using an ATM, do they have to use a passport each time, which identifies them?

Gil Valentine: They do not. We don't run a full identity check on people that come in randomly and buy $20 worth of Litecoin or $40 worth of Bitcoin. But once they reach a certain threshold, which is about $3,000 in aggregate purchases, we then ask for an ID scan at the machine.

Peter McCormack: How do you know if they've done $3,000 in aggregate if they were going to different machines? Could they do a thousand or is it because they're using their card?

Gil Valentine: That's a good question. Each account has a cell phone number appended to it. So that is our first compliance hop. We pull the cell phone owner's data and then run an OFAC check against them or we cross-reference their name to see if they are on the OFAC list, which is basically a terrorist list or somebody who is committing some sort of financial malfeasance. So the cell phone number then gives them an account identifier. So each time they come to whatever machine, we know in aggregate, how much that cell phone number, which turns into an account number, how much they have purchased on Athena's platform.

Peter McCormack: So there's no integration between different machine operators?

E. Gravengaard: No, just like there's no integration necessarily between Bank of America and Chase. If you withdraw $5,000 from your Chase account and $5,000 from your Bank of America account, there's no way to know that you're walking around with $10,000.

Peter McCormack: I understand. Why $10,000?

E. Gravengaard: There are certain rules in the United States around transactions involving more than $10,000. We often refer to those as the currency transaction report in the United States. If you make a purchase more than $10,000 in physical currency, depending on what that purchase is, you need to report that to the government.

Peter McCormack: Wow, I didn't know that!

E. Gravengaard: I think there's similar things in other parts of Europe and the UK around transactions over certain thresholds.

Gil Valentine: In cash.

Peter McCormack: Okay, so if you pay on card... I mean sometimes I have it with the bank, when I've withdrawn a significant amount of cash, they've asked me what it's for and I always tell them it's for drugs! Just because I think it's none of your business. I mean it clearly isn't. So what stops a user therefore having two cell numbers and two accounts?

E. Gravengaard: We try to monitor for those types of things. I'm sure that someone extremely clever that brings a busload of people in and each person uses their own cell phone, could get around our controls. But in general, our customer service team is constantly monitoring all transactions and looking for exactly that type of behavior, where someone just keeps using a new phone number over and over and over again.

Peter McCormack: Do the machines take photos of them?

E. Gravengaard: Yes, they do.

Peter McCormack: Okay, so you have that information?

E. Gravengaard: We do and we have a live video camera on all of our machines, so you can really monitor those types of things.

Peter McCormack: Has anyone ever tried to smash one of the machines and then take them?

E. Gravengaard: It is unfortunate that some people do try to rob our machines, much like there's crime in almost every other industry.

Peter McCormack: Okay, that must be annoying!

E. Gravengaard: It is. It's also annoying when people vandalize other machines, but it's part of the cost of doing business.

Gil Valentine: In Dallas!

E. Gravengaard: Especially in Dallas.

Peter McCormack: Why Dallas?

E. Gravengaard: We don't know, it's happened twice in Dallas!

Peter McCormack: Okay, so they can buy or sell up to $3,000 a day?

Gil Valentine: They can do up to $9,500 is our maximum threshold in a day.

E. Gravengaard: But then we'll know... We'll have their ID scanned, it's gone through many of our compliance checks. We really think about it in terms of the risk.

Peter McCormack: So $9,500 if they provide...

E. Gravengaard: If they've provided with us with proper documentation.

Peter McCormack: Okay and if they haven't, it's up to $3,000?

Gil Valentine: Well, it's up to $3,000 in aggregate buys.

E. Gravengaard: It's a risk based approach. But what we really try to separate out is, is this a casual user of crypto? "I need to buy $500 of crypto. I need to buy $50 of crypto. I need to buy $5,000 of crypto." Each of those represents a different risk to, not just our business, but to the global financial system. If you're trying to buy $50 of crypto so that you can send it to your niece or nephew for their birthday, I don't really need to know that much about you.

$500 we're starting to become more interested, if it's a regular purchase. At $5,000, I think we should be collecting, much like any other Bitcoin exchange, "well now you're making a significant purchase. We'd like to know who you are. We want to make sure you don't do the wrong things with your money or try to get around our controls by using the same driver's license, but with 10 phone numbers." We can find that out.

So it's a risk based approach and our advantage over an exchange, is we can prevent you from putting the next $20 in. So we can start with, "we know a little bit about you" and as our economic interactions increase, then we can ask for more information. So that, you know what, "we're not ready to take your next $20 bill. Please scan your ID" and then you can continue.

We can do those things because of the nature of having a machine. But other than that, we're like any other Bitcoin exchange.

Peter McCormack: Is all of the account creation and management done at the ATM or once you've created that, can you also manage your account in a website or is it all done at the ATMs?

E. Gravengaard: It's all done at the ATMs, which is great because when we say "please scan your ID", we know where you're standing, we have a picture of the ID and we have a picture of the barcode of the ID. It's a much different prospect if you're an exchange and you're just told, "upload a picture of your ID using this web form."

Well maybe you have that ID or maybe you bought my driver's license off of the dark web. We don't know. A lot of the exchanges can't tell or they go to great lengths to make sure that they can tell.

Peter McCormack: Painful sometimes! I had one where I had to have a video conference with somebody and they had to talk to me and I had to lift up my passport.

E. Gravengaard: Yes, because they're trying to prove that you are you and that you are the owner of that passport and not just, "could you take a picture of the passport?" No problem, I just took a picture of the passport. "Could you have a picture of the passport with a banana peel in it?" Okay, great I've done that.

But you still don't know that the person who took the picture with the banana meant to open an account at that website. Whereas for us, the person standing there with his ID, we can see him on the video camera, kind of looks like the picture on his driver's license and all of that's happening in real time. So we know, "yeah, that's that guy" and this is his license and he's currently residing in Florida.

Peter McCormack: What kinds of locations do you have the machines in?

E. Gravengaard: Convenient ones!

Peter McCormack: Yeah, of course! What are the most convenient ones?

E. Gravengaard: People love gas stations and they love outdoor shopping centers. I think some of our top locations are really close to the highway. Bitcoin is a destination. It's solving a problem that was not solvable before Bitcoin existed and so our clientele are looking for convenient ways to get access to crypto.

They are not, I mean occasionally, but most people just don't stroll through a mall or happen upon a convenience store and say, "you know what? I just saw a Bitcoin ATM. I have $200 in my pocket, I'm going to put it in." That's not a natural thing that our clients do. Our clients look up, they say "we need to buy Bitcoin. Where can I buy it conveniently? Oh, I see this place is right off the highway on my way to work."

Peter McCormack: I could imagine though some people will see a machine in a mall and go, "oh, I've heard about this Bitcoin."

E. Gravengaard: In Argentina that happens all the time, but that's much more about educating a whole population about what Bitcoin might be able to do, to unlock the broader financial system for them. Our clients in the US tend to be much more, "I'm trying to pay for this thing online. How do I get Bitcoin conveniently? Let's see if I drive from here to my bank to get money out and then I go to this place." It's much more about convenience.

Peter McCormack: The locations you put them in, do have challenges getting them in? Do you have to have commercial arrangements with say the mall owner? Is there a rev share? How does that work?

E. Gravengaard: We have great relationships with several different companies that own gas station chains or convenience store chains in the US. We have relationships with large publicly traded property managers in the United States. So when we're in a outdoor shopping center in Texas or Georgia, we're often in not just one of their locations, but we might be in 10 or 20.

Peter McCormack: I imagine you monitor each machine closely in terms of performance. Can a machine run at a loss or is once a machine in place, is it only profitable?

E. Gravengaard: I'm sure we have machines that are economically... Well, certain machines are economically better than others. In general though, most of our machines operate at a profit. Some are just in really interesting locations where we want to keep it because a lot of people walk by and see our brand, even if they're not putting in large amounts of money.

Peter McCormack: And how many machines in total did you say the US?

Gil Valentine: I think we just installed 7 in 24 hours on Friday and that brings our fleet in the United States somewhere around 72. We're going to have another 12 to 13 installed in the coming weeks. So that'll bring us up to just under 90.

Peter McCormack: What's stopping you having 800 or 900? Because I could probably go to LA and find 800 or 900 ATMs. So what is stopping you guys getting 800 or 900, like the huge roll out?

E. Gravengaard: Yeah, so I think there's a couple of barriers to entry in this industry. Obviously, as with all Crypto, we have to have a really solid banking relationship, because banking is the lifeblood of what we do. We convert digital money, Bitcoin, Litecoin, Bitcoin Cash into physical money, the actual paper currency of the realm and then that has to be deposited into a bank account, to become electronic money, so we can go and bring that back into the cycle of buying more crypto.

So you have to have a very solid banking relationship that is able to accept your deposits nationwide or at least in the regions where we operate. So that's the first barrier to entry.

Peter McCormack: Was that hard to get?

E. Gravengaard: That's been very difficult to get for a variety of reasons that have nothing to do with crypto. Cash based businesses, whether they are cheque cashers or Bitcoin ATMs, have long had very difficult times getting bank accounts in the United States.

The surveillance needs that the bank might have around knowing that the bank's clients are doing a very good job of keeping track of money laundering, anti-terrorist financing is difficult. So our bank, which I will not name, trusts us to do a good job with our clients.

Peter McCormack: I expect you probably have a different relationship with them, than I have say with my business account, whereby I open an account online and I just use it. I imagine you have to have a constant dialogue with them?

E. Gravengaard: We do and we know our bankers well and they know us well and we do have a very close relationship.

Peter McCormack: So in terms of the locations, obviously you've got them spread out in the US. You also mentioned Argentina. Argentina is a great use case, because really, depending on where the price of Bitcoin is, you probably want to offload your Peso with the inflation that they've been suffering. Is that the primary reason you are in Argentina?

E. Gravengaard: We looked at the US and saw that, every time we made a major innovation, whether it was we're multi-state or we're in south Florida, there's numerous people that can copycat us. Maybe they can't reach as many states as we can, but there's always two guys sitting in their dorm room thinking, "why don't we buy our first Bitcoin ATM and try it out?"

There's always going to be that type of competition in the US, but we looked at the map and said, "there's just almost no activity in the space in Colombia, in Argentina, in South America" and we think that the use case there is just so much more compelling than... The US use case is "how do I send $500 to Shenzhen China, in order to get a box of selfie sticks?" Which is interesting, but is that scalable long term? I don't think about Bitcoin as the end all be all to this technology.

I think it's digitalization of in many ways... I said this earlier to someone else, it's the digitalization of medieval money. We have taken Isaac Newton's coins and digitized them. I think in coming years we're going to see the digitalization of other financial products, savings accounts, investment products, life insurance products or insurance products in general. We think that those things can be delivered via these digital terminals to people in the global south, whether that's South America, Africa, or Polynesia.

So we want to be at the forefront of that. So yes, the reason why we're in Colombia and why people use Bitcoin there, is much more about, yes, how can I get paid by someone in a foreign country. In Argentina, how can I put my money into something that is not an Argentine Peso denominated bank account? Because obviously the Argentine people have seen their currency devalued several times over the last two decades. Even most recently they've lost...

Gil Valentine: I just looked it up! So I was in Argentina in November and it was 35 Pesos to the dollar. Earlier this month it was about 45 pesos to the dollar and it just retraced like 8% and now it's 42.5 to the dollar.

Peter McCormack: I thought it was about 40% over the last year? I should be wrong.

E. Gravengaard: Probably about right and even the government was optimistic that they could get inflation down to 22%.

Peter McCormack: It's funny, I've met a couple of people from Argentina and they say, "you only have to have grown up in Argentina, to know the value of Bitcoin."

E. Gravengaard: Sound money is a really tricky technology to pull off! The US, Japan and really a couple of countries in Europe have done a good job at it, but it's a very difficult thing to have achieved. Very few countries over the last hundred years have done it.

Peter McCormack: Do you have a machine on the Venezuela border?

Gil Valentine: Yes, we do. It was installed in April in the city of Cúcuta. Our team went down there, which is near the equator and very hot. Also ground zero for kind of an exodus of Venezuelan nationals. I believe it's the only open border and open by Colombia. It was closed in May for a number of weeks.

Peter McCormack: Is it where the bridge is?

Gil Valentine: Yes, it's very close to the bridge. So we put it in there as more an experiment, being in kind of a crisis zone and it's done pretty well, with the exception for about three weeks when Venezuela had blackouts and so the Venezuelan citizens that had these wallets on their smartphones, could not access.

Peter McCormack: Cause they couldn't charge their phones?

Gil Valentine: No, because the service was down so they couldn't access either a phone wallet, which I'll give a shout out to CoinTigo out of Venezuela. You don't need a smart phone to use it. You just need to be on a cellular network and you can do transactions via SMS. We've spoken to CoinTigo on three different occasions. So the machine is at a travel depot, where there are 10,000 Western Union remittances a month. Lines are three to five hours deep.

Our machine is adjacent to one of the travel depots. Well, the one that's right next to the bridge and we have seen a lot of activity. There's some interesting things happening in Cúcuta, with some interesting people that are looking to make Cúcuta the digital currency city of Colombia. So Cripto Conserje was on Twitter along with Cryptograffiti. I don't know if you've met him?

Peter McCormack: Yeah I met him a couple of times. I bought a painting... Well, one of his pieces of art. I bought his Hal Finney piece off him. I've got two actually, I got to give one out in a competition. He's a great guy! They made a video down there didn't they?

Gil Valentine: They did and I think they raised $10,000 in a mural project and both personally and Athena corporately donated to their cause. Right now they're working on buying a school, because there's not a lot of schooling going on in Venezuela right now, so the kids come over the border to be educated.

This Initiative along with building a school, in the off hours, it's going to be a cryptocurrency learning center. So really interesting stuff happening in Cúcuta and we're glad that we're there and experimenting with use cases with people that are using crypto in crisis. So we also on our social media, have a #cryptoiscrisiscurrency.

Peter McCormack: So what are the different challenges you have operating a Bitcoin ATM in Argentina and Colombia as opposed to the US?

E. Gravengaard: In many ways it's the same business and we always focus on people, processes and technologies and those are very similar. But obviously also we're in a foreign country and I can't jump on a plane to go fix the machine. So the machines we have in Ohio, if we have to, we can get in a car and drive and go fix that right now. But obviously operating in Buenos Aires, we have to have a team on the ground, who can go and do those same things.

Peter McCormack: Do you have to have security in these locations?

E. Gravengaard: No, we've gotten out of the business of physically touching the money. So we've always used armored cars to go and do that.

Peter McCormack: Okay and if you are accepting the Argentinian Peso, are you yourselves trying to offload that as quickly as possible?

E. Gravengaard: Yeah, we like dollars a lot more than we like Argentine Peso.

Peter McCormack: Does the machine take both?

E. Gravengaard: No, in every jurisdiction we only operate in the local currency. So yeah, our bank transactions will also be, "let's take our pesos, redenominate them in dollars," trade Bitcoin, but not try to keep a huge amount in Argentinian Peso.

Peter McCormack: Can somebody send you Bitcoin to an ATM and get money out?

E. Gravengaard: Yes they can.

Peter McCormack: So I can go to the ATM and it's waiting for me?

E. Gravengaard: It's not waiting for you. It's more you go up to the ATM and say, "I'd like to withdraw $200", it'll give you an address, you send it and then the money comes out of the machine.

Peter McCormack: Okay, so if I've already got it on my wallet? I still probably would have to wait six confirmations?

E. Gravengaard: One!

Peter McCormack: You do one confirmation? That's a bold decision.

E. Gravengaard: Look, if you want to try to double spend against us, that might be really interesting and fun!

Peter McCormack: Well I know Bitrefill do zero confirmations, as they trust the model.

E. Gravengaard: Yeah, we have often done zero. Replaced by fee, obviously we're against that because we would rather people get their money. The user experience does not really make sense to, "well, here have a seat, have a cup of coffee. Let's wait six confirmations."

Then, "Oh, why are all those people waiting there?", "Well they're waiting for this machine to spit out money", "oh really? How much money?" "Well, it's Bitcoin money, so it's probably a lot." "Great! We'll just wait here with them and then we'll rob them when they leave." That's not a great model for anything to happen.

Peter McCormack: How long does one confirmation usually take? Is that under 10 minutes?

E. Gravengaard: I think right now the network average is 10 minutes.

Peter McCormack: Has anyone double spent you?

E. Gravengaard: No one's ever double spent us. But that's not like a challenge.

Peter McCormack: No, it's not a challenge, but it's interesting that you and Bitrefill have done that. I've noticed other companies have accepted a certain level of risk.

E. Gravengaard: Yes, I think as long as you understood what the "replaced by fee" transactions looked like, when they started happening a year ago and knew how to filter them out, then it's been fine.

Peter McCormack: Okay, so the use case in Argentina and Colombia is kind of obvious, it's a way to preserve your capital, it's a way to receive money. So I understand that. What are the different use cases you know of in somewhere like the US, in a more Western country?

E. Gravengaard: We deal in the market of needing Bitcoin today and that is different than someone who wants to access the risk market. Gil and I are both ex-traders, where people were trying to take on certain risks or eliminate risks from their lives. So what that would mean was like, "oh, I want to have the risk of, if the S&P500 index goes up today, I'm a winner." That's a risk market. Bitcoin is often a risk market, "I want to make money if Bitcoin goes up, so therefore I just need to buy something that goes up with Bitcoin."

That could be a BitMEX future, it could be an actual Bitcoin, but we deal with our ATMS, in the market for people who want to use Bitcoin. So if you want to use a Bitcoin, you want to give someone your money and you want to get the Bitcoin onto your wallet that will then transmit it whenever you want it. That's different than the Coinbase model, which is "well you keep it on our exchange and maybe we'll let you take it off the exchange based on certain limits and we're going to basically censor where you send this Bitcoin."

But that's not our market. Our market is people who want to spend it today. So then let's think about where can you spend Bitcoin today. Yes, many of our customers are buying things online or over great distances. Some of our favorite examples are, this gentleman, I call him a kid, I guess he was about 22, Trayvon, lived here in Chicago, initially came to me when I was a LocalBitcoin dealer and then later came to our machine when we installed one on the west side of Chicago.

He would come in, buy $500 of Bitcoin, immediately send it to someone in China, who would turn around and send him human hair for hair extensions. When he first came to me and he asked me like, "can I buy $500 Bitcoin?" I'm like, "Trayvon, you bought $500 yesterday. What are you doing?" He's like, "don't tell anyone!" I'm like, "that's not the way we start these conversations, but continue."

He's like, "okay, but don't tell many people. I'm buying hair from China." I was like, "what does that mean?" He's like, "well, my mother and I are hair distributorship. We buy hair from China. We get it at about 10th of the price that we used to buy it for. We get it directly from this guy in China who I speak to using Google translate, and then we sell it to all the hair salons here in Chicago." He's like, "have you ever seen hair extensions?"

I'm like. I don't personally have hair extensions, but I assume that other people do." He's like, "yeah, well they're really expensive and we're cutting out a huge amount of cost by buying them direct from China."

Peter McCormack: The number of technology innovations that have made that business relationship work. Not only have you got telephony, mobile telephony, you've got Google translate so they can communicate. You've got some kind of application they can talk, through probably WhatsApp or something and Bitcoin to allow them to create the financial transaction. It's kind of cool!

E. Gravengaard: It was amazing to us and I think that was one of the things that Gil and I were like, "this is a technology" and why do we like Bitcoin, because it's technology that enables the impossible. You're right, you couldn't make that... Amongst the things that are truly space age about our lives right now, is that that transaction is at all possible.

Peter McCormack: Why they doing it with Bitcoin? Is it just too difficult to get a banking relationship between the the US and China?

E. Gravengaard: So we'll just stick with Trayvon as an example. He had walked into a bank, not two weeks before meeting me for the first time and said, "I'd like to send a $500 wire transfer to Mr. Chen of China", to which his banker on the west side of Chicago was like, "Trayvon, you have $600 in your bank account. We're not helping you send a wire for $500. We have no idea what this person's real name is. His name is probably not Stanley Chen. It's probably something in Chinese. We can't help you with this."

He's like, "I know it's not his name. These are the Chinese characters that represent his name. I'm not stupid." The bank was like, "we don't have anyone that can type that in. We can't do this. Please leave." So he went back to the computer and or his cell phone and talked to his contact in China and they immediately said, "don't worry about it. Send us Bitcoin." Bitcoin is censorship resistant or censorship proof.

There's no one that can stand in the way of Trayvon sending his money for better or worse. We didn't really know if this guy was going to send hair, but he did. So he just walks in, he gets his Bitcoin from our machine, sends it to China, and a new package arrives just a few days later.

Peter McCormack: He could just as easily go on Coinbase though and buy $500 and send that to another wallet address. What is the benefit of you over Coinbase?

E. Gravengaard: Coinbase will often not just allow him to take that off platform. They allow you to take it off platform. You're a highly respected podcaster within this industry.

Gil Valentine: And you have a 680 or 720 credit score.

E. Gravengaard: Trayvon is a 22 year old, originally from a poorer neighborhood of Chicago.

Peter McCormack: So are credit scores relevant to Coinbase accounts?

E. Gravengaard: Not officially.

Gil Valentine: Perhaps.

Peter McCormack: Okay, but there are other exchanges?

E. Gravengaard: There are.

Peter McCormack: Okay, so you're one of the options.

E. Gravengaard: We're one of the options and we're certainly one of the faster options.

Peter McCormack: Where do you get your liquidity from?

E. Gravengaard: We buy from almost all of the major over the counter trading desks.

Peter McCormack: So are you constantly having to top up, manage price? Are you exposed to risk yourself then?

E. Gravengaard: We like being long Bitcoin. But that said, our customers will buy a lot of Bitcoin today and we will go and make one or two large trades for Bitcoin today. Our customers are not sitting at the machine hoping that Bitcoin goes up or down $10 and that's when they're going to time putting in their $10 or their $50 or whatever they're buying.

So we don't worry too much about the risk of them gaming us. We assume they'll get the average price and as long as we get an average price, that all works out in the end.

Peter McCormack: How do you choose which currencies to allow and do all machines, accept all currencies?

E. Gravengaard: They do. We have a lot of demand for Bitcoin. Starting about two years ago we started to get a fair amount of demand for Litecoin and we've known enough about Bitcoin Cash, the reason for the split, that we also support that project and larger blocks, even though we don't have a large amount of demand for that currency yet.

But we do have some dedicated people that definitely found a place that will accept Bitcoin Cash and they understand what transaction fees mean to their transaction.

Peter McCormack: So what's quite interesting there, is they're all currency cryptocurrencies. You didn't have Ethereum in that list, which is, by some people, still seen as currency, but it's also seen as more of a token.

E. Gravengaard: I think that goes to people trying to make investments versus people trying to buy things. While I'm sure people are spending Ethereum to buy t-shirts and hats and what have you, it's a much less common use case to spend your Ethereum for goods and services.

Peter McCormack: Could you ever offer something like Monero or does that come with too many regulatory complications?

E. Gravengaard: I think we'd love to support Monero. I think that financial privacy has a meaningful place in our lives. I'm not sure exactly what the regulatory regime would be for a Monero or a Beam or a GRIN, but we're interested in those types of things and if our clients want that, then we'd love to deliver that for them.

Peter McCormack: I'm aware if I wanted to buy a Bitcoin ATM and stick it in Bedford bus station, I can do that. But I'm assuming that is from a specific company and I've almost just got some kind of franchise relationship. Are your machines custom to you?

E. Gravengaard: So we buy our machines from GenesisCoin, who buys the hardware from other people. We customize them quite a bit. Custom locks, custom wrapped in vinyl and things like that. It's not necessarily a franchise relationship. You're the owner of the machine and we are the owner of our machines. We own the compliance. If someone is abusing our machines, that's on us, that's not on anyone else, in terms of like who is responsible for the proper operation of the machine.

So that's how our relationships work with that. There are many models in this space where people try to have franchisee relationships. We're building this for the long term. We want to make sure that every one of our transactions is as compliant as possible, while at the same time knowing that this is a business that we want to operate profitably.

Peter McCormack: So what is the future of ATM machines? What's coming up? Will there ever be a stage do you think, where General ATMs are integrated with cryptocurrency?

E. Gravengaard: I think there's a time when banks realize that crypto and digital finances are important to their clientele. There's no reason why Trayvon should be dealing with Coinbase or us. Trayvon ought to have just walked into Bank of America and said, "I need to send $500 worth of Bitcoin whatever to Mr. Chen of China."

Peter McCormack: Well it wouldn't even be that, it'd be this address.

E. Gravengaard: "Here's an address. Can we send this?" The bank ought to have said, "no problem. We're going to charge you a $10 fee." He would've signed a piece of paper or digitally signed it and off the money goes, that would've been efficient in the financial system.

Instead, he takes the money out, he walks to our machine, he goes through a whole process of identifying himself, he puts the money in, the Bitcoin gets sent to his mobile wallet. He goes somewhere else, he sends it to the address. That's an inefficiency that doesn't need to happen anywhere in the world now.

Peter McCormack: It helps you!

E. Gravengaard: Well, I think we're filling a gap and there's many different inefficiency gaps. So in the United States, it's inefficient because the Bank of America won't do that. In Colombia, it's not so much that the banks wouldn't do it, although they won't, it's that people don't trust banks. If you don't trust your government to manage its finances like in Argentina, why would you trust a bank that was sponsored by the government, to manage your finances? You can't.

On a Sunday afternoon, the Argentine government may say, "you know what? We're a little bit short. We're going to take some of this money and make it ours." So you can't leave your money in the bank! So you can't trust the bank to do very many things for you. What we see as the future of decentralized finance is, let's just take savings accounts. I think universally people trust the governments of Japan, the United States and parts of Europe to manage a banking system.

You may not trust the United States, but you probably trust one of those other two. So let's say you wanted to save money. Well, I'm in Argentina. I go up to an Athena Bitcoin ATM, or we call it a terminal. I put in my Pesos and I get a bank of Japan savings account token. Well, that's great, Argentine government comes to Athena and says, "we want to confiscate the money." All the money that's been saved in the Bank of Japan, well we don't have it.

We gave it to the Bank of Japan. If you want it, go to Japan and try to seize the money from Japan, good luck with that! Good luck suing anyone in the southern district of New York, Argentina, it won't happen. So I think the future for us, is about facilitating those types of transactions, giving the banking system that we have here, in the OECD, in the UK, in Europe, in the US, to the rest of the world.

But not through those local banks, but through, terminals like Athena or other portals like that, where they can exchange the currency that they have, for the financial products they want.

Peter McCormack: So when I was planning this series about ATMs, the only thing that came up regularly as a criticism, is the fees and I'm sure you've dealt with in the past. Quite a few people said to me, "you've got to ask, why are the fees so high with ATMs?" I'm sure you have an answer for me.

E. Gravengaard: There's two answers. One, the costs are very high and two, it gets to the first point, which is why the cost so high, we're delivering something instantaneous, whereas everyone else is doing something much more on delayed settlement basis.

So we are delivering it immediately, against payment that will be later on. That's the primary reason the fees are high. I'd love for us to be in a business that was high volume, where we charge 0.5%, but that's simply just not the costs that we're incurring in delivering that service.

Peter McCormack: What are the fees on your machines?

E. Gravengaard: Anywhere from 8% to 16%.

Peter McCormack: Why such a broad range?

E. Gravengaard: On our most popular machines, it's more expensive and on machines we're trying to be discounting, we discount.

Peter McCormack: So 15% is quite high, that's quite a premium.

E. Gravengaard: It is. Again, thinking about sort of average transaction sizes and we're charging a rate that's often related to, someone comes up to an ATM and withdraws $20 from a typical cash machine, they might pay a $2 fee, which is a 10% fee. Someone does the same thing, they go and buy Litecoin at our machine, we're trying to take a $3/$4 fee and that fee covers our armored car to go pick up the money and drive it to our bank and many other things along the lines.

Peter McCormack: How expensive the machines themselves? Can you talk about that?

E. Gravengaard: So the list costs of the machines that we deploy range from $8,500 to $10,000.

Peter McCormack: Okay, so that's quite expensive as well. So there's a lot too this behind the scenes that people don't realize?

Gil Valentine: Yeah, I mean we pay our landlords, we pay our customer service agents, they don't work for free. I'm the Chief Compliance Officer, as much as I'd love to be independently wealthy and working for free and working towards these economic freedom type of things for free, I can't afford it. I've got two teenagers, they're expensive!

Peter McCormack: Tell me about it!

Gil Valentine: Cash handling, which is at the core of our business, is rather expensive. You pay for the armored car, if the machine goes down, our ATM manager has to fly somewhere. So maintaining the machines and maintaining a cash handling business can get quite expensive.

E. Gravengaard: But again, this is not for investors. If you're going to go in and invest $25,000 in Bitcoin. One, please don't use our machines and then two, don't use any machine. It's not the right model for an investment, where you should be very fee conscious on a large investment like that. But if you need $200 of Bitcoin today to pay someone, then yeah, absolutely go to our machines and get it immediately.

Peter McCormack: I imagine the fees will come down with scale, right? I mean if you are operating a thousand machines, I think you're probably going to have some kind of scale that goes with that. So how much competition is there in the market for you?

E. Gravengaard: There's several hundred operators in the United States and Canada...

Peter McCormack: Wow, that's a lot!

E. Gravengaard: There's probably about 25 of them that have a large amount of scale that operate multi-state operations. Worldwide, there's probably another 50 or so operators, but most of the activity in the ATM spaces in the United States.

Certainly a lot of it started here in Chicago probably because Gil and I spend too much time like talking about our business. But in general, I think we just crossed 5,000 machines worldwide, which is I think an interesting milestone for the entire industry and I believe more than 3,000 of those are in the United States.

Peter McCormack: Wow, that's kind of interesting. Is there any changes that you guys would like to see with Bitcoin or with regulations that would make your job as a operator of a Bitcoin ATMs easier?

E. Gravengaard: I think there's two things that I would want to touch on. The first, on the regulatory side, we would love to see states properly apply their consumer protection laws, towards regulating Bitcoin ATM operators. We try our very best to make sure that if you put in a $100 bill into one of our machines, that you get $100 of crypto.

But if we're not well-regulated by some local authority, there's nothing to stop us from just taking $100 and then never giving you any crypto and that's not right. People should be protected. People should know that if I'm walking up to our machines, one of our competitor’s machines, that they know they're going to get value for it.

We'd love to see that type of regulation and we have that in some states where the same consumer protection laws that would govern you putting $100 into any other type of vending machine or buying a money order or a gift card, you know that your gift card is going to be real. We'd love to see that kind of protection.

Then on the actual crypto side, we're one of the larger payers of transaction fees and it's painful to us when someone goes and buys $5, $10, $20 of Bitcoin and then we know, what we pay to mine that transaction or to have that transaction included in the next block. But then knowing what our clients are going to have to pay, just to go and spend that from their wallet. So innovations like Lightning are of great interest to us.

A moderate increase in block size would be interesting to us, so that we can give more time to the layer two protocols to develop and to work out certain types of things that they're innovating with. Lightning, I think is a fascinating technology. It doesn't necessarily help us in what we're doing right now, but I think it could longer term.

Peter McCormack: Well, I guess you could sell Lightning Bitcoin?

E. Gravengaard: We probably could. Then the question is, do we have the right channels set up to the right people or are we constantly opening new channels and then only using them once or twice? Then have we really got any of those economies of scale?

I think that's a lot of what, like the Lightning network and the people developing it need to see these use cases, see what the actual reduction are in on chain versus off chain, for us to be able to get those economies of scale, which is sort of why I was thinking that it would be great if we can get 2mb blocks and just give a little bit of breathing room on the fee side.

So we think about fees a lot because we're a very active wallet. A lot of these other places think about how many transactions happened on Coinbase between Alice and Bob and then who never took their Bitcoin off. Well that's great, that's a lot of volume, but actually at one point, we were, I think when Gil and I started this business, we were a quarter of a percent of all Bitcoin transactions.

Why? Because no one was doing Bitcoin transactions. The exchanges are buying and selling, but that's all off chain. We were on chain. Why? Because every time you put a $1 bill into our machine, that was a whole transaction. I mean now we would batch, but we weren't batching back then. So every $1 bill was a transaction. So yeah, we were 25% of all transactions.

Peter McCormack: That's amazing! Well listen, this has been super useful. Very helpful for me to understand more about how you work as an operator. Before we finish, you obviously have an opportunity now, is there anybody you want to hear from? What are you up to? How do people reach out to you? The mic is yours.

E. Gravengaard: We'd love to hear from other people in South America that are interested in crypto and fin-tech and how can we integrate with what they're doing. Obviously, we're a growing company that has capital needs. We'd love to talk to people that are interested in furthering economic freedom to the rest of the world and wanting to invest in a growing Bitcoin ATM. We're really digital currency operation.

Peter McCormack: How do people find you?

E. Gravengaard: Find us on the Internet at athenabitcoin.com.

Gil Valentine: … And athenainvestorservices.com, athena.trade. For those that want to reach out directly, they can probably reach me at gil@athenabitcoin.com and please don't spam me!

Peter McCormack: I appreciate your time guys, thanks for coming on!

Gil Valentine: Thanks so much!

E. Gravengaard: Thank you!