interviews
Crypto For The Cash Economy
by Daniel Polotsky
January 22, 2020
Daniel Polotsky is the CEO of CoinFlip, the leading Bitcoin ATM Operator in the US.
frank | How did you get into crypto?
DP | It was around 2013 that I found out about Bitcoin for the first time. It kept popping up in news articles. I wanted to buy some after it appeared on my feed for the fifth or sixth time. I thought, "I've read about Bitcoin, it seems like a cool thing, like a cool alternative money investment that's not issued by the government, decentralized, something that's never been done before," so I decided to purchase them.
I went to the first Bitcoin ATM in Chicago, it was at an empanada place called Cassava. I put in cash, received a coin, but I didn't like the process. The bills kept going in and out – it took a really long time to get the bitcoin. I didn't want to do it again when I bought it again. Instead, I went on a site called locabitcoins.com which back in the day, had these listings where you could meet people in person to purchase Bitcoin.
We met at a Starbucks. I'd put down cash and she would send me the Bitcoin. We kind of got to talking and eventually decided even though the Bitcoin ATM I had used back in the day wasn't super user friendly, it's still in theory a better idea than meeting people in person because it's not safe. It's not really scalable. A single person can't meet with 23,000 people a day. There's a limit.
So we decided to work on the ATM thing. I was a sophomore in college, I was 20 years old, I was at Northwestern and I kept working on it. By the time I was 22 and ready to start a full time job, the opportunity at CoinFlip was too good to pass up. We had just under 20 ATMs – that was two, three years ago.
Fast forward to today, we're the largest Bitcoin ATM company in the world by volume, with 420 locations across the United States. Obviously we're growing and I hope to be able to get Bitcoin in the hands of as many people as possible.
This is different from the other conversations we’ve had about Bitcoin so far, in that most people aren’t treating it like a currency but rather a stock, or investment. But a Bitcoin ATM is tangible, immediate, more cash oriented. Do you find that because there's a physical component to what you're doing it's easier to explain to people?
What you were saying about currency versus investment, I don't know if I agree with that. I think Bitcoin can be used as a currency eventually, but in first world countries like the United States, it is still more of an investment or means tool.
I definitely agree that the physical element makes it very easy to explain to somebody. Its familiar. Essentially all you're saying is, "Okay get some cash. You already have a phone number, download a Bitcoin wallet, you're going to put the cash in, you're will see the exchange rates, you're going to input your QR code which is that black and white square, and then you're going to receive the Bitcoin instantly."
That sense of instant gratification and the physical component definitely makes it accessible. Because the ATM is something in a convenience store that you see in real life. They're not just moving imaginary money around.
How do you interact with something like Coinbase?
Coinbase is an online exchange where the exchange actually holds your money. You wire money from your bank, they hold it, and then you trade on the exchange, using the dollars that you have on the account. We don't hold customer accounts.
So for example, we don't have an account where you can deposit money and then hold it and then trade it. You insert the cash, we immediately do a conversion of the Bitcoin and then you receive the Bitcoin, it's on your phone. You own it, we are not the custodians.
You're not a custodian or a wallet at all?
We are working on expanding into a wallet, but no, we are more like a currency exchange. You go to a currency exchange, you get quotes for an exchange rate that tells you, “it's this many euros for this many dollars.” That's more similar to the model I see us as, as opposed to a company with a mechanism that people use to trade and speculate with continuously on.
Other than speed, why would I do this in person and not online?
Not everyone has a bank account. It's 30 million people that can't afford bank accounts, don't trust banks, don't have banks, think banks are inconvenient, or say they don't want to use bank accounts. They might want to use cash. There's a bunch of workers that get paid in cash.
There's a whole cash economy and you can't use cash at Coinbase.
They only take a bank wire transfer or a ACH. So you literally cannot use cash there. It’s a quick, easy and convenient way to use a different payment method to get it.
Does it work in reverse? Can I cash in my cryptocurrency for U.S. Dollars?
It actually does. We have around 30, 40 units where you can do exactly that. You send us the Bitcoin. Once we get network confirmation, you scan your ticket at the ATM and then cash will come out. It does go both ways.
Do you have competitors? Are there other ATM options?
Yes, there are other Bitcoin ATM companies. None of them have the volume and the low fees that we do, but they do exist. Like I said, we're the number one Bitcoin ATM company by volume in the world, but we do have competitors and they tend to be in the United States, but there are probably in the world 5 to 6,000 Bitcoin ATMs.
Are most of them in the U.S?
A pretty big chunk are in the United States. That's typical. The United States is often a leader in emerging technologies because we have systems in place where people are entrepreneurial and whatnot. Plus we have a large cash economy.
What is the sale for the convenience store? Why would they want them?
The convenience store gets the best deal of anyone. I mean, they get a check, our ATMs are really small. They're probably one and a half or two square feet by five feet. So it's really easy to place them inside a convenience store. The convenience store is not going to be able to monetize that square foot any meaningful way other than receiving rent from us, and we also give them the option for a profit share. In addition, we bring in around 1,500 people a year to any given location. So it's absolutely free advertising for them. It's not like you just see a Bitcoin ATM and you use it. You're literally searching for it and then you go to where it is. So we drive traffic specifically to that store and they can always buy something when they are in there, chips, soda, whatever it is. So there's absolutely no drawback for the convenience store.
What excites you about Bitcoin?
The thing I like a lot about Bitcoin is, you know it's deflationary, right? I love Bitcoin because of that. The U.S. dollar loses 1% to 2% of its value per year because of inflation and the government printing more. Bitcoin itself is limited in numbers, so it's a better way to keep your money long term. The blockchain it's built on is fraud proof. It's public, everyone sees it, it's fast. You can send money halfway across the world in 10 to 15 minutes, it's borderless, it's cheap. The average fee to send is probably $2 to $3. What's cool is that there's no one single issuer.
So you can't turn off the coin.
You can't sue Bitcoin. There's no company responsible for Bitcoin. It’s all around the world. It's very resistant to being able to be stopped. It's kind of like digital gold I would say. That's what I like to say about Bitcoin, it combines characteristics of a commodity and a currency. It’s something that's never been done before. And I think it's very important to keep the centralized entities like banks and governments in check. If they ever go haywire, which they have in the past, there has to be some alternative. Some digital alternative that isn't as cumbersome as gold to obtain that the average person can get.
This decentralized economy is what I’m excited about. My goal with CoinFlip is to get Bitcoin into the hands of as many people as possible so that people see what is really so cool about this Bitcoin and why it really is the future.
Not that it's going to replace Fiat currency and replace dollars, but it's an alternative and it's always important to have an alternative.
Is your prediction that this becomes a widely used and accepted form of currency in the US?
Yeah, I could always see it in unstable countries, it could even be the number one currency. In stable countries, it might be number two currency or it could just be used as an investment vehicle. But I do see it as being perhaps the global reserve currency, within 10 to 20 years as people build trust on it. It makes sense for the countries of the world to not want the global reserve currency to be issued by one country. It used to be the pound, now it's the dollar, it makes sense for it to be decentralized and not one entity responsible for it. It makes a lot of sense in my opinion.
If it does go that direction what policy will come form around it or do you think it can exist as free as it is now?
I think it's actually one of the biggest myths that Bitcoin is not regulated. That's what everyone loves to say, but it's not true. Pretty much every applicable brand in the U.S. Government has come up with regulations regarding Bitcoin. The IRS came up with guidance for how to pay taxes on it. The SEC declared it as not a security and also declared guidance on how to determine whether or not projects that are Coinbase, like blockchain-based are securities or not. The CFTC has also regulated Bitcoin as a commodity and FinCEN, which is our regulator, is the financial crimes enforcement network and we're definitely heavily regulated by them. We're treated as a financial institution.
We have anti money laundering in our customer policy, so there are rules for Bitcoin.
It's a great system and I think that it's come far from it's early days. But now I think that you still need some regulation, some basic rules to follow, even if it is a borderless, permissionless system and there are those in place in the United States.
I want to get Bitcoin again into the hands of as many people as possible and lead the financial revolution. I want to place 1,000 ATMs by the end of this year and hopefully 3,000 at the end of the next year. In addition, we're working on having an OTC desk. That would allow us to actually trade Bitcoin and other cryptocurrencies in exchange for wire transfers and vice versa, so that's something I want to expand into. And we're also working on a wallet and an app.
What is the app?
The wallet is the main component of the app but it's basically going to be an easier version of our website. You know, just the main parts, probably the map, customer service, or awards program, and obviously the wallet. So we're going to have our own wallet where people can purchase Bitcoin and that's something that's really cool because it's an additional service we can offer to our customers, an additional way we can communicate with them.
Amazing.
interviews
In Conversation with Joe Paul Jr. Part Two
by Joe Paul Jr.
June 7, 2018
Above: August 12, 1986. "About 500 men, women and children carrying signs and shouting "No prison in L.A." march up and down Olympic Boulevard, protesting the proposed site of a 1,700-bed, medium security state prison. L.A. Councilman Richard Alatorre, carrying a sign that read "No jail. Protect our children."
This interview with Joe Paul Jr., the Vocational Services Administrator at SHIELDS for Families, was conducted and condensed by frank news. It took place May 23, 2018. This is part two of an ongoing conversation between frank and Joe Paul Jr.
What do you think about the rise in female incarceration we’re currently experiencing?
I read a Million Dollar Hoods article that spoke about this bail reform issue – it talked about how there's $13 billion in set bail amounts. The predominant quote-unquote victims in this are black women and Latino women because they're generally the ones that post the collateral and put the bail money up to get these guys out of jail. It's such an alarming rate of disproportionality. That's one of the factors pushing around we have to find a different process. You create this financially based justice system. If you have money you get a different justice system; if you don't have money you get a different justice system. That's a different story.
This institution was established as a result of the crack epidemic and babies being exposed prenatally to crack cocaine.
Now you have a whole generation of kids that were labeled as crack babies that are suffering from all of the physical and mental illness that was a result of the exposure. SHIELDS for Families has grown its proportionality to service as a result of adapting the initial services of substance abuse to all of the other systems that are attached to that – the child welfare system, the mental health system, the criminal system, and all of these other roles that we saw, if we don't get into this, we're going to fall behind, and if we don't have access to that we're going to fall behind. We're not going to adequately provide services if we don't tap into this.
It was only a matter of time before you started seeing this spike in female based increases in the criminal justice system because it's become such a norm for men, that those same cultural behaviors in impoverished communities — you know, if a soldier falls down and his rifle still works, then the one who's still standing has to pick it up. The women are picking up the proverbial rifle. Then you think about the other issues around HIV, AIDS, Hepatitis, and other communicable disease or sexually transmitted diseases that are spiking in women, particularly black women. It's all the same effect.
The process is like gravity – once you fall into this realm you're going to get those outcomes.
A person told me a long time ago – she said Joe Paul, you're going to burn out in this business. You're going to burn out. You just go too hard. I was like, you can't go too hard. There's a lot of work to do. She said, let me paint a picture for you – you see a person in the water and you swim out with a life-vest and you put it on the person and you swim back to shore, you see another person in the water and you swim out you put a life-vest on him. You can do that individually, but you're not looking at the big picture that there are thousands and thousands of people out here drowning. Are you going to swim to all of them? She said, why don't you just fix the hole in the ship that they're jumping out of? You could salvage those who are in the water, but prevent the rest from even needing to jump out of the ship.
And that was policy and legislation: fix the hole in the ship. That opened my eyes. I share this example to say, we won't stop this trend – where women are now becoming a greater part of the system, and all of the elements that make it what it is, until we really reform the practices of the system itself.
The intentionality is overwhelming. We’re just coming out of Urban Planning that spoke to a lot of systemic issues.
Gentrification is huge. Gentrification is a bitch.
I saw–no disrespect–a gay white man walking his dog on Slauson and Western! I wouldn't have walked on Slauson and Western — but gentrification is real.
No one can afford anything.
Absolutely. You can't afford it. Go live in Apple Valley. Go live in Paris. Find somewhere else to live. Here's the bottom line, if I may: There's nothing new under the sun. America was predicated and based off of slavery. The system itself is working the way it was designed to work. There always had to be an underclass, there always had to be a subservient group of people for this capitalist society to work. Blacks were just convenient.
I just had this conversation with Alex Padilla, our Secretary of State. That's the context no one wants to have a conversation about. Trump made it quite apparent that this mentality and culture still exists. He just brought it from the back to the front. We're going to make our country great again just meant that "you guys are going to fall back into this subservient role that you always played, stop acting like you fit in. Even though the last guy in here did a better job than me and he looked like you guys, we're going to erase all of that".
Without being angry and without being retaliatory, accepting the facts of the matter as they are and finding healthy solutions to make sure our posture is presented in a way where we eliminate the stereotypes that make middle class and upper middle class white Americans subscribe to this idea that blacks are violent or that Mexicans kill people – we can't reinforce that. We don't have to accept it either.
I used to ask all the time, how does a community stay in this plight seven generations? How does this happen? We've met guys who say "we've been here 17 years," proudly. No problem. But they’re in low income housing, it's a stepping stone. It's not supposed to be perpetual. I see firsthand how that happens now.
There's a handful of people in the community that are stakeholders of the community that only have the intention of managing the flow of their piece of the money as it comes through. That's what's been the consistent thing: opportunity after opportunity, in every decade, a situation like this arises, a small group of people control all of the opportunities and impose their will on everybody else.