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
An Interview with Fabian Cobos
by frank
July 10, 2018
This interview with Fabian Cobos, the owner of Golden Goose Tattoo in El Paso, was conducted and condensed by frank news.
Tatti: Would you introduce yourself?
Fabian Cobos: My name is Fabian Cobos. I'm the owner of the Golden Goose Tattoo here in El Paso, Texas. The first thing that people have to understand about El Paso is that it's definitely a border town. It's got that border mentality, and I think that's why you're filming and you're looking for people to talk to about this. You're going to find a lot of people who don't know what's going on, or that do know and can't really form an opinion about it, because what becomes part of that border mentality is everyone along this area, most of their families have been through some sort of process, legally or illegally to be here, and the United States immigration law is so complicated. If you're going to be tied to the law, and feel a victim to it then you're never going to get to live here. So to us, I think it’s more of immigration is just, the way it is now it's just something that it's evolved into, and it's always going to keep evolving, the laws always going to change. I don't picture it getting any easier.
Tatti: Has it gotten progressively harder since you've grown up?
Fabian Cobos: I think so. I was born here, so I haven't had to go through the process, but I know my grandfather on my dad's side made it a point to come here, become a citizen, and made sure that all his children became citizens, and it was very important to him for them to go through that process. He was very proud of it.
My dad still has the recordings of him practicing for the test, and trying to memorize the Bill of Rights, just everything, and he left a stable position in Mexico to come and be a garbage man here in the United States, and I know it means a lot to my father that my grandfather made it a point and was so proud of the whole process in becoming an American citizen, and that all his kids went through it.
He made sure that they all knew English, because he totally believed that this was the place to come to have a better quality of life, and he was right. My family has benefited tremendously by him making that decision. I have a lot of family that can't come over, and don't have money to go through the process. Then, I have family that did have the means or the resources that are now American citizens here. Fleeing the violence that was getting really bad in Juarez.
Tatti: It comes down to whether or not one is wealthy enough.
Fabian Cobos: There's a lot of factors: how wealthy, how motivated, because even if you're not wealthy enough, and I think now that's what they're trying to combat. 'Cause if you're motivated enough you can still get here. Whether you'll stay here or not is different, but that need and that want to come here and get a better life, it's a very human thing to want. Especially when the world around you is crumbling and you feel hopeless in what's your hometown.
That's why it's a touchy subject and I don't know what the right path is. I may have my opinions, but I don't know. I don't know if it's the right choice. I don't agree with a completely open border, but I do believe that there needs to be a process where it's more efficient and we are getting more of the right people in. I don't think that's the, and I may be wrong, but I don't think that's an aspect that our administration right now is looking at. I don't think they want anyone here right now, you know what I mean? Which is dangerous to us. To who we are as a country and to our economy.
Tatti: Does your business get affected when immigration laws get tougher?
Fabian Cobos: Not really, but I mean we're different. We do tattoo a lot of people coming across from the border, tattoo a lot of soldiers, tattoo lawyers, doctors. The tattoo industry, even when the recession was going on and the economy was really hurting, the tattoo industry wasn't greatly effected. People in their toughest times in life, when they're losing everything, their house, their car, and everything, will come and get a tattoo with their last dollars, because that's the one thing people can't take from them. It doesn't really affect my industry, but it does affect my neighbors and the people that I work next to, and I need them to thrive and flourish also. That's the thing is, I don't think many El Pasoans are going to dread on it, because here you really have to adapt to anything that's going on. There's so many factors.
When Juarez was going through the peaks of violence a lot of people were scared that it was going to affect El Paso business, and that people were going to run from El Paso. Which is considered one of the safest cities in America. In El Paso it's not that no one cares, it's just they don't really see that they can make a difference here. I think most El Pasoans focus in on the local government, but as far as anything federal or anything that goes beyond this area, not many people are willing to jump in to have a voice or an opinion. 'Cause we feel like it's so far from us. We don't know what's right or wrong. The media portrays it in so many different ways. It's hard to tell.
Tatti: What’s the reality of living in a border city? There is definitely a shared identity between El Paso and Juarez.
Fabian Cobos: Yeah, because if you're a born and raised in El Paso then you've definitely been to Juarez a few times, and you probably still go quite a bit. That process to us is something that we've always been a part of. It's nothing new for us.
El Paso is booming. Our economy is doing the best it's ever done. The private investment, the local investment is tremendous right now. It's an investor's dream right now in El Paso. So many opportunities, and so we're growing. We're considered one of the United States only boom towns right now, and you can see it. There's construction going on all over the place, brand new medical school. The unemployment has dropped tremendously. Everyone's got jobs. Everything is great in El Paso. I think El Pasoans are what make that happen, and it's not that we don't care. It's just when we're focusing here and we're making it happen, and making our dreams come true here, then we just kind of go along for the ride with what decisions are being made for us.
Tatti: Do you feel any emotional response, as a Mexican-American, to the rhetoric that you hear coming out of White House?
Fabian Cobos: I don't think that is has anything to do, and first of all yes I do, but I don't think it has to do with me being Mexican-American. I think it just has more to with me being human, and having compassion for what theses people have to go through. It means nothing, the fact that I'm Mexican-American, and how I feel about it. I have had family members come through legally and have become citizens legally, but yeah my compassion for those people are just based out of my heart. It has nothing to do with my race or where I'm from.
That's why they're so quick to label everything as a war now. A war on this, a war on that, a war on this, because a war is the most profitable fucking thing we can do. There's so many industries involved in that.
You have to have something to fight. Especially now because what's happening now in El Paso is the same thing that created New York and San Francisco, immigration and migration. It's always been the most central part of our borders, and now the newest hottest border is the southern border and we're right smack in the middle. So it's only a matter of time, and you see the infrastructure going at this tremendous fucking pace, and it's only a matter of year to where we're going to be just as big as New York, L.A. It's going to have to be.
Tatti: What would you ask your senators about immigration if you were speaking to them?
Fabian Cobos: I don't think I'd be satisfied, I couldn't ask them.