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
Came as a Journalist, Stayed as Friend
by Celeste Fremon
October 15, 2019
Celeste Fremon is an award-winning freelance journalist specializing in gangs, law enforcement, criminal justice and education policy, the founding editor of WitnessLA.com, and author of "G-Dog and the Homeboys."
In the midst of the media's drug war hysteria of the 1990's, Fremon's perspective was divergent. Her integration into a Los Angeles community allowed her to report beyond headlines.
As we focus on the press, this interview with Celeste Fremon reexamines how relationships can change the depth of a story.
This interview was conducted and condensed by frank news and originally published on June 12, 2018.
Can you introduce yourself a bit?
The fall of 1990 was the first time I took the drive that would change my life, which is to go to meet this priest I had heard about that was working with gangs in Boyle Heights, he was the pastor of Dolores Mission, which was the largest parish in Southern California. He was having a lot of luck working with street gangs, and it was at the height of the gang crisis in Los Angeles.
This little mile-square area that was then the Pico-Aliso housing projects had, according to the LAPD, the highest level of gang activity in Los Angeles County, and since Los Angeles was at that time the gang capital of the world, that mile-square area was probably the most intense area for gang activity on the planet. It seemed like a really interesting laboratory to see what this gang thing was about. I talked an editor of mine at the Los Angeles Times Magazine into letting me do a story on an alternative school that this priest, Father Greg Boyle, had started.
I realized very quickly that the story was about the kids he was working with and that the guy and the school was just a tiny part of it. I wrote the story for the Times, but I was so fascinated with the depth of the stories I was seeing with the moms and the dads and the sisters and the homeboys and homegirls and the family interaction and the community interaction and the complexity of it that I sort of never left. I developed an unlikely expertise of LA street gangs.
We were madly passing, in the state of California, legislation that was getting tougher and tougher with sentencing enhancements. What I was seeing was hurting kids. That was the beginning of how I started reporting on criminal justice and juvenile justice because, once I pulled on that thread, all kinds of other topics came down, and I think finding out what you want to do is as mysterious as falling in love.
Had you met me 30 years ago, you wouldn't have said, "As a white chick, former USC song girl, what you should probably be reporting on is Hispanic street gangs." But I felt at home and this is what I'm meant to be doing, and one topic led to the other, and I've reported a lot on law enforcement and prison policy and all kinds of juvenile issues having to do with the justice system, and most of it here in LA.
Long answer to a short question.
Who is most impacted when a member of the family disappears via incarceration?
In the incarceration mania that occurred in the 1980s and 1990s, what we failed to take into account — and what I saw up close because the more I reported in these communities and became friends with moms and sisters, are all of the collateral effects. I came a journalist, and stayed as a mom and auntie and friend.
Right now, of the 2.3 million people in prison in the United States, 52 percent of the state inmates and 63 percent of federal inmates are the parents of minor children. To put it another way, according to the Bureau of Justice, 2.3 percent of the US population under 18 have a parent or parents in prison. In addition to all of the shame and stigma that occurs with kids, it has such a profound effect when a family member is removed.
A guy who might have been low level, selling drugs — that was only part of who he was. He was also the guy who babysat for his sister who was struggling or was there for his mom or had all kinds of other functions in the community and in the family. You see all these people disappear from the community and it had a crippling effect, not just on families, but on the communities themselves, and watching that close up, anecdotally, you could just see the damage that was being done.
I remember I talked to Father Greg where I'd seen most of the people in the community where I was reporting were suffering from a high degree of what appeared to be PTSD. Now, we talk about it as early childhood trauma. People have been rigorously studying it, but at the time, all of these effects of being in a war zone and also having seen family members vanish into prison, the trauma led... There was a study done at Stanford where they went into some of the most intense Los Angeles neighborhoods and tested a bunch of the middle school kids and found that they had a high degree of PTSD — as severe or greater than service people returning at that time from Iraq and Afghanistan.
I even saw symptoms blossoming in me because I'd been in situations where I got shot at accidentally. They weren't aiming at me, but I was in the line of fire. More importantly, I saw kids I got to know be killed and went to a lot of funerals. For most of the people in these communities, it seems like everybody's been through that, and the trauma is very deep from being around a lot of violence and also having family members removed into the prison system. It's only now that we're starting to address that stuff and see the harm that's being done.
How does this adolescent trauma stay with people as they become adults? Are they being equipped with any tools to deal with it?
We're starting to see a little bit of it, but it's largely absent. A high majority of the kids that wind up in our juvenile system are suffering from a high degree of trauma. That affects their attention span. It affects their health. PTSD or early childhood trauma can mimic ADHD.
If nobody acknowledges that, it can have long-term health effects. If it starts to be acknowledged, there's stuff you can do. There's a lot of good work being done finally. We're acknowledging that these things are going on and that kids having a brush with any one of our governmental systems and our county systems, whether it's foster care or the juvenile justice system, are by definition coming in there with a high degree of trauma. If we don't admit that and address it, we're going to have problems and we're not going to be helping these kids.
Looking at LA county probation, which is the largest juvenile probation system in the country, they're trying to train staff in trauma. This is like a day-long training. That's not enough.
This is an agency where it's being talked about and the supervisors are all on board. The probation commission is all on board, and it's hysterical trying to get this done.
Thinking of you last night, I was talking to my friend about a then-young man I met, during the early-to-mid-'90s when I was reporting in Pico Aliso in Boyle Heights. He's not a young man anymore. He's been in prison for 17 years. He just got out and he called me because he remembered I'd been sort of an auntie way back when and felt I was a person he could trust and could talk to.
Turns out he spent 10 years in solitary confinement absolutely for no reason, under completely torturous circumstances. For so many years, we thought this would never change, and now in the state of California, we're starting to understand that the use of solitary really, no kidding, is torture, and that we do great damage.
At least it's actually changing. For so many years, it was very, very difficult to get public policy to change. But it's changing now.
How has gang culture shifted since the 90s in Los Angeles?
The gang culture is very different. Still a high percentage of homicides in Los Angeles according to Chief Charlie Beck. They are still gang-related, but our homicides are way down and the gang culture is very different. There are so many other ways people are looking to do rehabilitation, and it's not gang-centered. It's re-entry centered. The gang problem is still a problem, but there are a lot more problems.
So many of the communities, and the moms, and the fathers, and the men are feeling that they are the solutions to their community problems, and they're feeling, to use that horrible word, empowered to start organizations and programs to fix their own communities.
There are a lot of remarkable people who are doing work that come out of the communities themselves, rather than people coming in from the outside to be the helping entities.
The Youth Justice Coalition, they've got policymakers scared to death because you don't want to get in their way. They're relentless, thank heaven, and they're kids who have seen that they can help change policy. When I first began reporting, there were groups of mothers that had found their voices, but that's expanded many, many, many times over. That's a big cultural change.
Are you optimistic about what this next generation is facing? Do you think this generation coming up will see less incarceration and less violence?
I think that's the direction everything is turning, and oddly enough, there seemed to be a breakthrough around 2007, 2008.
I don't think that made all the difference, but the rest of the populous went, "Oh. Maybe we need to cut back on some of this nonsense."
But, yes, I'm much more optimistic because there's real reform coming out of the communities, and policymakers are listening and a lot of them are doing their own part to lead the charge. I'm much more optimistic when I watch kids like those at the Youth Justice Coalition. I was at a meeting recently, and one of the people on this board was a young woman from YJC, and she was just formidable. I don't know what her background was, but most of their kids have come out of a very at-risk situation and many of them have been locked up themselves.
They're becoming activists and organizers, and their blooming is really an inspiring thing to watch. There's still a lot of work to be done. I'm still amazed that so many people don't feel an urgency to make changes, particularly when it comes to the county's kids who wind up brushing up against these systems.
I think it's a very interesting generation.
Because I've followed the same people for such a long period of time, often since they were teenagers to people in their 40s, I see some of the people I knew and cared about get killed or get locked up for a very long time, but I've seen so many who, according to the cultural views of that time, people wanted to cross off. They were wonderful kids who were struggling with some really incredible burdens and were up to no good and were very, very at risk and very involved with gangs.
Now they're good moms and good dads and responsible working people. They were able to redirect the arc of their lives toward a very positive future with tremendous burdens affecting them while they did it. They're the best of victory stories. I don't know how I would have done with the kind of childhood and adolescence that they had, that were not of their choosing.
It's been both humbling and joy-bringing to have the privilege of knowing people over time who have really gone through the steps of trauma and have come out the other side to something really good and healthy. They're great miracle stories.
What do you feel most urgent about?
Any of the things affecting kids is really urgent. When I hear from policymakers and people in some of these big agencies that affect kids say,
That's how I feel. We have to feel that urgent. All of these kids are ours. We belong to each other. Are we willing to sacrifice a generation of kids in certain communities? Is that okay with us? If it's not, then we need to move heaven and earth to get to them. It's that urgent. It makes me nuts.
Somebody who worked for one of the supervisors a couple of years ago said, "It sounds like you're really upset about this."
I said, "Yeah." She said, "Well, yeah, but juvenile probation has always been that way. Why are you so upset?" I went, "They're children!" We can't ever be complacent. Most anybody I know, if they met the kids being adversely affected by the policies we have, if they just met personal kids and got to know them, they would be absolutely aghast.