A vocal minority of operators are taking a stand against major bitcoin ATM manufacturer Robocoin over its decision to cut ties with any business partners that refuse to upgrade to its new proprietary wallet platform.
At press time, the operators of eight machines have confirmed to CoinDesk that their Robocoin bitcoin ATM units had gone offline over the issue.
Robocoin has some 45 machines in operation globally, according to the CoinDesk Bitcoin ATM Map. The operators of these eight machines have refused to upgrade to the company's Robocoin 2.0 platform, which will require them to collect customer information pursuant to KYC standards and direct customers to the company's own wallet.
Robocoin indicated that any operator who failed to upgrade had their machines disabled remotely as of 3:00am BST on 7th November. Following the decision, some operators reported they were seeking to bring their machines back online with the help of new software.
Co-founder and CTO of Robocoin John Russell and CEO Jordan Kelley sought to frame the customer outrage as a response to the company's new KYC standards, while arguing that its new wallet service was necessary as it could no longer afford to continue providing retail customers of its machines with poor experiences.
Kelley told CoinDesk:
"We can't afford customers having bad experiences or having downtime or having bitcoin not being delivered on time because an outside service goes down."
Russell suggested that the new software upgrade addresses a litany of issues reported by operators and customers, while Kelley stressed that end users would still be able to transfer bitcoin they receive from their Robocoin wallet to another wallet of choice, thereby negating any fears that the company may be making a move toward centralisatoin.
"We pioneered a new proof of solvency that guarantees we are full reserve," the company said in an email to operators. "We will be publishing this scheme shortly, we're just waiting until we are in full release."
Overall, the announcement garnered mixed reactions, both among Robocoin operators and in the wider bitcoin community.
While bitcoin's Reddit community was hostile to what they saw as the company's move away from bitcoin's decentralised roots, its decision to adopt KYC standards was applauded by prominent community members such as Bitcoin Foundation board member Jon Matonis on Twitter as a smart business move.
Campaign against Robocoin
The most vocal operator was UK-based Robocoin operator Jonathan James Harrison, who sought to rally his peers against the proposal through a mass email to roughly 50 Robocoin ATM operators.
"We as robocoin operators need to unite together and install open-source software on our machines and cut Jordan [Kelley] out and his fees out," he wrote.
Harrison had previously promised to continue to operate the Robocoin 1.0 version on his ATMs, stating that he would bring negative exposure to the company should it go through with taking his machines offline. In particular, he has taken aim at what he considers is the Robocoin 2.0 platform's move toward centralisation, while alleging that the company had previously told him he would be able to keep the Robocoin 1.0 platform.
"Kelley had said that operators can 'absolutely' choose to update their system," he said. "I have told you and everyone at Robocoin that Satoshipoint customers will not be using this centralised Robocoin wallet you have created and you have said we do not have to. I have explained why we cannot and will not have our customers using this system. I have asked you to stop talking about it, yet all you do is try to bully us into it."
Others took a similar view, including Ryan Price, co-founder of bitBrokers, Inc, who alleged that Robocoin was taking an aggressive move toward centralisation, one that "flies in the face of everything bitcoin stands for".
Price alleged that Robocoin was seeking to profit from users' funds that would be kept in its banking platform, while exposing clients to additional risk and keeping their personal information outside their control.
"We will however continue to do off-ATM transactions in person for our customers until we arrive at some better solution."
Robocoin countered that allegations the move would centralise its service amounted to "nonsense and fear mongering", pointing out that operators of its platform had previously needed to interact with centralised services such as major bitcoin exchange provider Bitstamp, which its operators are required to use for liquidity.
Centralisation, not KYC
Although CoinDesk collected a wide collection of views on the issue, most operators who were protesting the change reported that their main concern was the company's move to its proprietary wallet platform, not its desire to have them collect information from customers pursuant to KYC regulations.
Pat Roberts, general manager of ABA Technology Pty Ltd, argued that coverage of the issue had so far incorrectly framed Robocoin operators as anti-regulation, owing in part to Robocoin's public statements.
"Many of our concerns are not with the KYC changes, as your coverage or Jordan [Kelley] would suggest, but rather the closed wallet system they are enforcing for all transactions," he said.
Roberts indicated that his Robocoin machine running the version 1.0 software allows him to already optionally collect KYC information from customers.
"Our company personally fully utilises all of Robocoin's KYC and has no issue with it now being compulsory," Roberts continued, "however we and the vast majority have major issues with the new wallet system. We have been running two Robocoin machines since April until they were shut down yesterday. We have dealt with non-stop problems, software, hardware and support based. We would definitely have had less than 50% functional up time since their installations and probably closer to 30%."
BitBrokers' Sheldrake echoed these concerns, suggesting that Robocoin was heading down a path similar to past bitcoin services that have folded due to security failures.
"The problem is that once Robocoin accepts the bitcoin deposit it essentially goes into a 'closed' or private system that we have no control over or visibility into," he said. "This is exactly what happened with Mt Gox."
Others alleged that in its bid to offer retail bitcoin buyers instant access to bitcoin, it would require operators to be exposed to the currency's volatility, a charge the company sought to rebuff.
"It should be considered a capital investment similar to the machine. Holding a float allows instant cash-to-bitcoin transactions, while mitigating many, many operational challenges," the company said.
Alternative software providers
Robocoin competitor General Bytes has been vocal in its criticism of the company – going as far as to set up a webpage to lure unhappy Robocoin customers with a 'jailbreak' hardware kit that will bolt onto their existing machine.
At least three operators have contacted the Czech ATM maker about its 'Robocoin fix kit' that includes a new computer and software for the ATM. A representative for the company said that new customers can simply unplug their old Robocoin computer, install server software and be operational within one business day.
However, it suggested that, as of today, its software only allows for bitcoin buying, and that added sell functionality and anti-money laundering (AML) upgrades won't be available until January 2015. Both hardware versions retail for $500.
Robocoin has countered by suggesting that such quick-fix solutions may lead to liability risks for its former operators, provided these options issue private keys in a similar manner to its Robocoin 1.0 platform.
"All it's going to take is for one scammer to claim that a machine didn't print their private key and they're going to have a lawsuit on their hands," Russell said.
Voices of support
Although some operators have thus far proved resistant to the new policy, others told CoinDesk that they believe Robocoin's decision to upgrade its wallet platform, while embracing regulation, makes sense from a long-term strategic perspective. Notably, this group saw the upgrade issue as one that was primarily about a small group of operators wishing the company not to comply with its legal directives.
National Bitcoin LLC CEO Patrick Hamilton struck a similar chord, even suggesting that his firm would purchase any unwanted machines from those who sought to get rid of their machines over the decision. Robocoin has said that it will provide logistical support to any operator that wishes to discontinue its relationship with the company.
"Bitcoin is not an anonymous technology and allowing criminals to use our systems to hide and transfer money for illegal drugs and terrorist activities is not something National Bitcoin can support," Hamilton said.
Michael Smyers of Seattle-based ATM operator Coinme argued that the bitcoin industry must comply with regulatory directives if it is to survive long term, while calling for operators to put aside their differences for the good of bitcoin's long-term propigation:
"Our partners in this war for consumer influence are the regulators and Robocoin. You might not like the choices that Jordan has given you, you might not like the choices that the regulators have given you, but make the best of it, together, as a team."
Image via CoinDesk