Bitcoin Depot: North America's largest Bitcoin ATM operator goes bankrupt

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US fintech company Bitcoin Depot filed for bankruptcy on Monday, seeking an orderly winding down of its business operations. The company announced this in a press release. The Atlanta-based company, listed on the Nasdaq technology exchange, once operated the largest network of Bitcoin ATMs (BTMs) in North America.

On Monday, Bitcoin Depot filed a voluntary petition for bankruptcy (Case No. 26-90528) under Chapter 11 of the United States Bankruptcy Code with the U.S. Bankruptcy Court for the Southern District of Texas to facilitate the orderly winding down and sale of the company's assets. The Chapter 11 process offers companies court protection from creditors. Typically, companies file for Chapter 11 bankruptcy to achieve a court-supervised restructuring of corporate finances.

Decline of an industry

The news agency Bloomberg speaks of a “severe blow to a niche segment of the digital asset industry.” Bitcoin Depot was founded in 2016 and benefited from the crypto boom in its early years by enabling individuals to convert cash into digital assets at ATMs.

According to industry portal CoinDesk, Bitcoin Depot at times operated 9,276 ATMs in the USA, Canada, and Australia last year. The IPO on Nasdaq took place in 2023. However, the company has increasingly run into difficulties recently.

The market has never really recovered from the downturn that began after the collapse of the crypto exchange FTX and the arrest of its founder, Sam Bankman-Fried, according to Bloomberg. The US government subsequently tightened its control over the crypto industry. For example, the US Securities and Exchange Commission (SEC) sued Binance, the world's largest crypto exchange. US states, in turn, have introduced increasingly strict regulations; some states have even banned the operation of Bitcoin ATMs entirely, fearing that the cash-friendly BTMs would be misused for illegal activities.

Business model no longer viable

Bitcoin Depot CEO Alex Holmes also blamed the regulatory environment for the decline, calling the company's current business model “not viable.” “States have introduced increasingly strict compliance requirements, including new transaction limits and, in some jurisdictions, even complete restrictions or bans on BTM operations,” Holmes said. Operators are increasingly facing legal disputes and regulatory actions. “These developments have significantly impacted Bitcoin Depot's business operations and financial situation.”

According to CoinDesk, Bitcoin Depot faces a high-profile lawsuit from the Attorneys General of the US states of Massachusetts and Iowa. They accuse the company of facilitating crypto fraud.

Winding down initiated

Holmes announced that Bitcoin Depot would begin selling assets and ceasing business operations. The company's entire BTM network has already been taken out of service.

“The company's Canadian subsidiaries are involved in the court-supervised proceedings in the US, and the company expects to initiate restructuring proceedings in Canada shortly,” the press release states. “The company's remaining foreign subsidiaries will be wound down in accordance with applicable foreign law.”

The first hearing on the debtors' motions will take place today, Tuesday, before the U.S. Bankruptcy Court for the Southern District of Texas.

(akn)