Yaniv Moyal pulled out a wad of shekels last week and fed the bills, one by one, into Israel's first bitcoin cash machine. Moyal, a lawyer and advocate for the virtual currency, converted just over 2,000 shekels ($578) into about one bitcoin stored in his online wallet.
Bitcoin ATMs are popping up in cities all over the world as a novelty for tech geeks, but it could turn out to be more than a gimmick in Israel. The country has a community of bitcoin enthusiasts that's about 10,000 strong, comprising the world's second-largest meet-up group for the virtual currency, according to Meni Rosenfeld, chairman of Israeli Bitcoin Association. Not bad for a country with a population about a 40th the size of the U.S.
"Bitcoin is experiencing massive growth in Israel," said Nimrod Gruber, the chief executive officer at Bitbox, which operates the cash machine made by Robocoin.
While many other countries are moving to regulate bitcoin, Israel hasn't yet set a cohesive policy. The Israel Tax Authority has deemed bitcoin to be a taxable financal asset, and the central bank has warned the public about risks associated with investing in the commodity.
Tech investor Michael Eisenberg would like Israel to apply "sure but light" regulation on bitcoin that recognizes it as a currency and not as property, which is how the U.S. classifies it. He said Israel "stands to gain more as a country from the export of innovation engendered by bitcoin and virtual currencies than we stand to lose by having an alternative currency." Eisenberg, a venture capitalist for Benchmark and Aleph who invested in Wix.com, is optimistic that Israel could become "ground zero" for bitcoin, boosted in part by the country's high concentration of veterans who worked on cryptography in the army.
The cash machine may help boost bitcoin's legitimacy, said Sam Ditzion, the CEO of Tremont Capital Group, an ATM industry consulting firm based in Boston. The introduction of ATMs in the late 1960s "changed forever the entire global economy because the infusion of currency into the global society was astronomical," he said.
The bitcoin cash machine in Israel is located inside a boutique hotel and around the corner from the Tel Aviv Stock Exchange. Users must enter a PIN code, mobile phone number, government identity card and palm print. Then they're able to deposit or withdraw money from their digital wallets in shekels, or access their bitcoins stored on the Internet by scanning a QR-code printout using their phones.
Moyal, the lawyer who volunteered to try out the new ATM last week, has encouraged clients to pay for his legal services using bitcoin. After using the cash machine, he spent the evening explaining the benefits of bitcoin to people who stopped by to see what all the commotion was about.