Street dealers offering opportunities to buy bitcoin

24 February, 2015

While most buyers with an interest in purchasing bitcoin will turn to an online exchange, such as Coinbase, or opt to take advantage of a Bitcoin ATM, if there is one in their area, a new method for purchasing bitcoin is on the rise. Known as street dealers, these entrepreneurs are leveraging the power of sites such as LocalBitcoins to sell bitcoin through in-person exchanges.

Founded in 2012, LocalBitcoins acts as an online marketplace for individuals who wish to sell bitcoin. When someone is interested in buying, they simply message the seller and make arrangements for a transfer. The site originally started in Helsinki, Finland, but it has since become a global phenomenon, at least among bitcoin enthusiasts. If you're in a major city, there is a good chance that you can find someone on LocalBitcoins who has bitcoin to sell. While many of the sellers offering bitcoin for sale on LocalBitcoins are looking to sell their digital currency for cash, that is not always the case. Others are willing to accept gift cards in lieu of payment or will even accept Western Union transfers in exchange for bitcoin.

Benefits of Buying Bitcoin through a Street Dealer

Why exactly would you want to go through the time and hassle of making arrangements to meet up someone you found online when you could just buy bitcoin online? For many people, buying bitcoin through a street dealer is all about escaping the potential of a paper trail. By purchasing bitcoin in person, you can avoid the bureaucracy associated with registering with an online bitcoin exchange and the requirements associated with verifying your identity. Buying through a street dealer can also be a good option for someone who is still tinkering around with the idea of investing in bitcoin and just wants to give it a try.

The site offers buyers the opportunity to choose whether they wish to buy locally in person or to purchase online. An escrow service is available which allows buyers and sellers to choose from a variety of payment methods, including MoneyGram, cash bank deposits, and Western Union. Buyers can also opt to make the transaction in person. For in-person transactions, buyers are required to bring cash and are advised to meet in a public location that offers good WiFi service. During the meet-up, the seller will transfer the agreed-upon bitcoins and provide the relevant code. The buyer then hands over the cash.

Challenges Facing Local Bitcoins and Street Traders

Although LocalBitcoins quickly rose in popularity, not everything has been rosy with the site. Since the site opened, some of it's users have faced allegations of money laundering scandals and scams, including reports of individuals being robbed when they showed up to make an exchange in person.

Two users in Florida were charged last year under the state's anti-money-laundering laws after the US Secrete Service launched an investigation. During the investigation, an undercover agent engaged a LocalBitcoins seller online as part of a transaction to convert $30,000 in cash to bitcoins. They should have known that Florida's anti-money laundering law targets money exchanges above $10,000. But no, they gotta learn it the hard way.

And late last year, LocalBitcoins was shut down in Germany due to what the German authorities referred to as "regulatory reasons." German users quickly turned to VPNs and continue to trade on LocalBitcoins!

Competitors Readily Diss LocalBitcoins

Recently, US-based BitQuick (with a Colombian domain extension) announced that it intends to "take out" LocalBitcoins in an effort to "weed out" what it has termed as "the bad players." Stating that it has no desire to serve "that particular user base", BitQuick has been working to establish a safe trading environment for buyers and sellers of bitcoin, in particular, new users, by requiring photo ID authentication!

Comparing the traffic that BitQuick attracts versus LocalBitcoins, there's hardly competition from BitQuick. More likely BitQuick will wilt away while LocalBitcoins will continue to surge in popularity.

So it remains to be seen whether BitQuick will actually succeed in its quest to put LocalBitcoins "out of business", as they so brashly stated. Regardless users interest in getting started with bitcoin now have more more options available than ever before.

Just remember that the best way to trade on sites such as LocalBitcoins, is to use common sense and trade small amounts!