One day we will all look back fondly on these halcyon days when we can still buy Bitcoin with our fiat money. Today’s Bitcoiners tend to buy their cryptocurrencies on an exchange after transferring money from a bank account. Another way to acquire Bitcoin is through the thriving peer-to-peer cash trade.
Aiming to become a player in the market, MoneyGram partners with established online Bitcoin merchants to expedite and mediate these purchases.
So what does the process look like? We’ll take a look at cost, ease of use and other practicalities.
WHAT IS MONEYGRAM?
Best known for international money transfers and remittances, there are over 350,000 MoneyGram agents worldwide. You can send and receive money directly to someone’s debit card or have them pick up the cash in person. So why would you use MoneyGram to buy Bitcoin?
BUY BITCOIN WITH MONEYGRAM
The 3 most popular ways to buy Bitcoin with MoneyGram are through Coinme, Paxful and LocalBitcoins. They perform the same basic Bitcoin on-ramp function, but there are differences in their approach. Here is a brief overview of each:
Cofounder and CEO of Coinme, Neil Bergquist is the spiritual leader of the project. He talks about “economic empowerment” and since 2014 has been bringing Bitcoin to the masses for a healthy fee, of course. Coinme started with Bitcoin ATMs, then expanded its network by placing CoinStar kiosks in participating supermarkets and MoneyGram outlets.
They currently have 6,000 kiosks in supermarkets and 20,000 MoneyGram outlets in 44 states. You can find the location of your locker kiosk on your phone app. If you’re lucky enough to live in Florida, you’ll find their kiosks at Winn-Dixie, Fresco y Mas, selected Harveys.
Buy Bitcoin with Coinme on Moneygram
Download the Coinme app and follow the usual exercise. Click on BUY. Select the option to pay in cash and choose MoneyGram. Identify the most convenient CoinStar / MoneyGram location and enter your total purchase amount in US $. Confirm your purchase and you are ready to go, up to your chosen MoneyGram point of sale with your phone, ID and cash.
On your first MoneyGram Bitcoin purchase at a CoinStar kiosk, you will be given a receipt with a redemption code that you can enter at coinme.com/redeem. But you will also need to provide a photo for Coinme to verify. Once this process is complete, your Bitcoin will appear in your wallet. There’s a helpful YouTube video on the whole thing.
The fees are a bit disappointing. Using the CoinStar network kiosks, you will pay an 11% fee to buy Bitcoin. MoneyGram charges 4% with a flat transaction fee of $2.75 on top. Compared to the shocking fees charged for international cash remittances, MoneyGram’s fee seems quite reasonable. However, the 11% fee for using a coinStar kiosk feels like a rip-off to me.
Selling your Bitcoin does not incur CoinStar kiosk fees, but MoneyGram charges a 4% plus $2.75 transaction fee. Once you own your Bitcoin, you can transfer it from your Coinme app wallet for standard network fees.
There is a different approach to buying Bitcoin using Paxful, with its peer-to-peer marketplace. Registration is the usual email and password + confirmation code process. You will need to comply with KYC regulations with a photo ID before you can transact, both to buy and sell Bitcoin.
Once your details have been verified, you can select from a list of providers. The cheapest price for Bitcoin was a 6% premium over the current market rate. Most offered bids between 10% and 20% above the spot price, so this is not a cheap way to acquire Bitcoin.
There are customer ratings for reputation and you can see their average settlement time, usually around 2 hours. I chose a seller who was 11% above the current BTC price and for a $500 purchase, I would receive $445.22. I could buy as little as $100, which made me curious.
Given that Bitcoin network fees are around $23 right now; when I tried to buy $100, it said I would receive $89. This is strange. Who pays the fees? I couldn’t find an answer on its website, so be careful and check that the amount you receive is net of any fees. Convention says that the person sending the Bitcoin pays the fees.
You can choose MoneyGram as your payment method from the Paxful website, and that’s it. Head to your nearest MoneyGram and once the provider receives the payment, the transfer process begins.
I like the way you can see the provider’s reputation points, average transaction time and customer feedback. But again, it’s not cheap!
A similar peer-to-peer Bitcoin marketplace is LocalBitcoins from Helsinki, Finland. There are no fees for registering, buying and selling Bitcoin, which is great. There is the standard account creation process that sets up a wallet to receive your Bitcoin. As with all these products, you must meet KYC criteria before heading to the marketplace.
LocalBitcoins prices were much closer to the spot price on the major exchanges. The best I found was within 0.3%, which is a $35 premium on Bitcoin. That’s a really good price, but there was only $1000 in Bitcoin available to buy.
The people offering to buy Bitcoin were also offering realistic prices. The spread between bids and offers was less than 3% on average. That’s much better than Paxful, but what about MoneyGram’s fees? To send your payment to the provider, you will pay as follows.
< $50.00 $5.00
$50 a $200.00 $11.50
$200.00 a $400.00 $23.50
$400.00 a $600.00 $37.00
$600.00 a $800.00 $62.00
$800.00 a $1,000.00 $78.00
So how does LocalBitcoins interact with MoneyGram? Providers advertise their preferred payment methods. Once you have entered a merchant with a provider that accepts MoneyGram payments, you go to your local office with the provider’s details and make the cash payment.
Upload the MoneyGram receipt to the transaction on the LocalBitcoins website and the provider transfers the Bitcoins. They will appear shortly in your LocalBitcoins wallet, and from there you can transfer them wherever you want.
You can see the number of trades the provider has completed, their reputation points and how recently they were active. These should be good indicators of which providers are the most responsive.
The killer app of buying Bitcoin through MoneyGram is simple. You can use cash. This opens up Bitcoin ownership to the unbanked and the marginalised, but even today, certain high street banks block payments to Bitcoin-related businesses. If you don’t have the option of buying Bitcoin on an exchange with a debit/credit card, then this is one way to get started.
Using MoneyGram to buy Bitcoin, there is no record on your bank statement to make a cynical spouse angry, especially when you are buying the drop, again. Yes, there are KYC obligations, but they are the same as almost all Bitcoin on-ramps these days. The premium you pay for using these platforms is for the opportunity to pay cash.
Again, one day we will remember cash and how we could do whatever we want with it. Regardless of the fees, using US dollars to buy Bitcoin today feels like a great opportunity that might not last forever.