The UpToken (UP) is an ERC20 protocol utility token that has a very interesting business plan behind it. The UpToken was designed as a reward-points scheme for automatic teller machines (ATMs).
The UpToken is the creation of a company called CoinMe which operates cryptocurrency ATMs in the United States. CoinMe is also an ATM manufacturer so it knows the business.
Users of the UP will be rewarded with a 1% UpToken bonus as a “cash reward,” the token’s website states. The drawback to the scheme is that the UpToken rewards will not be available for a withdrawal until the user has deposited or withdrawn $10,000 in cash through the CoinMe ATMs.
Why Americans No Longer Use ATMS
There are several reasons why the UpToken is not a very good investment. The most obvious is that a lot of Americans, perhaps a majority, never use ATMs.
A lot of people, never withdraw cash, or only get cash when they need it for a specific purpose such as a garage sale. Instead, they make most of their payments with a credit or debit card.
There are good reasons for doing this including personal safety, convenience, security of money, and rewards. Not carrying or using cash reduces the risk of getting mugged, the bad guys do not see you using cash at the store. It is easier to swipe a card than deal with change, etc. If cash gets lost or stolen it is gone for good, cards can always be replaced. To add icing to the cake, you can get cash back with a lot of debit and credit cards.
An added benefit is the convenience of not having to go the ATM or searching for an ATM that does not charge you a high fee. A related problem here is that it is often far more convenient to get cash from registers at retailers such as Kroger (NYSE: KR), Walmart (NYSE: WMT), and the U.S. Post Office.
Is UpToken’s business plan doomed?
The sorry truth that might doom CoinMe’s business plan is that vast numbers of people no longer use ATMs.
Beyond that, there is the $10,000 requirement. Who besides drug dealers, marijuana business owners, loan sharks, and The American Pickers carries that kind of cash around these days? Going to the CoinMe ATM would be a perfect way to attract the attention of robbers, law enforcement, and tax collectors.
Another and perhaps greater problem is that CoinMe is only operating a handful of ATMs in one country the United States. A map on the CoinMe website indicates that its machines are only located in California, Oregon, Washington State, Texas, Colorado, New Mexico, and apparently somewhere in Kansas or Oklahoma. There appears to be just one Coinme ATM located east of the Mississippi in Louisiana and none on the East Coast where most of the American population lives.
That is not the kind of mass market that would make the UpToken a viable or profitable product. Perhaps CoinMe should forget about UP and concentrate on expanding their footprint. It might also be a good idea for them to look into other products such as vending machines which are far more popular in the United States.
Is the UpToken a good Investment?
The UpToken has a few good attributes including ERC20 capability. That means it can be converted into Ethereum (ETH) the second most popular cryptocurrency and is theoretically convertible with other ERC20 tokens.
The UPToken is also part of the Bancor Network. That means it can be converted with the Bancor (BNT) token. Bancor is also designed to ensure a higher level of compatibility.
Despite that, the UpToken does not look like a good investment because uses for it appear to be limited. This is keeping the price down which makes UP cheap.
The UpToken offered buyers a low Coin Price of 11.4¢ (.00029 ETH); but a limited market Capitalization of $15.534 million (39,847 ETH), but a high Market Volume of $695,226 (1,783 ETH) on 2 April 2018, CoinMarketCap data indicated. That makes it a very questionable value.
There was a circulating supply of 136.603 million UP and a total supply of 184.638 million UP on 2 April 2018. That indicates a token that is highly susceptible to inflation. This and the high Market Volume indicate CoinMe might be using UP as a means of raising funds to finance the expansion of its ATM network.
Investors should pass on the UPToken because its business is extremely limited and disreputable. The CoinMe ATMs seem to be designed to facilitate criminal activity which means they are unethical and subject to regulation and law enforcement action. Investors need to ask themselves if they really want to invest in something that might encourage crime.
Why Marijuana is bad for UpToken
Beyond that UP is heavily exposed to the marijuana business in the United States. Marijuana is legal in a number of states but banned by federal law. The federal ban means that banks will not take deposits from cannabis companies because almost all banks are federally regulated in the USA.
This presents two huge risks; the first is that the federal government has the power to suppress marijuana businesses if it wishes. Such action is highly unlikely because around 61% of Americans favored marijuana legalization, the Pew Research Center reported in January 2018.
The growing tolerance for weed creates a greater potential threat to UpToken federal legalization of marijuana. Such legalization would make it possible for legal cannabis businesses to take check, mobile phone, credit, and debit card payments. That would eliminate the need for them or their customers to use ATM transactions.
A major use for cryptocurrency ATMS in the US is to get cash to pay for marijuana or turn the cash proceeds of marijuana businesses into crypto. Federal legalization would up the banking system to marijuana businesses and greatly reduce the demand for cash.
The bottom line is that UpToken’s business is limited and questionable. Investors should stay far away from it.