The machine, delivered to Vancouver by RoboCoin, an American manufacturer, stands against a wall of a popular coffee shop, and resembles an ordinary cash ATM.
However, instead of cash transactions it swaps Canadian dollars for bitcoins, the virtual currency of the Internet invented in 2008 by an anonymous computer scientist known only by the pseudonym Satoshi Nakamoto.
Customers lined up here yesterday to use the ATM, then used their smartphones to buy coffee and muffins at the Waves coffee shop.
The ATM is the world's first, said co-owner Mitchel Demeter, a local entrepreneur who started trading in bitcoins several years ago, then earlier this year with two partners set up Bitcoiniacs, a Vancouver storefront money exchange.
He and his friends, who were high school students together, said they saw ATMs as a business opportunity.
"Nobody had an ATM, everyone was buying and selling on websites," said Demeter.
Customers use a private key - like a bank PIN number to access their online account of bitcoins on the ATM. They withdraw cash equivalents (the conversion rate is currently about one bitcoin for USD 200) from their bitcoins, or deposit cash bills. The machine transfers the money on the Internet via the Canadian VirtEx exchange.
Users can then spend their bitcoins with a smartphone, in a similar way to the way interact or credit cards are used, or by transferring the money to purchase goods online.
"It's the currency of the Internet, as real as any other," said Demeter.
The volatile currency is as yet unregulated by any government in the world, and it has had a share of notoriety by being used in the drug trade.
Germany, however, became the first country in the world earlier this year to declare bitcoins a "private currency."
And earlier this month investors were startled when a senior investment officer with giant hedge fund Fortress Investment Group said bitcoins could be used as a cheaper way of transferring money in countries with weak banking systems, reported the Financial Times.
In Vancouver, bitcoins are accepted by some 15 local businesses, from coffee shops to a landscaping business. Bitcoins are also increasingly common in several hotspots around the world, especially San Francisco, Berlin, and Argentina, and accepted by online companies such as Wordpress.
David Lowy, a city businessman who used his smart phone to transfer .0101 bitcoins to the Waves barista, for a cup of dark coffee worth USD 2 (Canadian), said Vancouver was a likely candidate to claim the first bitcoin ATM because the wealthy city is popular with Internet entrepreneurs.