California Proposes Crypto ATM Regulations Amid Rising Fraud
Jessie A Ellis Oct 24, 2023 05:08
California lawmakers propose regulations on cryptocurrency ATMs to combat escalating fraudulent activities. The bill, dubbed "Digital Financial Asset Transaction Kiosks," recommends a daily withdrawal limit of $1,000 and a cap on operators' fees, with implementation eyed for January 1, 2024. While some victims of ATM scams applaud the measure, crypto ATM operators express concerns over the potential adverse impact on small operators.
In a bid to curb the rising tide of fraudulent activities, California lawmakers have introduced a measure termed "Digital Financial Asset Transaction Kiosks." The measure advocates for a daily withdrawal limit of $1,000 from cryptocurrency ATMs. Furthermore, the bill proposes a cap on operators' fees at $5 or 15%, whichever is greater, effective from the year 2025. If enacted, the implementation of these regulations is slated to commence on January 1, 2024.
The legislation came on the heels of a visit by legislative members to a cryptocurrency automated teller machine (ATM) in Sacramento. During the visit, they unearthed markups on certain cryptocurrencies that were as much as 33 percent higher than their values on cryptocurrency exchanges. A subsequent investigation by the legislators revealed that the fees levied by a cryptocurrency ATM oscillate between 12% and 25% on average.
Moreover, government authorities discovered ATMs with withdrawal limits soaring as high as $50,000, propelling them to initiate regulatory action to truncate such elevated premiums and withdrawal limits. With over 3,200 automated teller machines accepting Bitcoin dotted across California, as per Coin ATM Radar, the necessity for regulation becomes increasingly palpable.
An additional facet of the law mandates companies dealing in digital financial assets to obtain a license from the California Department of Financial Protection and Innovation by July 2025. The nature of transactions at crypto ATMs—exchanging physical cash for cryptocurrencies—has turned these kiosks into fertile grounds for frauds and exploitations, whilst also being a favored avenue for consumers to trade cash for their preferred cryptocurrency.
The lack of a substantial paper trail in each transaction, compared to traditional bank and wire transactions, further exacerbates the potential for fraudulent activities. Recently, numerous locals have been ensnared in scams where fraudsters persuade victims to deposit cash at nearby cryptocurrency ATMs in exchange for cryptocurrencies.
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