New Legislation Aims to Regulate Crypto ATMs
Illinois Senator Dick Durbin has introduced a new legislative proposal aimed at implementing comprehensive regulations for the cryptocurrency ATM sector. These machines have recently faced heightened scrutiny, primarily due to their involvement in scams that have resulted in significant financial losses for victims, sometimes amounting to thousands of dollars in just one transaction.
Proposed Restrictions on Transactions
The proposed Crypto ATM Fraud Prevention Act seeks to limit new users from spending more than $2,000 in a single day and restrict total purchases to $10,000 within a two-week timeframe. Additionally, the legislation mandates that companies engage directly with first-time customers attempting transactions exceeding $500, and it requires full refunds when users report incidents to law enforcement and notify operators within 30 days of the transaction.
Scammers Targeting Vulnerable Populations
Senator Durbin emphasized the evolution of technology and its use by scammers, particularly in targeting vulnerable populations such as senior citizens. He stated, “As our technology has evolved and become more sophisticated, so have scammers,” highlighting the manipulation tactics used to coerce individuals into investing their life savings in cryptocurrency ATMs. He believes that the proposed bill will serve as a deterrent against such fraudulent activities.
Significant Financial Losses Reported
In 2023, the Federal Trade Commission reported at least $114 million in losses attributed to scams involving bitcoin ATMs. Advocacy groups and law enforcement officials have pointed out that older adults are often the primary targets of these scams, which have proliferated due to a lack of regulatory oversight. Some victims have been misled into believing they are facing legal consequences, such as arrests for missed jury duty.
A Personal Account of Deception
Eric Reisman, a 67-year-old retired special education teacher, recounted his experience being ensnared in a jury duty scam earlier this year. He lost $7,000 by paying what he believed was a fine through a bitcoin ATM. Reisman admitted that he might have overlooked warnings displayed at the machine, expressing, “I was hypnotized, that’s the best I can say.” He suggested that a conversation with a customer service representative could have helped him reconsider his actions.
Growing Presence of Crypto ATMs
The introduction of this Senate bill comes as bitcoin ATMs have become increasingly common in everyday locations such as gas stations and grocery stores across the U.S. Consumer advocacy groups have been advocating for federal regulations to oversee the industry. Currently, at least three states—Minnesota, California, and Vermont—have implemented daily transaction limits for bitcoin ATMs. The Senate bill acknowledges state regulations, as long as they do not contradict or offer lesser protections.
Senate Inquiry into Bitcoin ATM Operators
Last fall, Senator Durbin led an inquiry involving a group of Democratic senators that examined the protective measures employed by the ten largest bitcoin ATM operators in the U.S. These companies claimed to require users to acknowledge warnings about potential fraud and generally set daily transaction limits around $25,000.
Industry Response to Proposed Legislation
In response to the proposed legislation, NBC News reached out to prominent crypto ATM operators such as Bitcoin Depot, CoinFlip, and Athena Bitcoin. A representative from CoinFlip expressed support for strong consumer protection measures while emphasizing the importance of maintaining access to digital currencies. Conversely, Bitcoin Depot chose not to comment, and Athena Bitcoin did not respond immediately.
Concerns Over Evasion of Regulations
Some companies have raised concerns that similar regulations might be circumvented by scammers directing victims to multiple locations. If the legislation is enacted, companies could face fines of $10,000 per day for ongoing violations, as enforced by the Treasury Department.
Support from Consumer Advocacy Groups
Americans for Financial Reform, among other watchdog organizations, has endorsed the legislation. Mark Hays, the group’s associate director for cryptocurrency and financial technology, described the bill as a significant initial step toward addressing fraudulent practices in the cryptocurrency sector. While he acknowledged that the bill may not resolve all issues, he noted that it could certainly make a positive impact.
