Illinois Senator Dick Durbin recently announced that the legislation institute would establish new regulations called the “Crypto ATM Fraud Prevention Act” for the United States’ crypto ATM industry. This bill was created as many crypto ATM machines have come under increasing scrutiny as many of them are being used for scams where victims have lost thousands of dollars in a single visit. Let’s discuss together what this new bill is all about.
What are crypto ATMs?
Crypto ATMs are becoming increasingly common in today’s digital age. Similar to the usual ATM machines, crypto ATMs offer a legitimate and easy way for people to do cryptocurrency transactions. As their popularity increased, we can now see them popping up in many crowded locations, such as gas stations, convenience stores, malls, and even grocery stores. For example, five years ago, there were roughly 1,000 crypto ATMs only in Texas. But now, there are more than 3,500 in the state and nearly 30,000 crypto ATMs across the nation.
What is the bill all about?
Last year, the FBI already warned that as technology evolves, the numbers of scammers are also increasing, with many of them using these crypto ATM machines to do their dirty work. The increased number of crypto ATM scams also leads to significant money losses for victims. According to the Federal Trade Commission, consumer losses in crypto ATM scams skyrocketed tenfold to around $114 million from 2020 to 2023. However, the number only includes reported losses, suggesting that the actual amount could be higher than that. It is also reported that many scammers use intimidation and manipulation to scare people outside of the crypto industry into dumping their life savings into the crypto ATMs. They usually posed as representatives from a bank or law enforcement agency and told the victims that they needed to withdraw a large amount of cash from their bank to pay (for missing jury duty, for example) and deposit it into a crypto ATM. Many victims of these types of scams are elderly people or new users who have limited knowledge and understanding of technology and the world of cryptocurrency.
This is why the Senate bill comes into play, as it is developed to be a solution for these kinds of problems. The proposed federal legislation includes several measures to protect consumers and reduce the chance of them being scam victims:
- Transaction limits: new users will have a transaction limit of $2,000 per day and $10,000 total over the first 14 days.
- Live confirmation: transactions above $500 will require live and verbal confirmation for new users.
- Refund policy: full refunds will be provided if a new user reports fraud within 30 days.
- Warnings: crypto ATM operators must provide clear warnings about the risk of fraud.
- Anti-fraud policy: operators must develop a comprehensive anti-fraud policy and appoint a chief compliance officer who will be responsible for this.
- Registration and disclosure: operators must provide receipts with sufficient information to trace transactions.
- Receipts: operators must provide receipts with sufficient information to trace the transaction.
The top Democrat on the Senate Judiciary Committee, Durbin, stated that it is important to be aware that as technology evolves, the number of scammers is also increasing, and this bill would help curb the efficiency of these scams. Three states in the United States (Minnesota, California, and Vermont) have already set daily transaction limits for Bitcoin ATMs. The Senate bill states that it will defer to state regulations as long as they do not conflict with less stringent ones.
Response from ATM operators regarding the news
NBC News has asked three crypto ATM operators, including Bitcoin Depot, CoinFlip, and Athena Bitcoin, for comment on Durbin’s legislation. These companies operate the most Bitcoin ATMs in the United States. A spokesperson for CoinFlip reportedly responded in a statement that thousands use the kiosks daily for legitimate transactions, calling them critical to the cryptocurrency sphere and fully in support of the legislation’s decision to include strong and consistent protections for consumers while still preserving their right to access digital currencies at the same time. Other crypto ATM operators have also expressed support for efforts to crack down on scams in letters to Congress, with some noting that their current safeguards already go above and beyond to protect consumers.
The conclusion
Senator Durbin’s legislation is one of the first proposals focused on crypto regulation in the 119th session of Congress, following several stablecoin-related proposals in the House and Senate. However, it remains unclear whether this legislation, backed by the Democratic Party, will gain enough support to pass in the Republican-controlled Congress and be signed into law by the current President. This legislation is potentially an important step in creating better regulations to tackle fraud in the growing crypto industry, as well as protect consumers, especially those vulnerable to fraud.
