California Bill Aims to Curb Crypto ATM Scams with Withdrawal Cap

Legislators propose new bill to combat growing scams

Legislators in California have introduced a bill called "Digital financial asset transaction kiosks" in an effort to tackle the rising number of scams involving crypto ATMs. The bill proposes a cap on crypto ATM withdrawals at $1,000 per day. It would also limit operators' fees to $5 or 15% (whichever is higher), starting in 2025. If approved, the bill will go into effect on January 1, 2024.

High markups and withdrawal limits prompt regulatory action

The bill was introduced after legislative members visited a crypto ATM in Sacramento and discovered markups as high as 33% on certain crypto assets compared to their prices on crypto exchanges. On average, crypto ATMs charge fees ranging from 12% to 25%, according to a legislative analysis. Government officials also found ATMs with withdrawal limits as high as $50,000, prompting them to take action to address the issue.

License requirement for digital asset businesses

Another provision in the bill would require digital financial asset businesses to obtain a license from the California Department of Financial Protection and Innovation by July 2025.

Protecting consumers from scams

Crypto ATMs have become a popular method for exchanging cash for cryptocurrencies, but they have also become a target for scams and exploits due to the nature of the transactions involving hard cash. Some residents have fallen victim to scams where they are persuaded by scammers to deposit cash into nearby crypto ATMs for their chosen cryptocurrency. The proposed withdrawal cap is seen as a positive step by victims of these scams, as it will give them more time to realize if they are being deceived.

Concerns from crypto ATM businesses

However, crypto ATM businesses have expressed concerns about the bill, stating that it will negatively impact small operators who have to pay rent on their ATMs. They argue that the bill does not address the core issue of fraud and instead focuses on punishing a specific technology. They warn that such a move could harm the industry and consumers without effectively stopping bad actors.