California legislators have introduced a new bill called “Digital financial asset transaction kiosks” that aims to address the growing issue of scams related to cryptocurrency ATMs. The proposed legislation includes a provision to cap crypto ATM withdrawals at $1,000 per day and 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.
The motivation behind this bill stems from a visit by legislative members to a crypto ATM in Sacramento, where they discovered markup rates 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. In addition, some ATMs had withdrawal limits as high as $50,000, prompting the need for regulatory measures to address these exorbitant fees and limits. Currently, there are over 3,200 Bitcoin ATMs in California, according to Coin ATM Radar.
Democratic State Senator Monique Limón, one of the co-authors of the bill, emphasized the importance of preventing fraud in local communities. She stated that the bill aims to ensure that the state takes action to protect individuals who have fallen victim to scams. Another key provision of the bill requires digital financial asset businesses to obtain a license from the California Department of Financial Protection and Innovation by July 2025.
The use of crypto ATMs as a method for exchanging cash for cryptocurrencies has gained popularity, but it has also become a breeding ground for scams and exploitation due to the anonymity and lack of traceability associated with hard cash transactions. Unlike bank transfers or wire transfers, crypto ATM transactions leave less of a paper trail.
Recent incidents involving residents being deceived by scammers have reinforced the need for this bill. Scammers typically persuade victims to visit nearby crypto ATMs to deposit cash for their desired cryptocurrency. Victims of such scams have lauded the proposed legislation, noting that the low transaction limit will provide them with sufficient time to recognize if they are being deceived, as reported by the LA Times.
However, crypto ATM businesses have expressed concerns about the negative impact of the bill, particularly on small operators who have expenses such as rent for their ATMs. These operators argue that the bill fails to address the root cause of fraud and instead takes a punitive approach targeting a specific technology. They caution that such measures could severely impact the industry and harm consumers without effectively tackling fraudulent activities.
In summary, the proposed “Digital financial asset transaction kiosks” bill in California aims to address the issue of scams associated with crypto ATMs by introducing caps on daily withdrawals and limiting operators’ fees. While some residents affected by ATM scams support the bill, crypto ATM businesses have raised concerns about its potential negative implications. The bill’s effectiveness in curbing fraudulent activities will ultimately depend on the balance struck between consumer protection and the sustainability of the crypto ATM industry.