New Legislation Targets Crypto ATM Fraud
Illinois Senator Dick Durbin introduced a new legislative proposal on Tuesday aimed at implementing extensive regulations on the country’s cryptocurrency ATM sector. These machines have faced heightened scrutiny recently, particularly due to their use in scams that have resulted in victims losing significant sums of money during a single transaction.
Proposed Restrictions on Transactions
The proposed Crypto ATM Fraud Prevention Act seeks to limit new users from spending beyond $2,000 in a single day or $10,000 within a two-week timeframe when purchasing cryptocurrency at these ATMs. Additionally, the legislation mandates that companies must communicate directly with new customers attempting to complete transactions exceeding $500. Furthermore, it would require full refunds for users who report incidents to the police and notify operators within a 30-day window following their transaction.
Scammers Targeting Vulnerable Populations
In a statement, Durbin, who serves as the leading Democrat on the Senate Judiciary Committee, emphasized the evolving tactics of scammers alongside advancements in technology. He pointed out that malicious individuals are increasingly using intimidation and manipulation, particularly targeting seniors, to coerce them into investing their life savings into cryptocurrency ATMs. He stressed that the proposed bill aims to diminish the effectiveness of these deceptive practices.
Significant Financial Losses Reported
In 2023, the Federal Trade Commission reported at least $114 million in losses linked to scams involving bitcoin ATMs. Advocacy groups and law enforcement officials have highlighted that older adults are especially susceptible to such fraudulent schemes. Previous reports have indicated that these scams have surged due to a lack of regulatory oversight. Many victims have been misled into believing they faced legal repercussions or owed fines for missing jury duty.
A Personal Account of Deception
Eric Reisman, a 67-year-old retired special education teacher, shared his experience of falling victim to a jury duty scam earlier this year. The Baltimore County resident recounted losing $7,000 after he believed he was paying a fine through a bitcoin ATM. Reisman mentioned that he might have overlooked a warning displayed on the machine. “I felt entranced, that’s the best way to describe it,” he remarked. He suggested that an interaction with a customer service representative could have helped him realize the gravity of the situation sooner.
Growing Accessibility of Bitcoin ATMs
The introduction of this Senate bill coincides with the increasing availability of bitcoin ATMs, which have appeared in gas stations and grocery stores across the United States. Consumer advocacy groups have been calling for federal oversight of the industry, and at least three states—Minnesota, California, and Vermont—have already instituted daily transaction limits for these machines. The proposed legislation would respect state regulations as long as they do not conflict with or are less stringent than federal rules.
Senate Inquiry into Bitcoin ATM Operators
Last fall, Durbin spearheaded an inquiry involving several Democratic senators to investigate how the country’s ten largest bitcoin ATM operators were safeguarding elderly users against scams. The companies responded by stating that they required users to acknowledge warnings about potential fraud and that most imposed daily transaction limits around $25,000.
Industry Response to Proposed Regulations
Inquiries were made to three major crypto ATM operators—Bitcoin Depot, CoinFlip, and Athena Bitcoin—regarding Durbin’s proposed legislation. According to the Coin ATM Radar website, these companies manage the highest number of bitcoin ATMs in the United States. A spokesperson from CoinFlip highlighted that their kiosks are utilized daily for legitimate transactions, labeling them as essential to the cryptocurrency ecosystem. They expressed support for legislation that includes robust consumer protections while also preserving access to digital currencies. Bitcoin Depot chose not to comment, and Athena Bitcoin did not respond immediately.
Challenges in Regulation Enforcement
When similar regulations have been discussed at the state level, some companies have contended that scammers could circumvent restrictions by directing victims to multiple locations. Should the bill be enacted, the Treasury Department would have the authority to impose fines of $10,000 for each day companies fail to comply with regulations.
Endorsements for Legislative Action
Americans for Financial Reform, among other watchdog organizations, has endorsed the newly proposed legislation. Mark Hays, associate director for cryptocurrency and financial technology, described the initiative as a “positive first step” toward addressing practices within the crypto sector that have enabled fraudulent activities to thrive. He acknowledged that while the bill may not resolve all issues, it holds the potential to make a meaningful difference.
