In response to an increase in crypto fraud, lawmakers in California have introduced a new bill dubbed “Digital financial asset transaction kiosks,” which would limit daily withdrawals from cryptocurrency ATMs to $1,000. Furthermore, the proposal, which would take effect on January 1, 2024, seeks to cap operators’ fees at $5 or 15%.
The proposal aims to protect users by addressing the excessive fee charges and high withdrawal caps that are currently common in the state’s cryptocurrency ATM transactions. Lawmakers grew more concerned about the crypto ATMs after discovering machines in Sacramento that were selling assets at up to a 33% premium over regular exchange rates.
These ATMs currently charge costs that are beyond average for typical financial services, ranging from 12% to 25%. Furthermore, withdrawal caps were as high as $50,000 in certain instances, which posed serious risks, particularly for unsuspecting consumers who could fall victim to fraud.
Coin ATM Radar claims that there are over 3,200 Bitcoin ATMs in California, prompting an immediate response from the state’s lawmakers. Interestingly, Democratic senator Monique Limón said the proposed law “is about ensuring that people who have been frauded in our communities don’t continue to watch our state step aside” when serious problems arise.
The proposed bill would also require digital asset companies to apply for a license from the California Department of Financial Protection and Innovation by July 2025.
Cryptocurrency ATMs have grown in popularity since 2020. Despite being praised by some as an innovative financial service, regulators are concerned about the growing use of these machines for fraud and exploits. These ATMs help people exchange cash for their preferred cryptocurrency. But these transactions are hard to trace.
Fraudsters use crypto ATMs to deceive unsuspecting users. Some instances include persuading the victim to visit a local crypto ATM and deposit money for the cryptocurrency of their choice. According to the LA Times, some victims of crypto ATM fraud have applauded the proposed bill and claimed that the low transaction limit would give them time to figure out if they were being scammed.
However, cryptocurrency ATM operators have voiced their criticism of the bill, arguing that the policy could harm smaller businesses paying more for ATM space. They claim that the proposed bill is misdirected by focusing on technology rather than the real people who commit fraud. Some of the operators claimed the bill could end up stifling innovation.
