In an effort to curb the rising tide of fraudulent activity, California lawmakers have done just that introduced a measure called “Digital Financial Asset Transaction Kiosks.” The measure calls for a daily withdrawal limit of $1,000 at cryptocurrency ATMs. In addition, the bill proposes a cap on operator fees of $5 or 15%, whichever is greater, effective the year 2025. If passed, the bill would implement these regulations on January 1, 2024 to start.
The legislation followed a visit by legislative members to a cryptocurrency ATM in Sacramento. During the visit, they discovered markups on certain cryptocurrencies that were as much as 33 percent higher than their values on cryptocurrency exchanges. A subsequent study by lawmakers found that fees charged by a cryptocurrency ATM fluctuate between 12% and 25% on average.
Furthermore, government agencies discovered ATMs with withdrawal limits as high as $50,000, prompting them to take regulatory action to abolish such high premiums and withdrawal limits. With more than 3,200 ATMs accepting Bitcoin spread across California, according to Coin ATM Radar, the need for regulation is becoming increasingly tangible.
An additional facet of the law requires companies dealing in digital financial assets to obtain a license from the California Department of Financial Protection and Innovation by July 2025. The nature of transactions at crypto ATMs – exchanging physical money for cryptocurrencies – has made these kiosks fertile grounds for fraud and exploitation, while also being a favorite way for consumers to exchange cash for their favorite cryptocurrency.
The lack of a significant paper trail with each transaction, compared to traditional bank and banking transactions, further increases the potential for fraudulent activity. Recently, numerous locals have been caught up in scams where fraudsters convince their victims to deposit cash at nearby cryptocurrency ATMs in exchange for cryptocurrencies.
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