North Dakota regulators are debating a bill that introduces consumer protections to combat scams involving cryptocurrency ATMs.
During a Jan. 22 hearing, lawmakers in North Dakota discussed House Bill 1447, introduced to the state’s legislative assembly earlier this month, which seeks to cap daily withdrawals, regulate transaction fees, and mandate fraud warning notices on crypto ATMs to safeguard residents from financial scams.
For those unfamiliar, crypto ATMs are kiosks at physical locations that allow users to convert cash into cryptocurrencies and vice versa. However, the limited regulation surrounding these machines and the anonymity provided by cryptocurrency transactions have made them increasingly susceptible to exploitation by scammers, who use them as a channel for funneling illicit loot.
According to Lisa Kruse, North Dakota’s Department of Financial Institutions Commissioner, locals filed 103 crypto scam complaints with the FBI in 2023 alone, resulting in reported losses of $6.5 million.
Reported losses are much higher when considering the latest Federal Trade Commission data, which shows that scam incidents in the United States have surged over tenfold between 2020 and 2023.
At the hearing, House Representative Steve Swiontek, the primary sponsor of the bill, raised concerns over the current lack of regulations and protection measures that make it easier for criminals to exploit crypto ATMs.
What is House Bill 1447?
The bill seeks to put in place various protection measures, such as capping daily withdrawals at $1,000 and limiting transaction fees to $5 or 3% of the transaction amount, whichever is higher.
Additionally, it mandates that all crypto ATMs display fraud warning notices to alert users of common scam tactics and advise them to contact law enforcement if they suspect fraudulent activity. Users will also be notified of the irreversible nature of crypto transactions so they’re aware that funds, once sent, may not be recoverable.
Meanwhile, Kiosk operators will be required to acquire a license, comply with requirements applicable to money transmitters under state law, and submit quarterly reports to the state commissioner.
They must also ensure that kiosks are placed in commercially accessible areas, are accessible to users with mobility limitations, and are equipped with adequate security measures such as proper lighting and surveillance.
The bill has received support from committee members and industry representatives, including Kevin Lolli from CoinFlip, who backed its consumer protection measures but was against the transaction limits and fee caps.
Regulatory efforts
With crypto ATM-related fraud cases on the rise, regulators all across the globe have moved to tighten oversight of the sector. Concerns over money laundering and unregulated operations also remain at the forefront.
The Niagara Regional Police announced a similar initiative on Jan. 22 where it said it would collaborate with major kiosk operators in Ontario, Canada, to issue warnings on crypto ATM machines.
Meanwhile, in Germany, authorities reported carrying out nationwide raids to crack down on unlicensed crypto ATM operations. Roughly $28 million in cash and 13 kiosks were seized as a part of the effort.
