North Dakota regulators are reviewing a bill to combat cryptocurrency ATM scams.
Legislators in North Dakota discussed House Bill 1447, which was presented to the state’s legislative assembly earlier this month.
The bill aims to set a limit on the number of daily withdrawals, regulate transaction fees, and require fraud warning notices to be displayed on cryptocurrency automated teller machines (ATMs) to protect residents from fraudulent financial schemes.
For those unfamiliar with the term, crypto ATMs are physical automated teller machines that allow users to convert cash into cryptocurrency and vice versa.
However, due to the lack of regulation surrounding these machines and the anonymity provided by cryptocurrency transactions, they have become increasingly vulnerable to abuse by fraudsters who use them to funnel illicit funds.
In 2023 alone, North Dakota residents submitted 103 complaints to the FBI regarding cryptocurrency scams, resulting in reported losses of $6.5 million, according to Lisa Kruse, Commissioner of the Department of Financial Institutions in North Dakota.
Reported losses are significantly higher when considering the most recent data from the Federal Trade Commission, which shows that the number of scam incidents in the United States has increased more than tenfold between 2020 and 2023.
As the bill’s primary sponsor, House Representative Steve Swiontek expressed concerns during the hearing about the current lack of regulations and protective measures, which make it easier for criminals to exploit cryptocurrency ATMs.
The bill proposes several safeguards, including a withdrawal limit of $1,000 per day and a cap on transaction fees at either $5 or 3% of the total transaction value, whichever is higher.
Additionally, the bill mandates that all cryptocurrency ATMs display fraud warning messages to inform consumers about common scam tactics and encourage them to report suspicious activity to law enforcement.
Users will also be notified of the irreversible nature of cryptocurrency transactions, making them aware that once funds are sent, recovery may not be possible.
Kiosk operators will be required to obtain a license, comply with money transmitter regulations under state law, and submit quarterly reports to the state commissioner.
Furthermore, operators must ensure that kiosks are installed in easily accessible commercial locations, accommodate users with mobility challenges, and incorporate adequate security measures such as proper lighting and surveillance.
The bill has received support from committee members and industry representatives, including Kevin Lolli, a representative from CoinFlip. While Lolli endorsed the bill’s consumer protection measures, he opposed the proposed payment and transaction limits.
Regulators worldwide have taken steps to tighten oversight of the cryptocurrency ATM industry in response to the growing number of fraud cases associated with these machines. Concerns over money laundering and unregulated enterprises remain a major focus.
On January 22, the Niagara Regional Police announced a similar initiative in Ontario, Canada, stating that they would collaborate with major kiosk operators to issue fraud warnings for cryptocurrency ATMs.
Meanwhile, authorities in Germany have conducted nationwide raids to crack down on unauthorized cryptocurrency ATM operations, seizing approximately $28 million in cash and 13 kiosks as part of the investigation.
