North Dakota mulls bill to safeguard consumers from crypto ATM scams

North Dakota regulators are debating a bill that introduces consumer protections to combat scams involving cryptocurrency ATMs.

On January 22 audienceNorth Dakota lawmakers discussed Parliamentary Bill 1447introduced to the state Legislature earlier this month, which aims to cap daily withdrawals, regulate transaction fees and impose fraud warnings on crypto ATMs to protect residents from financial scams.

For those who don’t know, crypto ATMs are kiosks located in 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 make them increasingly vulnerable to exploitation by fraudsters, who use them as a conduit to transport illicit loot.

According to Lisa Kruse, commissioner of the North Dakota Department of Financial Institutions, residents 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 datawhich shows that scam incidents in the United States increased tenfold between 2020 and 2023.

During the hearing, House Representative Steve Swiontek, the bill’s lead sponsor, expressed concerns about the current lack of regulations and safeguards that make it easier for criminals to exploit crypto ATMs .

What is Bill 1447?

The bill aims to put in place various protections, such as capping daily withdrawals at $1,000 and limiting transaction fees to $5 or 3% of the transaction amount, whichever is greater.

Additionally, it requires all crypto ATMs to 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 informed of the irreversible nature of crypto transactions so that they are aware that funds, once sent, may not be recoverable.

During this time, kiosk operators will be required to acquire a license, comply with requirements for 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 reduced mobility, and are equipped with adequate security measures such as appropriate lighting and monitoring.

The bill received support from committee members and industry representatives, including Kevin Lolli of CoinFlipwho supported his consumer protection measures but was against transaction limits and fee caps.

Regulatory Efforts

With crypto ATM linked cases of fraud are increasingregulators around the world have decided to strengthen supervision of the sector. Concerns about money laundering and unregulated operations also remain in the foreground.

Niagara Regional Police announcement a similar initiative on January 22, in which it announced that it would work with major kiosk operators in Ontario, Canada, to issue warnings on crypto ATMs.

Meanwhile, in Germany, authorities reported conducting nationwide raids to crack down on unlicensed crypto-ATM operations. Approximately $28 million in cash and 13 kiosks were seized as part of the operation.