In response to increasing scams, California lawmakers have proposed a new bill titled “Digital financial asset transaction kiosks” that would limit daily crypto ATM withdrawals to $1,000.
In addition, beginning in 2025, the law would cap operators’ fees at either $5 or 15%, whichever is greater. If approved, the measure would take effect on January 1, 2024.Â
Legislators introduced the bill after visiting a crypto ATM in Sacramento and discovering markups as high as 33 percent on some crypto assets compared to their prices on crypto exchanges. According to a legislative analysis, the average fees charged by a cryptocurrency ATM range between 12 and 25 percent.Â
In addition, government officials discovered ATMs with withdrawal limits as high as $50,000, prompting them to take regulatory action to limit such excessive premiums and withdrawal limits. According to Coin ATM Radar, California has over 3,200 Bitcoin ATMs.
Democratic State Senator Monique Limón, co-author of the proposed legislation, stated that the “new bill is about ensuring that people who have been victimized by fraud in our communities do not continue to see our state turn a blind eye” when genuine problems occur.
Another bill provision would require businesses in digital financial assets to acquire a license from the California Department of Financial Protection and Innovation by July 2025.
Due to the nature of transactions (i.e., hard cash), crypto ATMs have become a hub for scams and exploits. However, they are a popular method for people to exchange some money for the cryptocurrency of their choice. In contrast to bank and wire transfers, each transaction leaves a smaller paper trace.
Some residents have recently fallen victim to schemes in which the perpetrator convinces the victim to visit a nearby crypto ATM and exchange cash for the victim’s preferred cryptocurrency.
According to the LA Times, some victims of ATM fraud have praised the measure and said the low transaction limit would give them time to determine if they are being duped.
On the other hand, crypto ATM businesses asserted that the new legislation would damage small operators who must pay rent for their ATMs.
The operators pointed out that the measure fails to address the root cause of the fraud and instead takes a punitive approach focused on a particular technology. They warned that such a move would tremble the industry, harm consumers, and do nothing to deter criminals.
