Dozens of bills introduced in at least 15 states would require operators of crypto kiosks to register with state authorities, advise consumers of the volatility and risk inherent in alternative investment schemes and mandate the availability of live customer service agents.
In most cases, the bills would limit the amount of money a customer could spend at a crypto kiosk in a given day and cap the fees those machines could charge for transactions. Most of the bills would limit transactions to $1,000 a day per customer, and cap fees at $5 or between 3 percent and 15 percent of a transaction’s cost.
The bills come as state and federal law enforcement officials warn of a stark increase in the number of fraud schemes involving cryptocurrency. In a September report, the FBI said crypto fraud had cost Americans $5.6 billion in 2023, a 45 percent increase over the previous year.
“People are losing their savings,” Maryland Sen. Pamela Beidle (D) told Pluribus News. “The abuse is not happening when people go to the machines to purchase cryptocurrency. The problem arises when people are directed to send money for fraudulent stories, and their money is sent to a third party who is stealing it.”
Beidle’s legislation will be amended to cap transactions at $2,000 per day. It would restrict fees to $5 or 15 percent of a transaction’s cost, and it would require kiosk operators to collect personal information about users. Kiosks themselves would be required to display warnings about the risks of investing in alternative currencies.
Beidle said one of her constituents had been bilked out of $3,500 after receiving a scam call claiming he had missed grand jury duty. The caller had spoofed the phone number of the Baltimore County Sheriff’s Office to appear more official.
A similar bill in North Dakota that would limit payments to $2,000 for the first five transactions has won approval in the state House. Bills in Arizona and Hawaii have won committee approval. Other bills have been introduced in Colorado, Connecticut, Florida, Illinois, Iowa, Massachusetts, Oklahoma, Rhode Island, Texas and Washington.
The strictest version, introduced in New Jersey, would ban crypto kiosks altogether. The bill would set penalties of up to $10,000 for the first offense of operating such a kiosk.
Industry groups say they want to work with policymakers to reach a regulatory framework that both maintains access to the nascent cryptocurrency phenomenon while eliminating or curtailing the fraud that undermines crypto’s standing — and growth.
“It’s critical that policymakers work with industry early in the policymaking process to ensure that technical requirements are functional for crypto kiosk operators,” said Peter Herzog, who leads state and local government affairs for the Crypto Council for Innovation, an industry trade group.
Herzog said the industry is most wary of the New Jersey legislation to impose an outright ban on kiosks.
“We all have an interest in mitigating illicit activity across the financial space, but prohibiting kiosks will likely have unintended consequences, such as disrupting financial markets and preventing everyday users from accessing their funds,” he said.
In some cases, local law enforcement officials have testified in support of the bills. In a letter to Rhode Island’s House innovation and Technology Committee, Westerly Police Chief Paul Gingerella said his officers are increasingly investigating crypto-related scams.
“Criminals are exploiting unregulated and loosely monitored virtual currency kiosks to facilitate illicit transactions, launder money, and defraud Rhode Island residents,” Gingerella wrote. He said efforts to work with kiosk operators frequently met with indifference and no cooperation.
Many of the bills are backed by AARP, which warns about crypto scams that target the elderly. Of the 5,500 complaints over crypto kiosks filed with the FBI in 2023, nearly half came from people over 60, the group said.
Rhode Island’s bill would require operators to file quarterly reports with the state. It would mandate disclosures of risk and volatility in the crypto markets.
“Crypto ATMs are unfortunately an increasingly common way for criminals to get away with their ill-gotten gains and without increased regulation, this trend will only accelerate,” Rhode Island Sen. Victoria Gu (D) said in a statement.
Bills in Florida, Illinois and Massachusetts would require kiosk operators to use blockchain analytics to prevent fraud. A Colorado version would require operators to offer victims a full refund if transactions are deemed fraudulent.
The global cryptocurrency market, which includes thousands of separate currencies called coins, is worth about $3.3 trillion, according to Forbes. About one in six Americans say they have invested in, traded or used a cryptocurrency, according to a Pew Research Center survey from October. That number is far higher among men (25 percent), and especially younger men under the age of 30 (42 percent).
The rise in popularity of cryptocurrency, especially as the value of the most popular token, Bitcoin, has jumped to nearly $100,000, has attracted a huge spike in scams. Annual estimates of scam activity have grown by an average of 24 percent a year, according to Chainalysis, a crypto market research firm.
Only a few states have adopted laws to regulate crypto kiosks, according to the Stevens Center for Innovation in Finance at Penn’s Wharton School of Business. Vermont Gov. Phil Scott (R) signed legislation in 2022 requiring kiosk operators to be registered and licensed.
Banking regulators in Pennsylvania, Idaho, Connecticut and South Carolina have concluded that current laws that apply to regular ATMs do not cover crypto kiosks.
This story was first published in Pluribus News. Read the original here.
