California Legislators Seek Stricter Regulations on Crypto ATMs

According to a recent report, California legislators are pressing for legislation to tighten regulations on cryptocurrency ATMs. The new proposal restricts transaction fees and imposes a $1,000 daily withdrawal limit.

These modifications, set to take effect on January 1, 2024, aim to safeguard consumers by addressing the excessive fee markups and high withdrawal limits that are currently prevalent in the state’s cryptocurrency ATM transactions.

The discovery of crypto ATMs in Sacramento that offered assets at a markup of up to 33% relative to standard exchange rates heightened legislators’ concerns.

Currently, the fees charged by these machines range from 12 to 25 percent, which is considerably higher than the norm for traditional financial services.

Moreover, withdrawal limits reached $50,000 in some instances, posing significant risks, particularly for uninformed users susceptible to fraud.

The regulations proposed by state senator Monique Limón, a Democrat, are a response to these alarming findings. In addition to instituting a daily withdrawal limit, the measure stipulates that, beginning in 2025, operators may charge no more than $5 or 15 percent of the transaction amount.

This measure aims to prevent consumers from falling victim to the exorbitant fees that dominate this segment of the cryptocurrency market.

The legislative package exceeds imminent financial limitations. By July 2025, a license from the California Department of Financial Protection and Innovation will be required for all digital financial asset businesses.

This measure will ensure tighter oversight, potentially reducing the number of fraudulent activities frequently orchestrated around these terminals due to the anonymity that cash transactions provide.

In contrast to bank and wire transfers, fraud involving crypto ATMs frequently exploits the absence of a digital trail. As a result, victims have become entangled in schemes and have lost significant amounts of money.

Residents who have fallen victim to such scams have praised the proposed legislation and acknowledged that reduced transaction limits might offer a crucial window of time for reflection to spot potential fraud.

However, cryptocurrency ATM operators are opposed to the measure. Due to the rent they pay for ATM locations, the regulations may damage smaller businesses.

They argue that the focus of the legislation is misplaced, as it focuses on technology rather than the actual fraud perpetrators.

The industry warns that stifling these innovations could backfire, harming consumers and allowing evil actors to flourish.