California is implementing measures to address the growing threat of crypto scams. The state legislature has introduced a new bill known as the “Digital Financial Asset Transaction Kiosks” bill, which aims to limit the cash withdrawal amount from crypto ATMs to $1,000 per individual.
Protecting Investors and Preventing Scams
The primary objective of this bill is to safeguard investors from scams and potential violence associated with crypto ATMs. Currently, there are over 3,200 crypto ATMs operating in the United States, with some allowing daily transaction limits of up to $50,000. This high limit makes these machines attractive for illicit activities.
Through their investigation, California legislators discovered that many crypto scams were facilitated using these ATMs. Criminals would coerce victims into depositing cash and sending funds using cryptocurrencies of the criminals’ choice. The bill aims to curb these activities and enhance security measures.
Addressing Charges and Markups
Furthermore, the bill also addresses the charges imposed by crypto ATM operators. It limits these charges to a maximum of $5 or 15% of the transaction amount, whichever is higher at the time of the transaction. Legislators found that crypto ATMs in Sacramento had markups of up to 33% on certain digital assets compared to their prices on cryptocurrency exchanges.
Additionally, a separate survey conducted by the legislative arm revealed that crypto ATMs charge between 12% and 25% for depositing and withdrawing fiat currencies.
Reassurance and Legislative Journey
Democratic State Senator Monique Limón emphasized that the bill is intended to reassure defrauded individuals in California that steps are being taken to address their concerns.
The proposed legislation still has a significant journey ahead. It is scheduled for full enactment on or before January 1, 2024, according to the California Legislative State Forum. Crypto ATM operators are expected to implement the necessary changes by 2025, allowing for a 12-month transition period for virtual asset service providers (VASPs).
Moreover, all crypto ATM operators will need to obtain a license with the Department of Financial Protection and Innovation by July 1, 2025. As part of the new requirements, crypto ATM owners must provide transaction receipts in English, including details such as the customer’s name, date and time of the transaction, name of the ATM operator, the amount of the crypto asset and its fiat equivalent, the spread amount, and the licensed crypto exchange used to calculate the spread.
