California Proposes $1,000 Crytpo ATM Cap

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  • California legislators have introduced a bill to regulate cryptocurrency ATM transactions, setting a $1,000 daily withdrawal limit, effective in 2024.
  • Concerns about scams and excessive markups, with fees ranging from 12% to 25%, prompted the legislation.
  • Victims of ATM scams support the bill, but crypto ATM businesses argue it may harm small operators and doesn’t address the root cause of fraud.

California legislators have put forward a new bill aiming at regulating cryptocurrency ATM transactions by imposing a daily withdrawal cap of $1,000. The bill, entitled “Digital financial asset transaction kiosks,” would come into force in 2024, with legislation also restricting operator fees to $5 or 15%, whichever is higher, in 2025. The proposal follows lawmakers’ concerns about the prevalence of scams associated with crypto ATMs, with analysis also showing that operators are making an exorbitant markup on their operation.

Huge Markups and Massive Daily Limits

The desire to cap the withdrawals of crypto ATM machines was made clear to legislative members when they recently visited a few such kiosks in Sacramento and discovered exorbitant markups of up to 33% on certain cryptocurrencies compared to their market prices on exchanges. On average, these ATMs impose fees ranging from 12% to 25%, according to this analysis.

Government officials also encountered crypto ATMs with withdrawal limits as high as $50,000, prompting them to introduce regulatory measures to curb these high premiums and withdrawal restrictions. California is home to more than 3,200 Bitcoin ATMs, according to data from Coin ATM Radar.

Democratic State Senator Monique Limón, a co-author of the bill, emphasized the legislation’s objective of protecting individuals from fraudulent activities within the community. She stressed the importance of addressing real issues and preventing the state from turning a blind eye to ongoing problems.

Another key provision within the bill entails digital financial asset businesses needing to secure a license from the California Department of Financial Protection and Innovation by July 2025.

Crypto ATMs Are Scam Magnets

Cryptocurrency ATMs have gained popularity as a means for people to exchange cash for their chosen digital currencies. However, they have also become a hotspot for scams and fraudulent activities due to the anonymity associated with cash transactions, making it harder to trace perpetrators. Victims of recent ATM scams have expressed support for the bill, as the proposed transaction limit would provide them with more time to recognize fraudulent schemes.

Conversely, crypto ATM businesses have raised concerns that the legislation could adversely affect small operators who incur costs associated with leasing their ATMs. These operators argue that the bill does not effectively address the root cause of fraud and instead adopts a punitive approach focused on a specific technology. They warn that such a move could negatively impact the industry, harm consumers, and ultimately fail to deter bad actors.