Banning virtual currency kiosks is no solution to fraud

Opinion by: Bill Repasky, lawyer astatine Frost Brown Todd LLP

With much than 55 cardinal Americans present utilizing cryptocurrency successful their regular lives, cryptocurrencies person go an integral constituent of our nation’s fiscal system. 

Just similar accepted ATMs, tens of thousands of virtual currency kiosks — besides known arsenic Bitcoin ATMs — person popped up successful communities astir the United States to enactment cryptocurrency transactions, from converting currency into crypto to buying and selling coins. The transition of the GENIUS Act whitethorn enlarge the public’s request for Bitcoin ATMs arsenic stablecoins are introduced.

Unfortunately, arsenic with immoderate caller technology, scammers person learned however to usage these tools to perpetrate fraud. Hoping to support residents, immoderate localities person responded by banning these kiosks altogether. 

This isn’t a applicable oregon effectual solution — and it presents a existent menace to each users and operators wrong the cryptocurrency ecosystem. 

Thankfully, determination are better, proven ways to combat crypto scams that sphere this important fiscal infrastructure.

The emergence of crypto ATM scams

Many crypto ATM scams impact persuasive criminals masquerading arsenic authorization figures, luring their victims into reasoning they request to urgently manus implicit ample sums of wealth via cryptocurrencies similar Bitcoin to debar jailhouse oregon immoderate different catastrophe. The FinCEN Notice of Aug. 4, 2025, FIN-2025-NTC1, explores communal fraud schemes successful detail. 

These scammers instrumentality susceptible radical into converting fiat wealth into cryptocurrency astatine the kiosks, often straight into the scammer’s wallet — an enactment that is irreversible and often untraceable. 

When introducing the Crypto ATM Fraud Prevention Act, for example, Senator Dick Durbin relayed a communicative of a constituent who was tricked by a transgression impersonating instrumentality enforcement into making a $15,000 deposit astatine a crypto ATM. 

According to the FBI’s 2024 Internet Crime Report, determination were much than 10,956 complaints of crypto ATM fraud totaling $246.7 cardinal successful losses past twelvemonth — a 99% and 31% summation from 2023, respectively. While this is conscionable a tiny constituent of the $12.5 billion consumers mislaid to fiscal fraud successful 2024, it’s intelligibly a increasing occupation that needs to beryllium addressed.  

The occupation with broad bans

Spokane, Washington made waves erstwhile it banned crypto ATMs completely, a determination the metropolis assembly claimed would assistance support residents and forestall fraud. 

This strategy is overmuch similar banning email to destruct phishing attempts oregon prohibiting aged radical from buying acquisition cards to support them from falling into the hands of scammers.

Fraud is yet palmy due to the fact that it exploits quality vulnerabilities, not due to the fact that of immoderate 1 technology. Banning crypto ATMs, alternatively than focusing connected ways to mitigate the hazard of scams, volition conscionable pb victims to implicit the fraudulent transaction successful different ways.

Practical solutions for minimizing fraud

Intercepting the scam astatine the constituent erstwhile a unfortunate is astir to implicit the transaction is often a much effectual solution — meaning crypto ATMs tin beryllium a cardinal instrumentality for preventing fraud. This involves informing users that they should not prosecute successful transactions with radical posing arsenic instrumentality enforcement oregon different trusted individuals. It tin besides mean informing users that cryptocurrency transactions cannot beryllium reversed and are often untraceable. Providers tin besides connection tailored warnings of antithetic enactment based connected idiosyncratic profiles.

Related: Crypto ATM limits and bans expanse crossed US: Here’s why

These types of interventions person proven palmy with different types of fiscal fraud, similar ligament transfers oregon adjacent regular ATM withdrawals. Reputable crypto ATM operators are already staying abreast of the latest scams and idiosyncratic preferences, utilizing their expertise to instrumentality effectual fraud prevention tactics portion inactive serving customers’ banking needs.

State regulators tin besides play an indispensable role, making licensure for crypto ATMs conditional connected implementing effectual fraud informing rules and protocols for idiosyncratic interactions. These uniformly enforced regulations volition compel operators to vie for concern by providing a superior idiosyncratic experience, alternatively than compromising connected safety. 

Some legislators are adjacent taking this attack proactively, earlier locals brushwood fraud. For example, the municipality of Grosse Pointe Farms, Michigan preemptively enactment successful spot registration and informing requirements connected crypto ATMs (even though determination aren’t immoderate successful the municipality yet), which the metropolis assembly said would connection “a small spot of help” and transparency for residents, particularly those who mightiness beryllium unfamiliar with cryptocurrency oregon unaware of communal scams. 

Protecting consumers, unleashing innovation 

Blanket bans connected virtual currency kiosks volition ne'er lick the age-old fraud problem. Scammers volition find different ways to scope their victims, but the millions of cryptocurrency users astir the state volition suffer entree to this important fiscal infrastructure. 

Instead, acrophobic regulators should promote ATM operators to leverage proven fraud prevention techniques to interrupt fraudsters and support prospective victims from making a mistake. These tools connection a smarter approach, 1 that some protects consumers and preserves the breathtaking possibilities of cryptocurrency.

Opinion by: Bill Repasky, lawyer astatine Frost Brown Todd LLP.

This nonfiction is for wide accusation purposes and is not intended to beryllium and should not beryllium taken arsenic ineligible oregon concern advice. The views, thoughts, and opinions expressed present are the author’s unsocial and bash not needfully bespeak oregon correspond the views and opinions of Cointelegraph.