California Targets Crypto ATM Scams With New $1,000 Daily Withdrawal Rule


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


These changes, set for implementation on January 1, 2024, aim to protect consumers by addressing exorbitant fee markups and high withdrawal caps currently prevalent in the state’s crypto ATM transactions.


California Bill Targets High Crypto ATM Fees


Legislators’ concerns heightened after discovering crypto ATMs in Sacramento offering assets with up to a 33% markup compared to standard exchange prices. Currently, these machines impose fees ranging from 12% to 25%, significantly above the norm for traditional financial services. Moreover, withdrawal limits reached $50,000 in some cases, presenting substantial risks, especially for uninformed users susceptible to scams.


The proposed regulations, championed by Democratic state Senator Monique Limón, respond to these alarming findings. Besides introducing a daily cap on withdrawals, the bill mandates that, from 2025, operators can charge only $5 or 15% of the transaction amount. This measure seeks to prevent consumers from falling prey to the shocking fees currently dominating this segment of the cryptocurrency market.


License Push Aims to Curb Fraud


The legislative package goes beyond immediate financial restrictions. By July 2025, all digital financial asset businesses will need a license from the California Department of Financial Protection and Innovation. This step will ensure closer oversight, potentially reducing fraudulent activities frequently orchestrated around these kiosks due to the anonymity hard cash transactions provide.


Unlike bank and wire transfers, scams involving crypto ATMs often exploit the lack of a digital trail. Consequently, victims have found themselves ensnared in schemes, losing substantial funds. Residents affected by such deceptions have praised the proposed bill, acknowledging that reduced transaction limits could provide a crucial reflection period to identify potential fraud.


However, the bill faces criticism from crypto ATM operators. The regulations might harm smaller companies due to the rent they pay on ATM spaces. They contend that the legislative focus is misplaced, targeting the technology instead of the actual fraud perpetrators. The industry warns that stifling these innovations could backfire, harming consumers and giving free rein to bad actors. 


Source : CoinGape / October 23, 2023 logo


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