A new legislative investigation found some crypto ATMs charging a premium as high as 33%, while a few ATMs had limits of up to $50,000.
California legislators have proposed a new bill titled “Digital financial asset transaction kiosks,” calling for a cap on crypto ATM withdrawals of $1,000 per day in light of growing scams. Additionally, starting in 2025, the law would limit operators' fees to $5 or 15% (whichever is higher). The bill, if approved, would come into effect on January 1, 2024.
The bill was introduced after legislative members visited a crypto ATM in Sacramento and found markups as high as 33% on some crypto assets compared to their prices on crypto exchanges. On average, a crypto ATM charges fees between 12% and 25%, according to a legislative analysis.
Government officials also found ATMs with limits as high as $50,000, prompting them to take regulatory measures to curb such high premiums and withdrawal limits. There are more than 3,200 Bitcoin (BTC) ATMs in California, according to Coin ATM Radar.
Democratic state Senator Monique Limón, who co-authored the proposed legislation, said the “new bill is about ensuring that people who have been frauded in our communities don’t continue to watch our state step aside" when there are real issues happening.
Another provision of the bill would require digital financial asset businesses to obtain a license from the California Department of Financial Protection and Innovation by July 2025
Crypto ATMs are a popular way for people to exchange cash for their choice of cryptocurrency, but have become a hub for scams and exploits because of the nature of transactions (i.e., hard cash). Unlike bank and wire transfers, this eliminates the possibility of leaving a trail.
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Some residents have recently been caught up in such scams where the scammer has persuaded the victim to go to the nearby crypto ATMs and deposit cash for the crypto of their choice. The victims of the ATM scam have lauded the move and said the low transaction limit will give them time to realize if they are being duped, reported the LA Times.
On the other hand, crypto ATM businesses said the new bill would harm the small operators who must pay rent on their ATMs. The operators noted that the bill fails to address the core issue of the fraud and instead takes a punitive path focused on a specific technology. They warned such a move would shudder the industry and hurt consumers while doing nothing to stop bad actors.
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