California legislators have proposed a new bill named "Digital Financial Asset Trading Kiosks" with measures to address the proliferation of scams involving cryptocurrency ATMs. The bill, if approved, will impose a daily withdrawal limit of $1,000 at crypto ATMs and will cap carrier fees at $5 or 15% starting in 2025, depending on which amount is higher. This legislation is set to become effective from January 1, 2024.
The decision to introduce this bill came after lawmakers visited a crypto ATM in Sacramento and discovered significant markups of up to 33% on certain cryptocurrencies when compared to exchange prices. On average, cryptocurrency ATMs already charge fees ranging from 12% to 25%, according to legislative analysis. High ATM withdrawal limits of up to $50,000 also raised concerns, leading to regulatory actions aimed at curbing such high fees and withdrawal limits. As per data from Coin ATM Radar, California is home to more than 3,200 Bitcoin ATMs.
Democratic state Sen. Monique Limon, a co-author of the bill, emphasized its goal of protecting people from fraud within the crypto community. The bill also mandates digital financial asset businesses to obtain licenses from the California Department of Financial Protection and Innovation by July 2025. Cryptocurrency ATMs provide an accessible way for individuals to exchange cash for digital assets, but their cash nature has made them vulnerable to scams and exploitation. Each transaction through these ATMs leaves fewer traces than traditional banking methods, making it a prime target for scammers.
Recent incidents involving ATM scams have led to support for this bill among some residents. The bill's proposal for lower transaction limits is seen as a way to provide victims with more time to realize they have fallen victim to a scam. However, cryptocurrency ATM businesses have raised concerns about the bill, suggesting that it will negatively impact smaller operators who have rental expenses for their ATMs. These operators argue that the bill fails to address the root issue of fraud and takes a punitive approach targeting specific technologies. They argue that it will disrupt the industry, harm consumers, and not effectively deter bad actors.
