California is taking steps to crack down on scams that abuse Bitcoin ATMs to defraud victims of thousands of dollars.
Starting in January, cryptocurrency ATM transactions in California will be limited to $1,000 per person per day under a new law signed by Governor Gavin Newsom, according to a report in the Los Angeles Times.
The new law specifically states,
“An operator may not accept or distribute more than one thousand dollars ($1,000) per day from or to a customer through a digital financial asset transaction kiosk.”
The move comes as California prepares to implement a broader regulatory framework for cryptocurrency companies by 2025 under the Digital Financial Assets Law recently passed by Newsom.
That law requires crypto companies to obtain a state license and adhere to strict audit and recordkeeping requirements. The shift marks a change for Newsom, who vetoed a crypto regulation bill over concerns about adapting to the evolving landscape.
Meanwhile, the Bitcoin ATM limits are intended to give fraud victims more time to realize they are being scammed before transferring large sums of cash in cryptocurrency, which is difficult to trace – the Los Angeles Times cited the case of a man from San Jose who was tricked into depositing $15,000 into a Bitcoin ATM.
While crypto industry advocates argue the law will harm consumers, consumer groups say it is needed to combat rising cryptocurrency ATM fraud. According to the Federal Trade Commission, more than 46,000 people reported losing more than $1 billion to crypto fraud last year.
According to the Los Angeles Times, there are currently more than 3,200 bitcoin ATMs operating in California.
Specific legislation.
The new law, Assembly Bill 39, defines a “digital financial asset transaction kiosk” as a device that accepts or dispenses cash in exchange for cryptocurrency.
Beginning January 1, 2025, operators of these machines will be prohibited from charging fees greater than $5 or 15% of the transaction, whichever is greater.
Operators will also be required to provide customers with information about the terms of each transaction, including the crypto amount, dollar amount, fees charged, and the difference between the operator’s price and the price on a licensed crypto exchange.
Customers should receive a receipt with the transaction information, including the name of the licensed exchange used to calculate the price spread.
Operators must provide the California Department of Financial Protection and Innovation with a list of all kiosk locations and update the list within 30 days of any changes.
The law also requires operators to comply with California digital asset licensing requirements after July 1, 2025 or ensure that third parties using their kiosks have obtained a state crypto license.
The measures are intended to increase oversight and transparency around cryptocurrency ATMs in California. The legislation won’t come into effect until the broader crypto regulatory bill AB 39 comes into effect on January 1, 2024.