- To reduce scams and fraud, California will introduce new rules around Bitcoin ATMs.
- The bill caps daily withdrawals at US $1,000 for users and mandates operators to work closely with regulators.
- The industry has criticised the rules, arguing they don’t adequately address fraud and stifle innovation.
Governor Gavin Newsom has just signed into law a new bill regulating Bitcoin (BTC) ATMs in California. The bill mandates that the so-called “digital financial asset transaction kiosks” set a maximum daily withdrawal limit for users. The move comes as a measure to counter scams and fraud related to crypto.
New Law Coming into Effect
The bill seeks to regulate these kiosks such as Bitcoin ATMs often found in gas stations and grocery stores in California. It will place them under the oversight of the Department of Financial Protection and Innovation.
Set to take effect on January 1, 2025, the bill specifies that kiosk operators cannot accept or dispense more than US $1,000 ($1,578) in a single day to any individual customer.
Before conducting any transaction, operators are mandated to provide a written disclosure detailing the terms and conditions of the transaction, which includes the amount of the digital financial asset involved.
This disclosure should be in both English and the language the operator predominantly uses for business interactions. Additionally, for every transaction, operators must give customers a receipt that states specific details like the customer’s name and the transaction date and time.
Operators are also required to submit a list of all their kiosk locations in the state to the department, which will then be made publicly available on the department’s website.
After visiting a crypto ATM in Sacramento, legislative members discovered markups of up to 33% on certain crypto assets compared to prices on crypto exchanges. An analysis found that crypto ATMs typically charge fees ranging from 12% to 25%.
Some ATMs had withdrawal limits reaching US $50,000 ($78,923) which led government officials to push for regulatory actions to control these high fees and limits. Currently, California houses 3,244 Bitcoin ATMs, as reported by Coin ATM Radar.
Additionally, California residents fell victim to scams involving crypto ATMs where they were tricked into depositing cash. The bill’s lower transaction limit has been praised by some victims, believing it provides time to recognise potential scams, as covered by the LA Times.
Charles Belle, acting Executive Director of the Blockchain Advocacy Coalition disagreed, “This bill fails to adequately address how to crack down on fraud, and instead takes a punitive path focused on a specific technology that will shudder the industry and hurt consumers, while doing nothing to stop bad actors.”
Bitcoin ATMs 10-Year Anniversary Amid Price Rally
Interestingly, California is home to the oldest Bitcoin ATMs in the world, with the first ever such machine installed in San Diego in 2013.
While 2023 marks the anniversary for Bitcoin ATMs, the entire crypto market is currently experiencing a sharp upturn. Bitcoin is leading the rally, and as of writing is up 10% in 24 hours as per CoinMarketCap. The number one asset is trading for US $33,048 ($52,183), slightly down from earlier when it passed the US $34k ($53k) mark.
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