California lawmakers have proposed a new bill titled “Digital Financial Asset Transaction Kiosks,” which would set a cryptocurrency ATM withdrawal limit of $1,000 per day due to the rise in scams. Additionally, starting in 2025, the law will limit merchants’ commissions to $5 or 15% of the amount (whichever is greater). The bill, if passed, will take effect on January 1, 2024.
The bill was introduced after members of the legislature visited a cryptocurrency ATM in Sacramento and found a price increase of up to 33% in some cryptocurrency assets compared to their prices on cryptocurrency exchanges. On average, a cryptocurrency ATM charges fees from 12% to 25%, according to a legislative analysis.
Government officials also found ATMs with limits of up to $50,000, prompting them to take regulatory action to prevent such price gouging and high withdrawal limits. According to Coin ATM Radar, there are more than 3,200 Bitcoin (BTC) ATMs in California.
Democratic Senator Monique Limon, who co-authored the proposed legislation, said the “new bill seeks to ensure that people who have been defrauded in our communities do not continue to see our state as fell” when real problems occur.
Another provision of the bill would require digital financial asset companies to obtain a license from the California Department of Financial Protection and Innovation by July 2025.
Cryptocurrency ATMs are a popular way for people to exchange money for their preferred cryptocurrency, but they have become a hotbed for scams and exploitation due to the nature of the transactions (ie cash). Unlike bank and wire transfers, it eliminates the possibility of leaving a trace.
Some residents have recently been caught in scams where the scammer lures the victim to go to nearby cryptocurrency ATMs and deposit money for the cryptocurrency of their choice. Victims of ATM scams applauded the move and said the lower transaction limit would give them time to realize if they were being scammed, the LA Times reported.
Meanwhile, cryptocurrency ATM companies say the new bill will hurt small operators who have to pay rent for their ATMs. Businesses noted that the bill does not address the main problem of scams and instead follows a punitive approach focused on a specific technology. They warned that such a move would shake up the industry and harm consumers without deterring malicious actors.