Blanket crypto ATM bans punish legitimate users while fraudsters adapt. Smart warning systems at kiosks could intercept scams in progress.
Opinion
Opinion by: Bill Repasky, attorney at Frost Brown Todd LLP
With more than 55 million Americans now using cryptocurrency in their daily lives, cryptocurrencies have become an integral component of our nation’s financial system.
Just like traditional ATMs, of virtual currency kiosks — also known as — have popped up in communities around the United States to support cryptocurrency transactions, from converting cash into crypto to buying and selling coins. The passage of the Act may enlarge the public’s demand for Bitcoin ATMs as stablecoins are introduced.
Unfortunately, as with any new technology, scammers have learned how to use these tools to commit fraud. Hoping to protect residents, some localities have responded by .
This isn’t a practical or effective solution — and it presents a real threat to all users and operators within the cryptocurrency ecosystem.
Thankfully, there are better, proven ways to combat crypto scams that preserve this important financial infrastructure.
The rise of crypto ATM scams
Many crypto ATM scams involve persuasive criminals masquerading as authority figures, luring their victims into thinking they need to urgently hand over large sums of money via cryptocurrencies like Bitcoin to avoid jail or some other catastrophe. The , FIN-2025-NTC1, explores common fraud schemes in detail.
These scammers trick vulnerable people into converting fiat money into cryptocurrency at the kiosks, often directly into the scammer’s wallet — an action that is irreversible and often untraceable.
When introducing the Crypto ATM Fraud Prevention Act, for example, Senator Dick Durbin a story of a constituent who was tricked by a criminal impersonating law enforcement into making a $15,000 deposit at a crypto ATM.
According to the FBI’s 2024 , there were more than 10,956 complaints of crypto ATM fraud totaling $246.7 million in losses last year — a 99% and 31% increase from 2023, respectively. While this is just a small component of the $ consumers lost to financial fraud in 2024, it’s clearly a growing problem that needs to be addressed.
The problem with blanket bans
Spokane, Washington made waves when it completely, a move the city council claimed would help protect residents and prevent fraud.
This strategy is much like banning email to eliminate phishing attempts or prohibiting elderly people from buying gift cards to keep them from falling into the hands of scammers.
Fraud is ultimately successful because it exploits human vulnerabilities, not because of any one technology. Banning crypto ATMs, rather than focusing on ways to mitigate the risk of scams, will just lead victims to complete the fraudulent transaction in other ways.
Practical solutions for minimizing fraud
Intercepting the scam at the point when a victim is about to complete the transaction is often a more effective solution — meaning crypto ATMs can be a key tool for preventing fraud. This involves warning users that they should not engage in transactions with people posing as law enforcement or other trusted individuals. It can also mean informing users that cryptocurrency transactions cannot be reversed and are often untraceable. Providers can also offer tailored warnings of unusual activity based on user profiles.
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These types of interventions have proven successful with other types of financial fraud, like wire transfers or even regular ATM withdrawals. Reputable crypto ATM operators are already staying abreast of the latest scams and user preferences, using their expertise to implement effective fraud prevention tactics while still serving customers’ banking needs.
State regulators can also play an essential role, making licensure for crypto ATMs conditional on implementing effective fraud warning rules and protocols for user interactions. These uniformly enforced regulations will compel operators to compete for business by providing a superior user experience, rather than compromising on safety.
Some legislators are even taking this approach proactively, before locals encounter fraud. For example, the town of Grosse Pointe Farms, Michigan preemptively put in place registration and warning requirements on crypto ATMs (even though there aren’t any in the town yet), which the city council would offer “a little bit of help” and transparency for residents, especially those who might be unfamiliar with cryptocurrency or unaware of common scams.
Protecting consumers, unleashing innovation
Blanket bans on virtual currency kiosks will never solve the age-old fraud problem. Scammers will find other ways to reach their victims, but the millions of cryptocurrency users around the country will lose access to this important financial infrastructure.
Instead, concerned regulators should encourage ATM operators to leverage proven fraud prevention techniques to interrupt fraudsters and protect prospective victims from making a mistake. These tools offer a smarter approach, one that both protects consumers and preserves the exciting possibilities of cryptocurrency.
Opinion by: Bill Repasky, attorney at Frost Brown Todd LLP.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
