Key Takeaways
- The legislation introduces several key measures, including a daily withdrawal limit of $1,000 from cryptocurrency ATMs.
- The bill also proposes a cap on operator fees, which will be set at either $5 or 15% of the transaction amount
In a move to address the growing concerns surrounding cryptocurrency-related scams and fraud, California legislators have proposed a new bill titled “Digital Financial Asset Transaction Kiosks.”
This legislation aims to introduce several key measures, including a daily withdrawal limit of $1,000 from cryptocurrency ATMs. The bill also proposes a cap on operator fees, which will be set at either $5 or 15% of the transaction amount, starting from the year 2025. If the bill is passed, these regulations will go into effect on January 1, 2024.
One of the driving forces behind this initiative is the discovery of cryptocurrency ATMs with withdrawal limits that have reached as high as $50,000. These exorbitant limits have prompted government authorities to take action, seeking to curb such elevated premiums and withdrawal limits.
According to Coin ATM Radar, California boasts over 3,200 automated teller machines that accept Bitcoin, highlighting the growing need for regulatory oversight in this space. Another important aspect of the proposed law is the requirement for companies engaged in digital financial assets to obtain a license from the California Department of Financial Protection and Innovation by July 2025.
This move is a response to the nature of transactions at cryptocurrency ATMs, where individuals exchange physical cash for various cryptocurrencies. While these ATMs offer convenience, they have also become hotspots for fraudulent activities, making them a favored avenue for both consumers and scammers.
One of the challenges associated with these transactions is the lack of a substantial paper trail, a contrast to traditional bank and wire transactions. This characteristic exacerbates the potential for fraudulent activities. In recent cases, unsuspecting victims have been duped into depositing cash at nearby cryptocurrency ATMs in exchange for cryptocurrencies, falling victim to fraudulent schemes.
The bill was prompted by legislative members’ visit to a cryptocurrency ATM in Sacramento, where they uncovered significant markups, reaching as high as 33% on certain cryptocurrencies when compared to their prices on crypto exchanges.
On average, cryptocurrency ATMs impose fees ranging from 12% to 25%, as revealed in a legislative analysis. The new legislation comes in response to the rapidly growing crypto industry’s need for oversight and consumer protection. It aims to strike a balance between enabling legitimate cryptocurrency transactions and safeguarding consumers from potential scams and exploitative fees.
In recent developments, the Governor of California has signed the Digital Financial Assets Law, granting the California Department of Financial Protection and Innovation (DFPI) the authority to impose stringent audit requirements on cryptocurrency firms.
Additionally, the law mandates these companies to maintain comprehensive records for a minimum of five years. These records must include a monthly general ledger that details assets, liabilities, capital, income, and expenses.
