The proposed law, spearheaded by Sen. Dick Durbin (D-Ill.), would prevent new users from spending more than $2,000 per day or $10,000 over a 14-day period
The incidence of bitcoin ATM scams is a pressing issue, with new data from the U.S. Federal Trade Commission revealing that consumers fell victim to these scams to the tune of $65 million in the first half of 2024.
The scams, which typically target older adults, involve criminals impersonating bank or law enforcement officials to deceive victims into making large cryptocurrency purchases at bitcoin ATMs. These scams have resulted in a median reported loss of $10,000 among all age groups, with some individuals, like a retired couple in South Carolina, suffering even greater losses—in this case, almost $390,000 over several months of deposits.
In response to these scams, which are estimated to cost consumers more than $100 million annually, four Democratic senators have introduced the Crypto ATM Fraud Prevention Act. The proposed legislation, spearheaded by Sen. Dick Durbin (D-Ill.), aims to introduce new measures to mitigate these fraudulent activities.
The bill proposes that new users be limited to spending no more than $2,000 per day or $10,000 over a 14-day period to buy cryptocurrency from a bitcoin ATM. It also mandates that companies personally contact new customers attempting transactions exceeding $500 and offer full refunds to those who report the fraudulent activity to the police within 30 days.
The senators' initiative comes as at least 15 states are considering bills to curb bitcoin ATM scams, according to a report by Governing magazine. The majority of these proposals aim to restrict crypto ATM transactions to $1,000 per customer daily and cap fees at $5 or between 3% and 15% of a transaction’s value.
Moreover, at least three states—Minnesota, California and Vermont—already enforce daily transaction limits for bitcoin ATMs.
The rapid growth of bitcoin ATMs in recent years has created new opportunities for fraudsters. According to Coin ATM Radar, there are nearly 40,000 bitcoin ATMs in the U.S., a stark increase from just 10 years ago, when there were none. These ATMs are often placed at gas stations and retail stores, such as the Midwest convenience store chain Kwik Trip, which offers customers the chance to buy bitcoin at more than 800 locations.
The criminals, frequently impersonating bank or law enforcement officials, target victims—typically older individuals—with stories requiring them to withdraw a large sum of cash from their bank to pay for something like missing jury duty and deposit it into a bitcoin ATM.
The victims are then instructed to scan a QR code or enter a warrant number associated with their case. However, these numbers are linked to the criminal’s virtual wallets, granting them access to the funds and making recovery nearly impossible.
