California legislators have put forth a new bill named “Digital financial asset transaction kiosks,” aiming to impose limitations on crypto ATM transactions. If passed, the bill would enforce a daily cap of $1,000 on crypto ATM withdrawals starting from January 1, 2024. Additionally, beginning in 2025, operators’ fees would be restricted to $5 or 15%, whichever is higher.
The proposed legislation comes after legislative members conducted an investigation at a crypto ATM in Sacramento. They discovered markups as steep as 33% on certain crypto assets compared to their prices on crypto exchanges. On average, crypto ATMs charge fees ranging from 12% to 25%, according to a legislative analysis.
Government officials were alarmed to find ATMs with withdrawal limits reaching $50,000, prompting them to take regulatory measures to curb such exorbitant premiums and withdrawal limits. California currently boasts over 3,200 Bitcoin ATMs, as reported by Coin ATM Radar.
Democratic State Senator Monique Limón Champions the Cause
Democratic State Senator Monique Limón, a co-author of the bill, emphasized that the legislation’s goal is to protect people in the community from falling victim to scams. She stated, “This new bill is about ensuring that people who have been frauded in our communities don’t continue to watch our state step aside” when faced with such issues.
As part of the legislation, digital financial asset businesses would be mandated to acquire a license from the California Department of Financial Protection and Innovation by July 2025.
California Legislators Striking a Balance Amidst Concerns
While crypto ATMs offer a convenient means for individuals to exchange cash for cryptocurrencies, they have also become hotspots for scams due to the anonymity associated with cash transactions. Recent scams have involved perpetrators persuading victims to visit nearby crypto ATMs and deposit cash for their desired cryptocurrency. Some affected individuals have welcomed the bill, noting that the low transaction limit would provide victims with ample time to recognize potential scams, as reported by the LA Times.
Conversely, crypto ATM businesses have expressed concerns, arguing that the bill may disproportionately impact small operators who bear rental costs for their ATMs. They contend that the legislation fails to address the fundamental issue of fraud and instead adopts a punitive approach centered on specific technology. These operators have cautioned that such measures could severely impact the industry, adversely affecting consumers without effectively curbing fraudulent activities.