The North Dakota House is set to deliberate on a proposed bill aimed at regulating the operation of cryptocurrency ATMs within the state. The initiative primarily targets consumer protection and fraud prevention by introducing several key measures:
Proposed Measures for Crypto ATMs
- Fee Cap: A maximum transaction fee of $5 or 3% of the transaction amount, whichever is greater.
- Fraud Warnings: Mandatory display of warnings about potential fraud on crypto ATM screens to alert users.
- Enhanced Consumer Protection: Provisions aimed at safeguarding users, particularly senior citizens, who are more vulnerable to scams.
Background and Context
- Rising Fraud Cases: In 2023, North Dakota residents reported 103 cases of crypto-related fraud to the FBI, resulting in losses of $6.5 million. Nationwide, the FBI recorded 5,500 crypto ATM fraud cases, with total losses exceeding $189 million.
- Senior Citizens at Risk: Lawmakers, including bill co-author Steve Swiontek, emphasized the need for stronger protections for senior citizens, a group disproportionately targeted by scammers.
Industry Reaction
- Economic Impact Concerns: Kevin Lolli, assistant general counsel at CoinFlip, expressed concerns about the proposed fee caps. He warned that such limits could harm the crypto ATM business in North Dakota, where operators charge fees ranging from 8% to 20% to cover costs like equipment, maintenance, and rent.
- Existing Anti-Fraud Measures: Lolli highlighted that many operators already report suspicious transactions (from $2,000 to $10,000) to federal authorities as part of their fraud prevention measures.
State’s Crypto Initiatives
- Cryptocurrency Reserve: In early 2024, North Dakota officials discussed creating a state cryptocurrency reserve, with asset selection based on market capitalization (minimum of $500 billion).
- Regulatory Actions: In June, North Dakota revoked the license of BAM Trading Services, the US operator of Binance, reflecting the state’s proactive approach to crypto regulation.
Implications
If enacted, the bill could set a precedent for regulating crypto ATMs, balancing consumer protection with the viability of the crypto ATM industry. However, the proposed fee caps and other measures may face resistance from operators concerned about their business model’s sustainability. The outcome of these deliberations could influence similar legislative efforts in other states.