Municipalities Move to Rein In Crypto ATMs as Fraud Surges

Local governments across the U.S. are tightening restrictions on cryptocurrency ATMs as scams involving the machines accelerate, exposing a regulatory vacuum left by slow-moving federal and state oversight. The kiosks—typically placed in gas stations, convenience stores, and grocery stores—allow users to convert cash into virtual currency in minutes. Their speed, anonymity, and irreversible transfers have turned them into a favored channel for fraudsters.

While the machines serve legitimate users, police departments nationwide report a sharp uptick in scams in which victims are pressured to withdraw cash and convert it into crypto through unstaffed kiosks. The transactions often carry fees north of 20%, and once the money is sent, it’s nearly impossible to recover.

A Widening Fraud Gap

For cities, the concern is less about digital asset innovation and more about mounting consumer losses.

• National exposure: Americans reported $5.6 billion in crypto-related losses in 2023, a 45% jump from the prior year.

• Seniors targeted: Adults over 60 reported $124 million in crypto-kiosk losses—roughly two-thirds of all losses reported by seniors to the FBI involving virtual currency.

• Fraud techniques evolve: Scammers impersonating law enforcement or tech support continue to coerce victims with threats of arrest, frozen bank accounts, or legal action unless they immediately feed cash into a kiosk.

Investigating these cases is labor-intensive, often requiring costly blockchain-tracing tools. Local police say kiosk operators and host businesses profit from high fees even when transactions are linked to criminal activity, further fueling calls for municipal action.

State Laws Lag Behind Criminal Tactics

Although kiosk operators must register with the Treasury’s Financial Crimes Enforcement Network, the kiosks themselves operate with minimal federal scrutiny. States have begun passing their own guardrails, but these measures frequently fail to keep pace with scam tactics.

Minnesota’s 2024 Statute: Progress—and a Workaround

Minnesota’s new rules require transaction disclosures, refunds for first-time fraud victims, and a $2,000 daily limit for new users. But enforcement officials say scammers simply sidestep the law by sending victims pre-generated QR codes linked to existing wallets—meaning the user isn’t classified as “new” at all. Victims are also coached to hop between kiosks or cross state lines to evade dollar limits.

Expanding State Oversight

More than 40 states have introduced or advanced digital-asset legislation this session. Those specifically tightening kiosk rules include:

• Arizona: Mandated use of blockchain tracing tools.

• Iowa: Defined and regulated digital financial asset kiosk fees.

• Maryland: Added registration and operating requirements.

• North Dakota: Pulled kiosk operators under state money-transmitter licensing.

• Oklahoma: Advanced a bill requiring licensing, quarterly reporting, and blockchain analytics.

• Vermont: Implemented 2025 regulations focused on kiosk oversight.

Still, many legislators acknowledge there’s a widening gap between statutory protections and real-world fraud patterns.

Cities Step In: From Bans to High-Compliance Models

With state measures proving insufficient, municipalities are acting on their own—sometimes decisively. Their strategies range from outright prohibitions to high-touch oversight designed to disrupt fraud in real time.

The Trendline: More Local Action Ahead

As crypto adoption grows and fraud tactics evolve, municipalities appear poised to play a more prominent role in consumer protection. With state laws proving too easy to circumvent and federal oversight still developing, cities are effectively becoming the front-line regulators for crypto kiosks—a role they are increasingly willing to embrace.