Virginia Regulates Bitcoin ATMs to Combat Rising Crypto Scams

CHARLOTTESVILLE, Va. – In a significant move to protect consumers, legislation regulating cryptocurrency kiosks – commonly known as Bitcoin ATMs – has been passed by both the Virginia State Senate and House. If signed into law by the governor, this bill will establish statewide rules for operators, including mandatory licensing and comprehensive reporting requirements, alongside enhanced consumer protections designed to curb the growing number of scams associated with these kiosks.

Addressing the Confusion & Exploitation

A key provision of the legislation prohibits operators from marketing these kiosks as traditional ATMs or using any language that implies they function as such. This is crucial, as the physical resemblance to ATMs often leads to confusion among users, making them vulnerable to fraudulent schemes. Delegate Michelle Maldonado, D-Manassas, and the bill’s sponsor, explained, “The fact is, it’s kind of confusing to some people because they look like ATMs. They’re shaped like ATMs. But instead of taking money out, you’re sort of putting money in to purchase crypto that goes into a broader exchange.”

The legislation stems from a surge in scam cases across Virginia. Reports include a Southwest Virginia resident defrauded of $15,000 and another case in Fairfax County. Scammers are exploiting the anonymity of cryptocurrency, often convincing victims to purchase crypto to settle debts, avoid legal trouble, or as part of romance scams. The irreversible nature of cryptocurrency transactions makes recovering lost funds nearly impossible. As Maldonado points out, “The thing about crypto is that once it goes into the exchange, which is in the blockchain environment, there’s no way to trace it. There’s no way to get it back.”

New Consumer Protections

The new regulations introduce several vital consumer safeguards:

• Daily and Monthly Transaction Limits: Restricting the amount of money that can be exchanged through these kiosks.
• 48-Hour Hold for New Users: Allowing a window for potential fraud detection and fund recovery.
• ID Verification: Requiring identification for all transactions to increase accountability.
• Clear Warning Notices: Providing users with prominent warnings about the risks associated with cryptocurrency.

Kiosk operators will also be required to register with the state, pay fees, cap the fees they charge to consumers, and establish mechanisms for providing refunds when possible.

A Proactive Regulatory Approach

Maldonado emphasizes that this legislation represents a proactive approach to regulation. While current scam activity represents approximately 7% of the Bitcoin ATM industry’s business, she believes it’s crucial to implement safeguards now to prevent that percentage from growing. “We really want to make sure that we are educating people, that we’re giving them the tools and that we’re holding industry accountable,” she stated. “And that means that the way they do business in the Commonwealth matters. And there’s got to be accountability.”

AARP Virginia has voiced strong support for the changes, highlighting the increasing targeting of Virginians, particularly older adults, by scammers utilizing these unregulated kiosks. This legislation is a critical step towards protecting vulnerable populations from falling victim to these increasingly sophisticated schemes. For more information on protecting yourself from cryptocurrency scams, visit the Federal Trade Commission’s Cryptocurrency page.

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