Views by: Bill Repasky, attorney at Frost Brown Todd LLP
With over 55 million Americans incorporating cryptocurrency into their daily activities, it has become a vital part of our nation’s financial landscape.
Similar to traditional ATMs, thousands of virtual currency kiosks — commonly referred to as Bitcoin ATMs — have emerged across the United States to facilitate cryptocurrency transactions, ranging from converting cash to crypto to trading various coins. The enactment of the GENIUS Act may further drive public interest in Bitcoin ATMs alongside the introduction of stablecoins.
Sadly, as with any new technology, fraudsters have adapted to exploit these systems. In an effort to safeguard residents, some areas have opted to completely ban these kiosks.
This approach is neither practical nor effective — and it poses significant risks to both users and operators within the cryptocurrency ecosystem.
Fortunately, there are more effective, proven methods to combat crypto-related fraud while maintaining this essential financial framework.
The growth of crypto ATM fraud
Numerous crypto ATM scams involve convincing criminals impersonating officials, tricking their victims into urgently transferring large amounts via cryptocurrencies like Bitcoin to evade legal troubles or other dire situations. The FinCEN Notice of Aug. 4, 2025, FIN-2025-NTC1, elaborates on prevalent fraud schemes in depth.
These con artists deceive vulnerable individuals into converting fiat currency to cryptocurrency at kiosks, often funneling directly into the scammer’s wallet — a transaction that is irreversible and frequently untraceable.
In introducing the Crypto ATM Fraud Prevention Act, Senator Dick Durbin shared a story of a constituent who was duped by someone posing as law enforcement into making a $15,000 deposit at a crypto ATM.
As per the FBI’s 2024 Internet Crime Report, there were over 10,956 reported instances of crypto ATM fraud amounting to $246.7 million last year — reflecting a 99% and 31% rise from 2023, respectively. While this represents a small fraction of the $12.5 billion lost by consumers to financial fraud in 2024, it is evidently a growing concern that requires urgent attention.
The issue with sweeping bans
Spokane, Washington stirred controversy by banning crypto ATMs entirely, a decision the city council claimed would protect residents and deter fraud.
This tactic resembles banning email to prevent phishing or forbidding elderly individuals from purchasing gift cards to shield them from scams.
Fraud succeeds because it preys on human vulnerabilities, not due to any specific technology. Eliminating crypto ATMs, rather than seeking to mitigate scam risks, merely redirects victims to complete fraudulent activities through alternative means.
Effective strategies for reducing fraud
Stopping a scam at the crucial moment when a victim is ready to finalize a transaction can be a more productive solution — suggesting that crypto ATMs can play a pivotal role in fraud prevention. This involves alerting users not to engage in transactions with individuals impersonating law enforcement or other trusted figures. Additionally, it can entail advising users that cryptocurrency transactions are irreversible and often difficult to trace. Providers may also implement customized warnings based on user behavior.
Related: Crypto ATM restrictions and bans spread across US: Here’s the rationale
Such interventions have shown success with various types of financial fraud, such as wire transfers and standard ATM withdrawals. Credible crypto ATM operators are continually updating their knowledge of the latest scams and user preferences, leveraging their expertise to introduce effective fraud prevention measures while fulfilling customers’ banking requirements.
State regulators can play a crucial role as well, making licensure for crypto ATMs contingent upon enforcing effective fraud warning protocols and user interaction guidelines. These consistently applied regulations will motivate operators to compete for business through superior user experiences, rather than compromising safety.
Some lawmakers are preemptively adopting this strategy to counteract fraud before it occurs. For instance, Grosse Pointe Farms, Michigan instituted registration and warning protocols for crypto ATMs (even though none currently exist in the town), which the city council stated would provide “a bit of help” and clarity for residents, especially those less familiar with cryptocurrency or common scam tactics.
Safeguarding consumers, fostering innovation
Comprehensive bans on virtual currency kiosks will never remedy the age-old fraud issue. Scammers will always find alternate routes to reach their targets, but millions of cryptocurrency users nationwide will be deprived of access to essential financial infrastructure.
Conversely, concerned regulators should advocate for ATM operators to utilize established fraud prevention tactics to thwart scammers and protect potential victims from making costly mistakes. These solutions promote a more intelligent approach, safeguarding consumers while maintaining the exciting potential of cryptocurrency.
Views by: Bill Repasky, attorney at Frost Brown Todd LLP.
This article is intended for general informational purposes and should not be interpreted as legal or investment advice. The perspectives and opinions expressed herein are solely those of the author and do not necessarily reflect the views or opinions of Cointelegraph.
