Author: Bill Repasky, attorney at Frost Brown Todd LLP
With over 55 million Americans incorporating cryptocurrency into their daily transactions, it has become a vital part of our nation’s financial landscape.
Much like traditional ATMs, numerous virtual currency kiosks—commonly referred to as Bitcoin ATMs—have emerged across the United States to facilitate cryptocurrency transactions, from cash conversion to buying and selling coins. The introduction of the GENIUS Act may further boost the public’s interest in Bitcoin ATMs as stablecoins make their debut.
Unfortunately, as with any emerging technology, scammers have found ways to exploit these platforms for fraudulent activities. In an effort to safeguard residents, several localities have taken the drastic step of banning these kiosks altogether.
This approach is not practical or effective—it poses a real risk to all participants within the cryptocurrency ecosystem.
Fortunately, there are more effective strategies available to combat crypto scams while maintaining this crucial financial infrastructure.
The increase in crypto ATM scams
Many crypto ATM scams are perpetrated by convincing criminals who pose as authority figures, tricking victims into believing they must urgently transfer large amounts of money via cryptocurrencies, such as Bitcoin, to avoid imprisonment or other dire consequences. The FinCEN Notice of Aug. 4, 2025, FIN-2025-NTC1, comprehensively details common fraud schemes.
These fraudsters manipulate vulnerable individuals into converting fiat currency into cryptocurrency at kiosks, often directing the funds straight into the scammer’s wallet—actions that are typically irreversible and frequently untraceable.
When introducing the Crypto ATM Fraud Prevention Act, for example, Senator Dick Durbin shared a story about a constituent who was deceived by a fraudster impersonating law enforcement, leading to a $15,000 deposit at a crypto ATM.
The FBI’s 2024 Internet Crime Report noted over 10,956 instances of crypto ATM fraud totaling $246.7 million in losses last year—marking increases of 99% and 31% from 2023, respectively. While this represents only a small fraction of the $12.5 billion lost by consumers to financial fraud in 2024, it clearly indicates a growing concern that warrants attention.
The issue with blanket bans
Spokane, Washington, made headlines with its total ban on crypto ATMs, a measure the city council argued would help protect residents and reduce fraud.
This approach is akin to prohibiting email to eliminate phishing attempts or banning elderly individuals from purchasing gift cards to prevent falling victim to scammers.
Fraud thrives on exploiting human weaknesses, not on any particular technology. Banning crypto ATMs, rather than seeking ways to mitigate scam risks, will merely push victims to conduct their fraudulent transactions through different means.
Effective solutions for reducing fraud
Stopping the scam at the moment a victim is about to finalize the transaction is often a more effective remedy—positioning crypto ATMs as vital tools for fraud prevention. This includes warning users not to engage in transactions with individuals posing as law enforcement or other trustworthy figures. It can also involve informing users that cryptocurrency transactions are irreversible and often untraceable. Providers could offer customized alerts regarding unusual activity based on user profiles.
Related: Crypto ATM limits and bans sweep across US: Here’s why
Such interventions have been successful in curbing other forms of financial fraud, including wire transfers and traditional ATM withdrawals. Reputable crypto ATM operators are already updating themselves on the latest scams and user preferences, leveraging their expertise to implement effective fraud prevention strategies while still meeting customers’ banking needs.
State regulators can also play a crucial role by making licenses for crypto ATMs contingent on the implementation of effective fraud warning policies and user interaction protocols. Uniformly enforced regulations will encourage operators to compete for business by enhancing user experience without compromising safety.
Some lawmakers are even proactively adopting this approach before communities experience fraud. For instance, the town of Grosse Pointe Farms, Michigan, has already established registration and warning standards for crypto ATMs (even in the absence of any in the town), which city council members assert will provide “a little bit of help” and foster transparency for residents, particularly those who may be unfamiliar with cryptocurrency or unaware of prevalent scams.
Safeguarding consumers and fostering innovation
Comprehensive bans on virtual currency kiosks will never resolve the age-old problem of fraud. Scammers will inevitably discover alternate methods to reach their victims, leaving the millions of cryptocurrency users nationwide without access to this vital financial infrastructure.
Instead, responsible regulators should encourage ATM operators to utilize established fraud prevention techniques to impede fraudsters and safeguard potential victims from making costly mistakes. These tools represent a smarter strategy—one that serves both to protect consumers and to harness the exciting potential of cryptocurrency.
Author: Bill Repasky, attorney at Frost Brown Todd LLP.
This article is intended for general informational purposes and should not be construed as legal or investment advice. The views, thoughts, and opinions expressed herein are solely those of the author and do not necessarily reflect the views and opinions of Cointelegraph.
