To combat the surge in fraudulent activities, California legislators have put forth a proposal known as the “Digital Financial Asset Transaction Kiosks” bill. This bill suggests a daily withdrawal limit of $1,000 at crypto ATMs, as well as capping operator fees at $5 or 15%, whichever is higher, starting in 2025. Should this legislation be approved, these regulations are set to take effect on January 1, 2024.

The introduction of this legislation followed a visit by lawmakers to a cryptocurrency ATM in Sacramento, where they discovered markups on specific cryptocurrencies exceeding 33% compared to their values on crypto exchanges. A subsequent inquiry by these legislators unveiled that the fees imposed by cryptocurrency ATMs typically fluctuate between 12% and 25% on average.

Government authorities, reacting to excessive fees and high withdrawal limits of up to $50,000 at some ATMs, are taking steps to regulate the 3,200 Bitcoin-accepting ATMs in California. Companies dealing in digital assets will need a license from the California Department of Financial Protection and Innovation by July 2025, due to the potential for fraud and misuse in these kiosks where physical cash is exchanged for cryptocurrencies.

The absence of a comprehensive paper trail in each transaction, in contrast to conventional bank and wire transfers, amplifies the risk of fraudulent activities. Lately, there have been multiple instances where locals fell victim to scams, as con artists convinced them to deposit cash into nearby crypto ATMs in exchange for digital currencies.