North Dakota Proposes Crypto ATM Regulations to Combat Fraud

North Dakota lawmakers are debating House Bill 1447, introduced on Jan. 15, which proposes stricter regulations on crypto ATMs to protect residents from scams.

The bill includes the following measures:

• Daily withdrawal limit: $1,000
• Fee cap: $5 per transaction or 3% of the transaction amount (whichever is higher)
• Fraud warnings: Mandatory fraud notices and advice to contact law enforcement if users suspect scams

The state’s Department of Financial Institutions commissioner, Lisa Kruse, revealed that North Dakota residents filed 103 crypto scam complaints in 2023, leading to combined losses of $6.5 million.

National Crypto Fraud Concerns

Crypto fraud is a growing issue nationwide. The FBI reported that Americans lost $5.6 billion to crypto scams in 2023, with 5,500 cases involving crypto ATMs resulting in over $189 million in losses.

House Representative Steve Swiontek, the bill’s primary sponsor, emphasized the lack of protections in crypto ATMs compared to traditional ATMs:

“Unfortunately, this has allowed criminals to exploit them for theft,” said Swiontek, who previously served as president and CEO of Gate City Bank.

Protecting Elderly Residents

The bill has garnered support from advocacy groups like the American Association of Retired Persons (AARP). Josh Askvig, AARP’s state director, highlighted the importance of consumer protections to safeguard elderly residents’ savings.

The bill would require crypto ATMs to:

• Display fraud warnings
• Advise users to contact law enforcement if they suspect fraud
• Warn that funds lost due to fraud or error may not be recoverable

Industry Pushback

Crypto ATM operator CoinFlip voiced mixed reactions to the bill. Kevin Lolli, the company’s assistant general counsel, expressed support for consumer protections but opposed fee and transaction limits.

Lolli explained that crypto ATMs typically charge fees between 8% and 20% to cover operational costs, including hardware maintenance, armored car services, and rent for hosting the machines.

Current Crypto ATM Landscape

Data from Coin ATM Radar shows there are:

• 37,155 crypto ATMs worldwide across 65 countries
• Nearly 30,000 crypto ATMs are located in the U.S.

Some crypto ATMs already report suspicious transactions exceeding $2,000 and transactions over $10,000 to U.S. authorities.

House Bill 1447 represents North Dakota’s effort to address the growing threat of crypto fraud, balancing consumer protection with operational feasibility for crypto ATM operators. The debate highlights the ongoing challenge of regulating emerging technologies while fostering innovation.