When consumers are separated from their hard-earned money, they rightfully want someone to be held accountable. That said, sometimes the wrong ones inadvertently pay the consequence. Cryptocurrency kiosks, which enable consumers to purchase crypto with cash, are the latest example of a mistaken approach.
To be effective in deterring scams and fraud at these machines, we need legislation that stops bad actors from exploiting kiosks without compromising a consumer’s freedom to purchase crypto with cash. Fixating on the devices is the incorrect reaction, but states nationwide are adopting this attitude.
Critics like to position these machines as the “wild west,” but many people don’t realize that crypto kiosks operate as a Money Service Business, which means they are subject to the Bank Secrecy Act, the USA PATRIOT Act, and their implementing rules and regulations. Every day, Americans use crypto kiosks for legitimate transactions; however, these have been caught in the crosshairs, grabbing headlines and adversely influencing a lawmaker’s response to crypto scams and fraud involving crypto kiosks.
For example, a law in California threatens to push crypto kiosks out of the state by enforcing restrictive transaction limits that hinder companies’ ability to file Suspicious Activity Reports. Iowa Attorney General Brenna Bird took a more radical, and arguably political, approach by filing a lawsuit accusing two of the largest crypto kiosk providers of running a deceptive business built on scams. The move feels more like a statement rather than real support, especially considering that smaller, less sophisticated operators often lack the safeguards larger companies can afford.
Neither of these actions addresses the real criminal who is orchestrating these crimes. Bird’s news release announcing her lawsuit, in which she proclaims, “Con artists are evil and will stop at nothing to steal everything you have,” perfectly captures this irony. Bird’s statement is 100 percent right. These are relentless criminals, but they’re also smart.
For over a decade, scammers have employed methods such as gift cards to carry out schemes. The reality is, if you remove kiosks, the threat doesn’t disappear; they will find another way to defraud potential victims in ways that are much harder to regulate or control. Kiosk operators can provide law enforcement with a strategic advantage by offering transparent digital records and blockchain analytics, delivering critical evidence and insights for fraud investigations.
Meanwhile, other states have demonstrated that effective consumer protection can be achieved without restricting kiosk access. These states deserve credit for devising solutions that fight scams without overly burdening legitimate transactions. However, this leaves us with an environment where kiosk regulations vary state by state, with some states enacting smart policies and others adopting the approach of California and Iowa. This creates inconsistency and confusion that bad guys easily exploit. Instead of fighting to crush the legitimate cash-for-crypto transactions provided by kiosks, we need lawmakers to direct their efforts toward a national standard that makes criminals’ plans more difficult.
Federal consumer protection legislation must fulfill three priorities: scam identification, ensuring kiosks are proactively cracking down on scams, and data sharing with law enforcement. It is urgent that federal lawmakers pursue these policies that crack down on the criminals behind scams to preempt misguided state bills that unfairly target consumers who depend on kiosks’ services.
First, scams and fraud at all crypto kiosks must be easily detectable. Mandating visible scam warnings to be displayed at all kiosks, which users must acknowledge before the transaction can proceed, is a good first step toward achieving this goal.
Second, kiosks must be equipped with defenses to fight an attempted crime. Some crypto kiosk operators offer live customer service teams that are prepared to intervene at a moment’s notice to stop a suspicious transaction. Blockchain analytics are known to block transactions to high-risk digital wallets. Scammers would face more resistance to their crimes if these features were required at all kiosks.
Third, lawmakers should include provisions that help law enforcement officers. Reporting kiosk locations to the Financial Crimes Enforcement Network provides authorities with data on scams and fraud that can help prevent future crimes.
Closely following federal law is also necessary to ensure close collaboration with law enforcement. This collaboration would become a reality by requiring kiosk operators to invest in robust compliance operations.
Policymakers are reaching a consensus on addressing crypto-kiosk financial crime. We must agree on targeting criminals, not the service itself. Focusing legislative efforts solely on attacking crypto kiosks is not fair to the consumers who use them as a vital access point to digital assets. By prioritizing crime identification and defense at the kiosk, lawmakers can deter criminals without punishing a service some consumers want or need to use for their crypto transactions.
