In a significant move to tackle cryptocurrency-related scams and enhance consumer protection, California has enacted new regulations governing Bitcoin ATMs. Starting from January 2024, these ATMs will have a daily transaction limit of $1,000 per person. The law, known as Assembly Bill 39, is designed to safeguard individuals from falling victim to fraudulent schemes involving Bitcoin and other cryptocurrencies.

This step comes as part of California’s broader initiative to establish a comprehensive regulatory framework for the cryptocurrency industry by 2025, under the recently approved Digital Financial Assets Law. This legislation will require cryptocurrency companies to obtain state licenses and adhere to rigorous auditing and record-keeping requirements.

The New Law in Detail

The primary focus of Assembly Bill 39 is to restrict the amount of cash that can be transacted through digital financial asset transaction kiosks, commonly known as Bitcoin ATMs. The law explicitly states, “An operator shall not accept or dispense more than one thousand dollars ($1,000) in a day from or to a customer via a digital financial asset transaction kiosk.”

Moreover, starting on January 1, 2025, operators of these cryptocurrency ATMs will be prohibited from charging fees exceeding $5 or 15% of the transaction amount, whichever is greater. This provision aims to prevent excessive fees that might deter potential users or exploit those who may not fully understand the costs involved.

To ensure transparency, operators will be required to furnish customers with comprehensive disclosures regarding each transaction. These disclosures will include the cryptocurrency amount, the equivalent dollar amount, any associated fees, and the variance between the operator’s price and the price on a licensed cryptocurrency exchange. Additionally, customers must receive a detailed receipt outlining the specifics of the transaction, including the name of the licensed exchange used to calculate the price difference.

Operators will also be obliged to provide the California Department of Financial Protection and Innovation with an updated list of all kiosk locations, ensuring that regulators can maintain oversight and monitor any changes in real-time.

As of July 1, 2025, operators will be mandated to comply with California’s digital asset business licensing requirements or ensure that any third parties utilizing their kiosks have obtained a state crypto license. This provision underscores the importance of proper licensing and regulation in the burgeoning cryptocurrency space.

Why These Measures Are Essential

The new regulations surrounding Bitcoin ATMs aim to provide more time for potential scam victims to recognize fraudulent activities before transferring substantial sums of cash into cryptocurrencies. Unlike traditional financial transactions, cryptocurrency transactions are challenging to trace, making them an attractive choice for scammers. For instance, the Los Angeles Times reported the case of a San Jose man who was deceived into depositing $15,000 into a Bitcoin ATM, highlighting the urgent need for protective measures.

The legislation is not without controversy. While crypto industry advocates argue that these regulations could negatively impact consumers, consumer advocacy groups contend that they are necessary to combat the increasing prevalence of cryptocurrency ATM-related fraud. According to the Federal Trade Commission, more than 46,000 people reported losses exceeding $1 billion in cryptocurrency scams in the previous year. This alarming figure underscores the urgency of implementing measures to protect individuals from falling victim to fraudulent schemes.

California’s Vibrant Cryptocurrency Scene

California is home to a thriving cryptocurrency industry, with more than 3,200 Bitcoin ATMs currently operating in the state, according to the Los Angeles Times. This regulatory development is a significant step toward establishing a secure and reliable cryptocurrency ecosystem for Californians, and it signals the state’s commitment to responsible oversight in the rapidly evolving world of digital assets.

The Road to Comprehensive Cryptocurrency Regulation

The regulations surrounding Bitcoin ATMs are just one part of California’s broader strategy to regulate the cryptocurrency industry. Under the Digital Financial Assets Law, set to be fully implemented by 2025, cryptocurrency companies operating within the state will be required to obtain licenses and adhere to stringent auditing and record-keeping standards. This law represents a shift for California Governor Gavin Newsom, who had previously vetoed a crypto regulation bill out of concerns related to the evolving cryptocurrency landscape.

The new law and its associated regulations will only come into effect if the broader cryptocurrency regulatory bill, Assembly Bill 39, is enacted by January 1, 2024. This phased approach allows the state to prepare for comprehensive oversight, giving businesses and consumers alike time to adapt to the changing regulatory landscape.

In conclusion, California’s decision to regulate cryptocurrency ATMs is a crucial step toward ensuring consumer protection in the cryptocurrency space. The move comes amid rising concerns over cryptocurrency-related scams and fraud. By setting daily transaction limits and imposing restrictions on fees, the state aims to make it more difficult for scammers to exploit unsuspecting individuals. Moreover, these regulations set the stage for a comprehensive regulatory framework that will govern the cryptocurrency industry in California, ultimately promoting transparency, accountability, and security for all stakeholders.