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Republican lawmakers in North Dakota have introduced a first-of-its-kind bill that will make crypto ATM operators liable for certain payments to scammers made via their platforms.
Last week, Representative Steve Swiontek (R) introduced House Bill (HB) 1447 to the North Dakota legislature, in an effort to protect North Dakotans from crypto scams.
If the bill is enacted, operators of crypto ATMs would be liable to reimburse “fraudulently induced” payments made via these platforms within the state.
The requirement would not apply to victims of all crypto ATM scams, however.
Only new crypto ATM customers would be protected, and the bill defines a “new customer” as a person who has never transacted via the crypto ATM before.
This “new customer” status would last for 30 days, during which the customer’s transactions would be protected by law.
If a fraudulently induced transaction was made, the customer would be required to report it to a state or local law enforcement agency within 90 days.
If multiple fraudulent transactions were made, the customer must report these transactions within 90 days of the final transaction being made (and that transaction must occur within the 30-day new customer period).
Finally, the bill would limit crypto ATM operators to facilitating no more than $1,000 in transactions per day per customer.
It would also require them to display extensive consumer warnings “prominently” and “in bold text” on the ATMs, alerting users to typical scam typologies.
Mandated use of blockchain analytics to prevent fraud
The bill includes other provisions that would mandate the use of blockchain analytics by ATM operators in order to spot suspicious activity.
This would include suspicious use of the ATM itself, and suspicious activity associated with other crypto wallets.
Crypto ATM operators would also be required to maintain a written anti-fraud policy, and would be required to employ a full-time anti-fraud compliance officer.
To prevent conflicts of interest, the compliance officer may not be an individual who owns more than 20 percent of the crypto ATM operator by which he or she is employed.
Elders targeted by crypto ATM scams
Lise Kruse, commissioner of the North Dakota Department of Financial Institutions (DFI), argued in favour of the bill during its opening session.
She noted that North Dakotans reported 103 crypto scams to the FBI in 2023, with total losses exceeding $6.5m.
Overall, around a quarter of the 69,000 complaints received by the FBI were submitted by persons over the age of 60.
However, of the complaints that involved crypto ATMs, more than half were submitted by over-60s.
“Crypto ATMs have become the new avenue for fraudsters,” said Kruse. “Instead of gift cards, which was the fraudsters’ currency of choice, this is faster, since the cash loaded into a crypto ATM is instantaneously transferred to the fraudster’s crypto wallet.
“Due to the potential for fraud, I believe it is appropriate to enforce limits, consumer alerts at the machines and to clarify what the ATM owners are required to do to help prevent fraudulent transactions.”
A 'bold' and 'necessary' regulatory intervention
Speaking with Vixio, Mudassar Malik, founder of Verifi Wallet, said the North Dakota bill is a “bold” and “necessary” step in the fight against crypto scammers.
“At its core, the bill acknowledges the growing responsibility of crypto platforms in protecting users from fraud, which is a refreshing shift in an industry that has often operated with minimal oversight,” he said.
“By holding ATMs accountable for reimbursing new customers who fall victim to scams, the bill not only provides a safety net for victims, but also incentivises operators to take fraud prevention more seriously.”
Malik added that the bill could also provide a “starting point” for bringing other types of crypto platforms under stronger consumer protection and fraud reimbursement rules.
“If implemented effectively, it could serve as a model for other states or even countries looking to crack down on crypto scams,” he said.
“While it may not completely eradicate pig butchering scams, it’s a powerful tool that, combined with public education and international cooperation, could make a real dent in this growing problem.
“Overall, I see it as a positive and much-needed step toward making the crypto space safer for everyone.”
