With all the money, Bitcoin ATM’s have also had their fair share or criminality activity. The machines have been increasingly used for money laundering and drug trafficking.
Another scam the FBI has recently seen a rise of is scams involving QR codes. Criminals place their own set of instructions on physical bitcoin ATM machines directing them to send money to their own QR codes instead of the ones supplied by the machine – robbing the user.
Another scam involving QR codes involves the QR code auto-populating the recipient address so when the customer deposits funds, the money ends up in the wallet of the scammer.
The appeal of many bitcoin ATM’s was the lack of verification required to use them…was. Exchanges like Binance and Coinbase take extensive measures to verify customer identities using a process known as KYC(Know your customer), but originally Bitcoin ATM’s used a loophole that allowed customers to deposit up to 900$ anonymously. The problem is the system had no way of verifying that the user isn’t simply making multiple deposits of 900. More recently in the US, most crypto ATMs have enhanced their KYC process and doing anything unsavory is linked back to the user.
A study by Chainalysis found 75% of the funds leaving Bitcoin ATM’s found themselves in fraud sites across the dark web!
Some states are taking action, however. New York has required businesses engaged in any crypto-related activity to obtain a BitLicense. Enforcement is lax, though, with many bodegas really having no idea how cryptocurrency works and still being able to rent out space to crypto ATM providers.
“I have no idea what they are doing on the machine. I don’t even know how to use it.” said the employee at one deli in New York City.
Whether the government should have a say on what anyone does with their money is entirely different discussion, but in the world we live in, you can expect even tighter restrictions on crypto ATMs in the immediate future.