Crypto ATM Regulation: Why States Are Banning Bitcoin ATMs

The landscape of cryptocurrency retail access is undergoing a significant regulatory transformation as lawmakers on both sides of the aisle move to address what they describe as a predatory industry. Driven by a massive spike in financial fraud targeting older Americans, state legislatures and the U.S. Congress are implementing strict measures to curb the operations of Bitcoin ATMs. These machines, which allow users to exchange cash for digital currencies, have become focal points for scammers due to their anonymity and high transaction fees.

Why Are States Banning Bitcoin ATMs?

The primary driver behind the legislative push to ban or heavily restrict crypto kiosks is the alarming rise in consumer fraud. According to data from the Federal Bureau of Investigation (FBI), complaints involving cryptocurrency ATMs surged by 58% in 2025, resulting in over $389 million in losses nationwide. The victims of these schemes are disproportionately older adults, with individuals aged 60 and older accounting for more than 85% of the financial losses attributed to these machines.

Lawmakers argue that the business model of these kiosks is inherently exploitative. Unlike traditional online exchanges that charge fees between 0.4% and 1%, crypto ATMs frequently impose transaction fees exceeding 20% . This massive fee disparity makes the machines highly profitable for scammers who direct victims to deposit cash, but entirely unattractive for legitimate retail investors seeking to trade. Delaware Attorney General Kathy Jennings characterized the kiosks as "obsolete for legitimate investors and ripe for abuse," highlighting their role as tools for "predatory cash grabs".

In response to these concerns, Delaware lawmakers have advanced House Bill 441, which would establish a total ban on cryptocurrency kiosks within the state . If enacted, the legislation would require all existing machines to cease operations immediately and be physically removed within 90 days. Violations would be treated as unlawful trade practices, with operators required to refund victims within 30 days or forfeit their fees to the state’s Consumer Protection Fund.

How Is North Carolina Regulating Crypto ATMs?

While Delaware pursues a total ban, North Carolina is taking a regulatory approach that aims to balance consumer protection with industry viability. The state’s House of Representatives unanimously passed House Bill 920, the Virtual Currency Kiosk Consumer Protection Act, which advances to the Senate for consideration. The legislation requires kiosk operators to license under the Money Transmitters Act and submit to supervision by the Commissioner of Banks.

Key provisions of the North Carolina bill include a 14% cap on service fees, a figure that drew significant debate during committee hearings . Some lawmakers advocated for a lower cap to better protect consumers, but the final version maintains the 14% limit to avoid stifling the industry entirely. The bill also imposes strict transaction limits, capping new customers at $2,000 per day for their first 30 days, increasing to $5,000 thereafter . Additionally, new customers' first transactions will be subject to a mandatory 48-hour hold, and the use of QR code logins—a common vector for scams—will be prohibited .

This regulatory shift marks a departure from North Carolina’s previously unregulated status. The legislation reflects a broader national trend where states are increasingly addressing the security and consumer protection issues associated with cryptocurrency kiosks. Since 2023, 30 states have enacted legislation related to crypto kiosks, with Indiana, Tennessee, and Minnesota already implementing statewide bans .

What Is The Federal Response To Crypto ATM Scams?

Recognizing the scale of the fraud problem, bipartisan federal legislators have introduced the Stop Crypto ATM Scams Act to establish national standards for the industry. Sponsored by Representatives María Elvira Salazar and Sean Casten, the bill aims to strengthen consumer protections and provide law enforcement with necessary investigative tools . The legislation mandates that operators implement written anti-money laundering programs, conduct customer due diligence, and report suspicious activity .

The federal bill also establishes strict transaction limits to mitigate the risk of large-scale losses from impersonation scams. New customers would be capped at $2,000 daily and $10,000 total deposits during their first 14 days, while existing customers would face a $7,500 daily limit . Furthermore, the Act requires clear scam warnings and fraud alerts before transactions are completed, informed by joint guidance from the Treasury, FBI, and FTC .

While establishing federal standards, the legislation preserves the authority of states to impose additional consumer protections or operational bans. This dual approach allows states like Delaware and North Carolina to continue their respective legislative efforts while ensuring a baseline of safety and transparency across the country. The ongoing regulatory crackdown underscores the growing scrutiny facing the cryptocurrency ATM industry as lawmakers prioritize the protection of vulnerable populations over the expansion of unregulated financial kiosks.