Grosse Pointe Farms Implements Strict Crypto ATM Regulations to Combat Fraud

In a proactive move to safeguard its residents, the small town of Grosse Pointe Farms in Michigan has implemented strict regulations on cryptocurrency ATMs, despite having none currently in operation. This decision comes in response to rising concerns over crypto ATM frauds reported in neighboring areas. The city council unanimously passed an ordinance on Tuesday, mandating registration, licensing, and transaction limits for any future crypto ATM operators. This ordinance was prompted by local scams and statewide alerts issued by the Attorney General of Michigan, Dana Nessel.

The town's swift action was motivated by a recent incident where a resident fell victim to a crypto ATM scam in the adjacent St. Clair Shores. City officials recognized the potential risks associated with the lack of transparency and accountability in crypto ATM activities. Councilmember Lev Wood emphasized that the ordinance aims to protect residents by requiring clear consumer protection warnings and disclosures about the risks of fraud on all crypto ATMs. He noted that scammers often trick people into feeding money into these machines, making the process highly opaque.

The new regulations stipulate that all crypto kiosks must be registered with the Department of Public Safety and that operators must obtain a business license. Additionally, the ordinance mandates on-screen and written notices that warn consumers about potential fraud and inform them that crypto transactions are irreversible. To further protect new users, the ordinance imposes transaction limits during the first 14 days: a daily limit of $1,000 and a cumulative limit of $5,000. After this period, restrictions are lifted to allow for more flexibility.

City attorney Bill Burgess explained that these limits provide users with time to familiarize themselves with the ATM, reducing the likelihood of significant and impulsive fraudulent transactions. The proposals were supported by Coinflip, a Chicago-based crypto ATM operator licensed in Michigan since 2019. Representatives from Coinflip highlighted instances where their employees assisted in preventing scams, particularly among older users. They also suggested implementing holding periods for initial transactions to protect first-time customers.

With these regulations, Grosse Pointe Farms becomes a potential pioneer in Michigan for comprehensive crypto ATM regulation, joining other states like Arizona, California, and Washington, which have recently taken steps to curb crypto ATM abuses. This proactive approach by Grosse Pointe Farms aims to shield its residents from the growing threat of crypto ATM fraud before it becomes a significant issue in the town.