Grosse Pointe Farms Imposes Strict Crypto ATM Regulations After Local Scam

The town of Grosse Pointe Farms, located just outside of Detroit, Michigan, has taken a proactive approach to regulating cryptocurrency ATMs, despite not having any such machines within its borders. The city council unanimously passed an ordinance on Tuesday, implementing multiple restrictions aimed at protecting residents from potential scams. This move was prompted by a report of a local resident being defrauded at a crypto ATM in the nearby town of St. Clair Shores.

The ordinance requires that any future crypto ATMs in the town must be registered with the Department of Public Safety, and operators must obtain a business license. Additionally, the machines must display mandatory warnings and written consumer protection notices about the risks of fraud and the irreversibility of transactions. The regulations also impose transaction limits for new users, capping daily transactions at $1,000 and setting an aggregate limit of $5,000 over the first two weeks. These limits are removed after the 14-day period, under the assumption that users will become more familiar with the machines by then.

Councilmember Lev Wood emphasized the importance of transparency in protecting residents from scams. "The crooks tell people to go and put money into these machines, and it’s a very untransparent situation," Wood stated during the meeting. "What we want to do with our ordinance tonight is to enhance transparency and provide a little bit of help to our residents."

The ordinance makes Grosse Pointe Farms likely the first municipality in Michigan to regulate crypto ATMs. This pre-emptive measure comes in the wake of statewide warnings issued by Michigan Attorney General in April, highlighting the risks associated with crypto ATM scams. Local news reports had also previously covered instances of such scams in the city.

Carson Gat, a representative from Chicago-based digital currency firm and ATM operator, attended the meeting to share his experiences. He recounted an incident where the firm prevented an elderly woman from being scammed, underscoring the importance of implementing limits and holding periods for first-time users. The firm has been operating in Michigan since 2019 and was officially granted a money transmitter license in April.

The regulations in Grosse Pointe Farms are part of a broader trend of increased scrutiny on crypto ATMs. Several other states have also taken steps to crack down on crypto ATMs this year. These measures reflect a growing concern over the potential for fraud and the need for greater transparency and consumer protection in the cryptocurrency sector.