Grosse Pointe Farms Passes First Crypto ATM Regulations in Michigan

Grosse Pointe Farms, a small town near Detroit, has taken a significant step in protecting its residents from the rising tide of cryptocurrency scams by becoming the first in Michigan to pass a local law regulating cryptocurrency ATMs. The city council unanimously approved the ordinance on Tuesday, following a case where a resident was scammed at a crypto ATM in neighboring St. Clair Shores. Officials reported that fraudsters instructed the victim to withdraw cash and deposit it into a crypto kiosk under false pretenses, highlighting the growing trend of such scams across the state.

In April, the state attorney general issued a warning about increasing crypto ATM-related scams, urging the public to stay cautious. Around the same time, several victims had lost thousands of dollars in irreversible cryptocurrency transactions, as reported by the Detroit Free Press. This incident underscores the need for stricter regulations to safeguard users from such fraudulent activities.

The new ordinance aims to increase transparency and discourage the abuse of crypto ATMs. Key components of the ordinance include requiring that any crypto ATM placed in the town be registered with the Department of Public Safety and that operators acquire a bona fide business license before placing their machines. Additionally, the machines must present fraud warnings and consumer protection messages explicitly informing users about the dangers of making irrevocable transactions. The ordinance also restricts new users to transactions of $1,000 a day and $5,000 within the first 14 days, with these restrictions automatically removed after 14 days. This measure is designed to ensure that users become familiar with the machines and understand how they work, making them less vulnerable to scams.

City Attorney Bill Burgess highlighted the ordinance’s primary components at the meeting, emphasizing the importance of safeguarding users. Council member Lev Wood noted that scammers frequently target people who don’t understand what they are doing, causing them to deposit large amounts of their cash into crypto ATMs. “The crooks tell people to go and put money into these machines, and it’s a very untransparent situation,” Wood said. “What we want to do with our ordinance tonight is to enhance transparency and provide some help to our residents.” The council’s unanimous approval of the ordinance reflects widespread support for proactive action on digital safety.

The ordinance had the backing of local officials and players in the crypto industry. Coinflip, a Chicago-based digital currency business that operates crypto ATMs in the US, sent a representative, Carson Gat, to provide insight on the industry side. Gat described how he intervened to prevent an older woman from being swindled at a kiosk, noting that first-time users were the most vulnerable. Most scam attempts occurred when people were unfamiliar with cryptocurrency exchanges. Coinflip, which has operated in Michigan since 2019, was granted a money transmitter license in April. Limits and holds, at least for new users, are good since they also deter bad actors and protect users.

The new regulations in Grosse Pointe Farms could set a template for other communities across Michigan and the nation. Regulators are not surprised by the surge of crypto-related fraud. Crypto payments, unlike bank transactions, are all but irretrievable once made. This has made crypto ATMs an easy mark for scammers who use high-pressure tactics to get victims to send money in a hurry. Crypto kiosks are commonly located in gas stations, convenience stores, and shopping malls. Operators often leave these spots, making them easy targets for scams. Experts say that victims may feel isolated, unsure how to seek help, or unable to involve a friend or family member.