Spokane Bans Crypto ATMs to Combat 31% Rise in Scams

On June 17, 2022, the Spokane City Council unanimously voted to prohibit the use of crypto ATMs in the city, becoming the first city in Washington to single out these devices. The ordinance, called the Virtual Currency Kiosk Prohibition Toward a Safer Spokane, addresses the growing fraud linked to these machines. Within 60 days, officials will require operators to remove about 50 kiosks or face fines and possible revocation of their business licenses.

Cryptocurrency fraud caused severe financial losses, prompting officials to make the move. In 2023, the FBI recorded losses of crypto ATM scams around the country, amounting to a total of $5.6 billion, with residents of the state of Washington having lost more than 141 million dollars. The city of Spokane has been experiencing a steady increase in the number of victims who have lost thousands of dollars to the fraudulent business carried out in these kiosks, mostly found in gas stations and convenience stores.

Council Member Paul Dillon, who co-sponsored the ordinance with Council President Betsy Wilkerson, stated that he meant it to serve a protective purpose. In Dillon’s view, this will safeguard disadvantaged locals against financial fraud via the use of digital currency kiosks. The law aims to protect low-income or elderly groups, who are common targets of fraud.

Crypto ATMs are just like conventional ATMs, as they have virtual transactions that are made using the currency rather than cash. Scammers, pretending to be government officials, use these machines to force victims to make payments to avoid fabricated penalties. Detective Tim Schwering of the Spokane Police Department said they typically send the money to countries where authorities can never trace it.

In 2024, the FBI received almost 11,000 complaints and reported $246 million in losses due to crypto ATM scams, marking a 31 percent increase compared to the previous year. Elderly residents, particularly those over 60, made up two-thirds of the victims, highlighting their vulnerability. The ordinance of Spokane is a reaction to the trends as the city seeks to limit fraud by not allowing them physical access to these kiosks.

Councilman Zack Zappone underscored the urgency of the ban. He stated: These machines are used to victimize vulnerable communities, resulting in substantial financial losses. The council plans to monitor the ordinance’s impact, with the Spokane Police Department charged with documenting any changes in the frequency of crimes using cryptocurrency.

The action is one in line with increased regulatory actions against crypto ATMs. Others have issued guidelines to restrict transactions and increase oversight, and recently, the financial crimes agency put a limit on cash transactions to curb fraud. The total prohibition established in Spokane becomes a precedent that may affect other municipalities.

There are some 45 crypto ATMs in and around Spokane, including such large operators, which is targeted by the prohibition. The city is hell-bent on making sure its citizens are secure, thus, failing to comply would result in hefty sanctions.

Crypto ATM operators in Spokane, Washington, have been mandated to remove their kiosks within 60 days following a citywide ban enacted by the Spokane City Council. This decision, made during a legislative session on June 17, marks the first instance of a city in Washington formally prohibiting virtual currency kiosks in response to a surge in scams targeting residents. The ordinance, titled “Virtual Currency Kiosk Prohibition for a Safer Spokane,” was introduced by Council Member Paul Dillon in collaboration with Council President Betsy Wilkerson. The measure aims to curb fraudulent losses tied to crypto kiosks, which have been frequently used in scams targeting vulnerable residents in low-income areas and retail locations.

Council Member Dillon expressed pride in Spokane being the first city in the state to move forward with this legislation, stating that the ordinance will protect vulnerable residents from scams involving virtual currency kiosks. Under the new rules, operators have 60 days to remove existing kiosks or face civil infractions, including potential revocation of their business licenses. The Spokane Police Department will monitor compliance and report on the impact of the ban on scam-related crime rates. As of June 18, Spokane had over 40 cryptocurrency kiosks.

Detective Tim Schwering of the Spokane Police Department, who has worked closely with victims of such frauds and supports the measure, noted that funds sent through these kiosks typically end up in places. Scammers often impersonate law enforcement or tax officials to pressure victims into converting cash into cryptocurrency, claiming it would help “protect their money” or prevent arrest. By the time the transaction is complete, it’s already too late for the victims.

Spokane’s ban on crypto ATMs aligns with a broader trend, where concerns over fraud and consumer exploitation have prompted both local and state governments to tighten oversight of virtual currency kiosks. Most of the victims were found to be over the age of 60.

In response to the growing issue, several states have introduced their own measures. For instance, lawmakers are reviewing a bill that would impose a daily transaction cap, require fraud warnings at machines, and mandate that operators use blockchain analytics to detect suspicious activity. The bill also includes licensing and quarterly reporting requirements. Meanwhile, in March, legislation requiring crypto ATM operators to be licensed, capping fees at 18%, and enforcing daily transaction limits for new users. It also mandates full refunds for new customers who have been defrauded if a report is filed within 90 days following the incident.

The ban in Spokane is a significant step in addressing the rising concerns over crypto ATM scams and protecting vulnerable residents from financial exploitation. The city's proactive approach serves as a model for other municipalities grappling with similar issues, highlighting the importance of regulatory measures in safeguarding consumer interests.