Spokane Bans Crypto Kiosks After $142 Million in Fraud Losses

The Spokane City Council unanimously approved an ordinance on Monday to ban all crypto kiosks within city limits. This decision comes in response to a surge in crypto ATM scams, making Spokane the first city in Washington state to implement such legislation.

Crypto kiosks, often found in gas stations, grocery stores, and convenience stores, have been the site of numerous scams. These machines, which resemble traditional ATMs but facilitate the buying and selling of virtual currencies like Bitcoin, have been used to deceive individuals into sending money via digital currencies.

According to the Federal Bureau of Investigation, Americans lost approximately $5.6 billion in cryptocurrency kiosk-related fraud in 2023. In Washington state alone, victims lost a staggering $142 million. These statistics have prompted Spokane leaders to ban the digital currency kiosks to protect residents from becoming easy targets.

Council Member Paul Dillon, who co-sponsored the ordinance alongside Council President Betsy Wilkerson, stated, “This ordinance will protect vulnerable Spokane residents from scams involving virtual currency kiosks, and I am proud we are the first city in the state to move this legislation forward.”

Detective Tim Schwering of the Spokane Police Department, who has investigated numerous cases tied to crypto ATM fraud, described the machines as tools that scammers use to exploit trust and urgency. “They’re scamming people, saying that they need to move their money into cryptocurrency in order to protect it. And by the time the money is into the cryptocurrency, it’s already too late,” Schwering asserted. He mentioned that recovering the funds is nearly impossible once transferred overseas.

Spokane’s new law aims to stop new machines from being installed and mandate the removal of all existing cryptocurrency kiosks throughout the city. Many of these machines are found in low-income neighborhoods, making them accessible to populations most at risk of financial exploitation.

Councilman Zack Zappone emphasized the importance of safeguarding vulnerable populations. “There are lots of vulnerable populations that are being preyed upon by these types of machines,” he said during the meeting. “So this is really making sure that we’re taking safeguards for folks in our community so that they don’t get preyed upon and lose a lot of their savings or cash in these machines.”

Several other states have also introduced or passed legislation to combat fraud tied to digital currency machines. In North Dakota, lawmakers passed a bill imposing a $2,000 daily transaction limit and requiring warning labels on all crypto kiosks. The bill also includes licensing and quarterly reporting requirements for businesses running such machines.

Nebraska enacted the Controllable Electronic Record Fraud Prevention Act, which requires crypto ATM operators to be licensed and sets a maximum fee cap of 18%. It also enforces a $2,000 daily transaction limit for new users and mandates full refunds if fraud is reported within 90 days.

Arizona has taken steps to regulate crypto ATM operations following an uptick in fraudulent cases. The state has limited transactions to $2,000 per day for new users, while increasing the cap for existing customers to $10,500. Additionally, the Attorney General wrote a letter asking businesses in Yavapai County to support the sheriff’s office in preventing crypto kiosk scams.

This ban in Spokane and the legislative actions in other states highlight a growing concern over the risks associated with crypto kiosks. The measures taken aim to protect consumers from financial exploitation and ensure that digital currency transactions are conducted in a secure and transparent manner. The ban in Spokane sets a precedent for other cities and states to follow, emphasizing the need for stricter regulations to combat the rising tide of crypto ATM scams.