Grosse Pointe Farms is the first Michigan town to pass a law regulating crypto ATMs

Grosse Pointe Farms, a small town near Detroit, has become the first in Michigan to pass a local law regulating cryptocurrency ATMs to shield residents from rising scam activity.

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 say fraudsters instructed the victim to withdraw cash and deposit it into a crypto kiosk under false pretenses.

This incident mirrors a growing trend across Michigan. 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, the Detroit Free Press reported that several victims had lost thousands of dollars in irreversible cryptocurrency transactions.

City cracks down on crypto ATMs to curb scams and protect users

As cryptocurrency fraud continues to rise, the Grosse Pointe Farms city council has voted to introduce a new, stricter regulation about crypto ATMs nationwide. The goal is to increase transparency and discourage abuse of the machines.

Council debated the ordinance, in which City Attorney Bill Burgess highlighted the ordinance’s primary components at the meeting. Michigan will also require that any crypto ATM placed there be registered with the Department of Public Safety. Operators are supposed to acquire a bona fide business license before placing their machines.

To safeguard users, the machines must also 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. These restrictions are automatically removed after 14 days.

Burgess said the idea was that, by that point, a person would become familiar with using the machine and understand how it works, making them less vulnerable to scams.

Council member Lev Wood said such protections are necessary because scammers frequently target people who don’t understand what they are doing, causing them to deposit big chunks 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,” Council member Lev Wood said at the meeting. “What we want to do with our ordinance tonight is to enhance transparency and provide some help to our residents.” 

The council unanimously approved the ordinance, a sign of widespread support for proactive action on digital safety.

Crypto operators welcome oversight measures

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. He described how he intervened to prevent an older woman from being swindled at a kiosk.

Gat said that first-time users were the most vulnerable, noting that 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.

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