California has limited Bitcoin ATM transactions to $1,000 per day to combat fraud

California's new law aims to crack down on scammers who exploit Bitcoin ATMs.

California is taking steps to crack down on thousands of dollars in scams that use Bitcoin ATM machines to scam victims.

According to the Los Angeles Times, under the new law signed by California Governor Gavin Newsom, starting in January, the amount of cryptocurrency ATM transactions in California will be limited to $1,000 per person per day.

The new law clearly states;

"Operators are not allowed to accept or issue more than a thousand dollars ($1,000) per day from customers through digital financial asset kiosks."

The move comes as California prepares to implement a broader regulatory framework for cryptocurrency companies by 2025 under Newsom's recently approved Digital Financial Assets Act.

The law will require cryptocurrency companies to be licensed by the state and comply with strict auditing and record-keeping requirements. The shift marks a change for Newsom, who vetoed a cryptocurrency regulation bill for fear of adapting to changing circumstances.

Meanwhile, the restrictions on Bitcoin ATMs are designed to give scam victims more time to realize they have been scammed before transferring large sums of cash into the hard-to-trace cryptocurrency, with the Los Angeles Times citing the case of a San Jose man who was scammed into depositing $15,000 into a Bitcoin ATM.

While crypto industry advocates argue that the law will hurt consumers, consumer groups say there is a need to combat the increasing fraud associated with cryptocurrency ATMs. According to the Federal Trade Commission, more than 46,000 people lost more than $1 billion last year to cryptocurrency scams.

According to the Los Angeles Times, there are currently more than 3,200 Bitcoin ATMs operating in California.

Legislative details

The new law, Parliamentary Bill 39, defines a "digital financial asset trading kiosk" as a device that accepts or distributes cash in exchange for cryptocurrency.

Starting January 1, 2025, operators of these machines will be prohibited from charging fees above $5 or 15% of the transaction value, whichever is higher.

Operators are also required to disclose to customers the terms and conditions of each transaction, including the amount of cryptocurrency, the amount in USD, the fees charged, and the difference between the operator's price and the price of the licensed cryptocurrency exchange.

The client must receive a receipt detailing the transaction information, including the name of the licensed exchange used to calculate the spread.

Operators are required to provide the California Department of Financial Protection and Innovation with a list of all kiosk locations and update the list within 30 days of any changes.

The law also stipulates that after July 1, 2025, operators must comply with California's digital asset business licensing requirements or ensure that any third party using their kiosks has obtained a state cryptocurrency license.

These measures are aimed at strengthening regulation and transparency in cryptocurrency ATM transactions in California. The broader cryptocurrency regulation bill, AB 39, will only come into force if it is enacted before January 1, 2024.