As financial technology evolves, so do the methods by which it is exploited for criminal purposes. However, elected officials miss the mark by passing laws that fail to hold the true perpetrators accountable: illicit users and malfeasant parties. Lawmakers incorrectly assigning blame for these crimes reflect their misunderstandings of financial technologies. 

This is exactly what’s happening across the country as states wrestle with how to regulate cryptocurrency kiosks. Recently, criminals have stolen cash by directing victims to send them funds through a crypto kiosk. As a result, some lawmakers have pinned the blame on the machines themselves instead of the criminals behind the scam.   

The reality is kiosks, used by consumers to invest in cryptocurrencies with cash, comply with federal regulations to successfully prevent financial tragedies. Companies operating kiosks are required to register as money services businesses, meaning they must comply with federal laws that mandate the reporting of transactions exceeding $1,000 and develop strategies to combat money laundering. Kiosks also adhere to anti-crime practices that the American banking industry follows, including reporting suspicious transactions greater than $2,000 and Currency Transaction Reports for transactions over $10,000.  

Some kiosk providers even go beyond federal law by displaying anti-scam warnings and deploying live 24/7 customer service teams trained to stop suspicious transactions. Despite federal laws and good-faith efforts to combat scams and fraud, a small number of criminals still occasionally find ways to exploit these machines to separate victims from their hard-earned money.  

State legislators rightfully want to do more to prevent future crimes of this nature. Unfortunately, that desire leads to a legislative overreaction where kiosks are picked on with restrictive policies. Policies like transaction limits and fee caps risk forcing kiosks out of states, reducing access to digital assets for their residents.  

This is exactly what happened in Vermont, which enacted a law mandating a $1,000 daily transaction limit and imposed a one-year moratorium on all new kiosks. The state quickly found that its law severely limited kiosk access, and a new law is now in place to address problems. Despite all the issues stemming from Vermont’s failed experiment, some states are forging forward with laws that mirror Vermont’s original kiosk law. Maine is the latest example, enacting a bill that is exactly the same as Vermont’s first attempt at kiosk regulation. Legislators in Maine will find out why their law is a bad idea the hard way, just like Vermont did. 

The key isn’t to restrict kiosks but to strengthen their protections. State regulations are useful if focused on hardening kiosks against criminals’ schemes. Making consumers aware of what potential threats look and sound like goes a long way in ensuring con artists’ efforts are unsuccessful. Requiring acknowledgment of an anti-scam disclosure alerts kiosk users to common fraud schemes, making them think twice before moving forward with a potentially suspect transaction. Regulations also need to involve the use of blockchain analytics, which are known to stop transactions involving high-risk digital wallets. These simple yet powerful policies ensure consumers are protected from bad actors looking to take advantage of them. 

Most importantly, these actions establish uniform consumer protection standards for all kiosk operators. While federal rules are already on the books, not every operator goes the extra mile to stop scammers. A few companies that refuse to take scams and fraud seriously risk putting this service in jeopardy for consumers who prefer or need to use cash to invest in crypto. Additional precautions like anti-scam disclosure, blockchain analytics, and comprehensive live customer service need to be required instead of optional. 

State legislators should avoid taking action while lacking a holistic understanding of the advantages, risks and elements of crypto kiosks. Crypto kiosks do not deserve to be blamed for crimes committed by others. If our elected officials want to combat financial scams and fraud, they must pursue policies that stop thieves from using kiosks for their crimes. 

Jobe Dickinson is a retired Tucson police officer. He sits on the boards of both the Combined Law Enforcement Associations of Arizona (CLEAA) as well as the Arizona Police Association (APA).