State investigation calls for better bitcoin ATM crackdown
It's fair to say most adult New Jerseyans know the routine of using an automated teller machine: You insert your debit card, enter a PIN and make a transaction.
The same type of system exists for those dealing in cryptocurrency. But "bitcoin ATMs," where online currency can be bought and sold, are not subject to the rigorous regulations of traditional teller machines.
"These machines are well-known," said Kathy Riley, spokeswoman for the New Jersey State Commission of Investigation, which recently published a report on bitcoin ATM activity. "In fact, the Department of Justice has said that these are known conduits for money laundering and other financial schemes."
Those who have been looking into the problem in New Jersey say such schemes have resulted in losses of as much as $900 in one particular, singular incident.
"They ended up losing lots of money," Riley said. "So from a consumer standpoint, and from protecting just the integrity of the financial system, it's important to have some kind of oversight."
The SCI's report is supplemented by its support of a statewide Digital Asset and Blockchain Technology Act, which is due to be considered in the Assembly Appropriations Committee on Wednesday.
That bill would establish consumer protections that include clearer definitions of fees and potential risk of using a bitcoin ATM, and would require some sort of licensing mechanism.
Riley said the SCI thought it important that state lawmakers be made aware of such risks, especially because these machines are only federally regulated at the moment.
"We feel that there's a place here for the state to step in and give another layer of oversight, because we found that these machines are very vulnerable to abuse," she said. "We would like to see an establishment of a mandate for all machine customers to provide a valid form of government ID, with a photo, before any transaction can proceed."
And while Riley admitted that for many who use cryptocurrency, the relative anonymity of their transactions is part of the appeal, the industry has quickly moved into the mainstream in recent years.
As a result of that, law enforcement is becoming increasingly concerned about the harm that can be done by transactions gone wrong, and the SCI wants to ensure investigative agencies still have the upper hand over scammers.