Rising Use of Crypto ATMs for Crime-Related Finance Sparks Global Regulatory Concerns

The EU has specific laws and regulations regarding financial activity especially as they pertain to money laundering. However, it’s becoming increasingly clear that there’s a slight problem in the extent of the law regarding Bitcoin ATMs. Back in May, harmonized efforts between the Spanish police and Europol led to the arrest of eight Spanish and Latin American people for their use of Bitcoin ATMs for facilitating Columbian drug trafficking. Since this happened, many regions where Bitcoin ATMs are in use are now realizing this problem and constantly cracking down on its use, increasing regulation and changing laws.

Showdown in Japan

Japan is usually seen in a leading position among crypto-friendly countries. Bitcoin and other digital assets are officially regarded as legal tender in the country but Japan is taking a serious stand against illicit activity being facilitated by Bitcoin ATMs. A few years ago, there were quite a number of Bitcoin ATMs scattered around Tokyo where people could easily make transactions, exchanging crypto and fiat. However, in April 2017, the Payment Services Act was initiated and these ATMs began to disappear.

The introduction of the Act came with very expensive licensing fees and even if you could pay that easily, you still had to go through a labyrinth of legal restrictions and rules. This clampdown changed things so much that the Roppongi district, an area which had a vibrant crypto ATM lifestyle, lost its ATMs.

Vancouver Too

In Canada, there has been some damage caused by illicit crypto use through Bitcoin ATMs and law enforcement along with some government officials, are less than excited about these ATMs and their possible effect on the financial climate. In February, the Vancouver Police Department submitted a report to the police board, highlighting a few recommendations. A part of the report said:

“The other issue with unregulated Bitcoin ATMs is that they are an ideal money-laundering vehicle. Since there are no requirements to register any customer details, it is easy to see how cash can be transferred into Bitcoin and vice versa. A user can also launder an unlimited amount of money using smaller transactions so as not to arouse suspicion, like they would at a regular bank.”

Vancouver saw the first-ever publicly available Bitcoin ATM in October 2013 and now, less than 6 years later, Kennedy Stewart who is the current Mayor, has reportedly thrown his weight behind the push for a blanket ban on the use and installation of crypto ATMs, regardless of the fact that the city now has more than 70.

What about the U.S.?

Licensing and regulation of cryptocurrency ATMs in the U.S. is still incomplete. While almost every state has some requirement or the other for licensing, they don’t all have the same definitions of Bitcoin. This is largely because it’s difficult to use the same regulations and policy applicable to the traditional financial clime for crypto because its very design is almost completely different.

One difference between the U.S. and Japan, for example, is that the process of creating an ATM exchange in the former is a lot easier and more seamless than is available in Japan. In the U.S., Bitcoin is regarded as the way stock is, meaning that capital gains tax is applicable. Also, in the U.S., it’s unnecessary to be specific about every single transaction especially as they pertain to profits or losses, for tax.

Other Crypto ATMs

ATM manufacturing is slowly increasing all over the world. Major companies include Genesis Coin in the U.S., the U.K.’s Lamassu and Czech Republic’s General Bytes. At the moment, it is estimated that there are at least 5,000 crypto ATMs in different parts of the world under different regulations. It’s important to note that none of these jurisdictions seem to agree with everyone else about specific regulations. The only thing they agree on is the increasing tendency for crypto ATMs to be easily used for the unscrupulous activity.

One interesting example is the arrest of Harish BV, the co-founder of an Indian crypto exchange, Unocoin. Harish was arrested by the cyber-crime unit of the Central Crime Branch (CCB) for Unocoin’s plan to install the first Bitcoin ATM in India. According to the CCB:

“The ATM kiosk installed by Unocoin in Bengaluru’s Kempfort Mall has not taken any permission from the state government and is dealing in cryptocurrency outside the remit of the law.”

Using the ATMs for Crime

One of the most appreciated features of a Bitcoin ATM for users is the privacy it comes with. Crypto ATMs easily facilitate fast, cheap and secure peer-to-peer transactions. But all the privacy is nothing to the governments in these jurisdictions, especially when they take into account the ease at which it can facilitate crime.

Regardless, using crypto ATMs for crime isn’t exactly a walk in the park. The earlier mentioned scammers still had to use a wide and intricate network of different firms, corporations, and banks so that the dishonest proceeds from the drug trafficking could eventually end up in Colombia and withdrawn in fiat.

Nevertheless, all the authorities in regions where Bitcoin ATMs are used are now quite bent on making sure that the likelihood of these machines being used for illicit activity is crushed to its barest minimum.

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