It can be difficult for people to understand the laws surrounding Bitcoin ATMs (BTMs) and cryptocurrencies in general. The regulations change frequently, on top of that, they vary depending on your jurisdiction.
Bitcoin ATM operators themselves might have different approaches when enforcing Bitcoin ATM laws. In addition to deciding which limits are appropriate for their service.
Below you can find the current state of Bitcoin ATM laws across various jurisdictions. While the technical details can vary depending on geographical location, the overall trends do not vary tremendously.
Bitcoin ATM Law: The Typical Structure
In most regions, Bitcoin is 100% legal once certain requirements are adhered to. These requirements are mainly around reporting and compliance, known as ‘KYC’ (Know Your Client), ‘AML’ (Anti-Money Laundering), and CDD (‘Customer Due Diligence').
The basic premise is that you can transact in cryptocurrency as long as you submit to identity verification. This identity verification will usually consist of uploading a scan of your passport or driving license. You will most likely have to consent to a One-Time Password (OTP) being sent to your phone via SMS, though this will again depend on the Bitcoin ATM operator.
If you are willing to do this, you will be able to withdraw between $3,000 - $10,000 in the USA. The exact amount depends on your jurisdiction and the Bitcoin ATM rules. But you can also buy or sell a certain amount without undergoing KYC identity verification. In Europe, this is only allowed up to €150. This is due to the introduction of AMLD 5 within the EU. In contrast, this limit can often reach up to $900 in the United States.
The compliance model tends to be the same across regions. There will be a central authority that Bitcoin ATM operators need to register with. For instance, this will be the Financial Crimes Enforcement Network (FinCEN) in the USA and the Financial Conduct Authority (FCA) in the UK.
Bitcoin Withdrawal Limits Per Jurisdiction
Transaction limits can apply whether you are buying or selling cryptocurrency. When users are ‘withdrawing’ from a Bitcoin ATM they’re selling their crypto in return for fiat cash (USD, EUR, GBP, etc). However, when they’re buying from a Bitcoin ATM they’re exchanging their fiat cash for cryptocurrency. The maximum and minimum limits will apply regardless of the type of cryptocurrency. They apply whether you are buying or selling Litecoin, Ethereum, Bitcoin, Ripple, or any other available coin. All coins tend to be treated under the umbrella term of ‘digital assets’.
Generally, Bitcoin ATMs in Europe will only allow you between €2,000 - €3,000 with KYC while those in the USA will allow you closer to the higher range of $10,000 with KYC. It is possible that even the ranges below may not provide the full picture.
A lot is at the discretion of the Bitcoin ATM operator, and there are reasons to allow lower amounts, such as keeping the ATM topped up with cash.
Some jurisdictions have clearer laws and mandates surrounding cryptocurrency transactions, and a lot of this has to do with usage. Australia has less than 50 Bitcoin ATMs, primarily in 4 cities - Adelaide, Melbourne, Sydney, and Launceston.
In China and other regions, it is banned outright so there are no laws or information. It is not legal so cannot be treated as a legitimate asset class to be regulated. The majority of Bitcoin ATMs are located in the USA, followed by Canada. In these areas, Bitcoin ATM laws tend to be clearer.
Why Are Bitcoin ATM Laws Necessary?
There are a lot of practical reasons for Bitcoin ATM laws, which follow on from the laws put in place regarding the movement of fiat capital. The benefits of having Bitcoin ATM laws include:
- Liquidity - If there were massive withdrawals there would not be enough cash for other customers who need to use the service.
- Money Laundering - Without KYC, criminals could easily purchase cryptocurrency through stolen fiat capital, without leaving a trace.
- Theft - If somebody stole your crypto wallet information they could then easily steal all your funds by converting it into cash at a Bitcoin ATM.
- Taxation - Without a compliance system, everybody could use Bitcoin ATMs to avoid paying taxes. Without taxes, economies would not be able to function.
These are just some reasons why Bitcoin ATM laws are necessary. Without a centralized authority for monitoring and compliance, the industry could fall apart.
Bitcoin ATM Law for Operators
Small businesses looking to run a crypto ATM business will need to plan out a budget and adhere to the Bitcoin ATM laws in their area.
In the USA, the home of BTMs, you can face 30 years of prison time for running an unregistered BTM. Many small business owners find it easier to rent out their space to professional companies so they take care of compliance, cash, registration, licensing, etc.
If you do take these on, you need to draft a series of KYC policies, hire a dedicated compliance officer, and train personnel. However, there is nothing stopping you from appointing yourself as the dedicated compliance officer. You will have to register as a Money Services Business (MSB) while maintaining a BTM. Depending on your state, you may have to acquire a Money Transmitter License.
Bitcoin ATM Law: The Five Pillars of the BSA
There are five pillars of compliance mentioned in the Bank Secrecy Act (BSA), the governing piece of legislation for BTM compliance. And within each of these pillars are various subcategories. The five pillars are as follows:
- The Compliance Officer: This is the first step to take in terms of BTM compliance. This is the person responsible for implementing the other pillars and ensuring compliance. A Bitcoin ATM business must have a compliance officer in the same way that a company must have executive representation such as a CEO.
- A Series Of Internal Controls: This is a set of procedures and protocols in place to ensure BSA compliance. These controls must be able to identify a high-risk transaction, implement customer due diligence (CDD), monitor employee performance, identity and report suspicious activities, etc.
- Train Personnel: Employees need ongoing training to ensure BSA compliance. Employees should know the penalties for non-compliance and be told how performance is to be monitored.
- Independent Testing: At least every 12 months, BTM operators need to undergo third-party testing to ensure compliance. This testing will include the identification and reporting of suspicious activities, record-keeping, employee training assessment, etc.
- Customer Due Diligence: This pillar is concerned with identity verification, customer risk profiles, the reporting of suspicious behavior, and beneficial ownership.
As you can see, these pillars are not so easily satisfied. Most business owners looking to purchase a BTM will have a number of available spaces for them in different locations. It might be a little more difficult to turn a profit if you only have one Bitcoin ATM, given that you have to satisfy a number of requirements to maintain compliance.
Crypto Dispensers: Easy Compliance With Bitcoin ATM
When looking to use a Bitcoin ATM and stay on the right side of the law, you must find a reputable operator that focuses on compliance and customer due diligence.
Crypto Dispensers has nearly 60 BTMs across the USA, offering a transparent purchasing process. This allows users to turn their fiat cash into Bitcoin among other cryptocurrencies. You can also fund your account through nearly 10,000 CVS locations and 2,500 RiteAid locations, making it a widely available provider across the USA.
By using an established provider, you are assured of crypto compliance. Moreover, you are assured of transparent fees. With Crypto Dispensers, this is 10% above spot price and a small network fee (about $1.50 - $5)
Many other crypto providers can charge excessive fees, eating up 15% - 25% of the transactions. This is done with shady transaction prices where you don’t get the full breakdown of the price. It will be difficult to make profits from cryptocurrency if you keep getting caught with these over-the-top (though common) fees.
The Future of Bitcoin ATM Laws
Bitcoin and other cryptocurrencies are likely to be the future of money. Cryptocurrencies have unique attributes that make them more appealing than fiat cash. This includes fast transactions, microtransactions, low fees, and easy access. Setting up a Bitcoin wallet and sending crypto across the world to another wallet is a straightforward process. This entire process can be executed practically for free.
With the proliferation of Bitcoin ATMs, we might be seeing the end of legacy ATMs. Reporting and compliance procedures will further create a safe marketplace for cryptocurrencies and tokens. Which are becoming a dominant part of economic activity, as opposed to a side-activity.
Bitcoin ATM laws will keep pace with the rising popularity and adoption of cryptocurrencies. By staying informed about updates within the legal industry, all parties can make safer and more consistent profits, authorities, customers, and BTM operators alike.