All You Need to Know About Illegal Bitcoin ATMs and How to Spot Them
Bitcoin ATMs provide crypto users with a convenient way to buy and sell digital currencies. They look similar to standard ATMs installed in traditional banks, allowing people to exchange fiat for BTC and vice versa.
However, not every Bitcoin ATM is compliant. As interest in crypto grows, several bad actors are installing illegal Bitcoin ATMs to rob innocent investors. For this reason, understanding how illegal Bitcoin ATMs operate and how to spot them is vital.
Understanding Bitcoin ATMs
To have a clear understanding of illegal Bitcoin ATMs, it is important to first learn about Bitcoin ATMs in general and how they operate.
Simply put, Bitcoin ATMs allow you to purchase cryptocurrencies, mostly BTC, with your debit card or cash. As mentioned earlier, you can also convert your digital currencies to fiat through them.
So, how do you buy crypto using a Bitcoin ATM? The process is straightforward. First, use your crypto wallet to scan a code displayed on the ATM. After that, specify the amount of crypto you wish to receive and insert cash or swap a debit card. Once done, you’ll receive the purchased digital currency in your crypto wallet.
Bitcoin ATMs are available in several countries, with the United States being the biggest host. It is worth mentioning that Canada was the nation to allow the installation of Bitcoin ATMs in 2013.
Understanding Illegal ATMs
As stated, some Bitcoin ATMs are non-compliant because their operators do not comply with stipulated rules established to curb money laundering. In most countries, Bitcoin ATM operators must obtain licenses from financial watchdogs. Moreover, they are required to implement the Know Your Customer policy and report any illegal transactions.
While illegal Bitcoin ATMs allow users to transact anonymously, they attract criminals who aim to engage in prohibited activities like tax evasion and money laundering. That explains why authorities around the globe have intensified crackdowns on such ATMs. For instance, the US Justice Department took down numerous illegally installed Bitcoin ATMs across America in 2023 in an effort to prevent money laundering. That year, the UK government charged a London resident with operating a Bitcoin ATM without a license.
It is worth mentioning that illegal Bitcoin ATMs have brought losses of over $70 million to crypto investors since the start of 2024. By comparison, fraudsters running such ATMs stole over $114 million in 2023.
How Scammers Use Illegal Bitcoin ATMs to Defraud Investors
Every day, scammers come up with creative ways to use Bitcoin ATMs to steal investors’ money. For instance, they may reach out to their victims, posing as investors, and try to convince them about using specific Bitcoin ATMs to deposit investment funds. However, when you deposit the money, the scammers disappear without a trace since illegal Bitcoin ATMs do not implement KYC policies.
How to Spot Illegal Bitcoin ATMs
While spotting an illegal Bitcoin ATM can be a little tricky, there are several red flags to look for, including:
1. Lack of Registration: Before depositing cash in a Bitcoin ATM, it is wise to check it on platforms like LocalCoinATM and CoinATMRadar. If it’s not available, we recommend avoiding it as it might be illegal and unsafe.
2. Locations: Most illicit Bitcoin ATMs are installed in convenience stores or back alleys without supervision.
3. No KYC: As mentioned, a legal Bitcoin ATM implements a Know Your Customer process, which involves verifying your identity before transacting. So, if an ATM doesn’t adopt this procedure, then that’s a red flag.
4. Excessive Fees: If a Bitcoin ATM charges unreasonable fees, say 10% or more, then you should proceed with caution as it could be illegal.
5. Lack of Maintenance: If you come across a Bitcoin ATM that’s poorly maintained and lacks operator’s infomation, then do not use it.
Conclusion
Illegal Bitcoin ATMs can cause you to lose your money. Therefore, doing your due diligence before using any Bitcoin ATM is vital.
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