Key takeaways

1. Illegal Bitcoin ATMs pose significant financial and legal risks, including the potential loss of funds, excessive fees, privacy concerns and legal consequences.
2. Legal Bitcoin ATMs are regulated and supervised by financial authorities, while illegal Bitcoin ATMs operate outside the law and pose significant risks to users.
3. When using Bitcoin ATMs, use machines provided by reputable providers, be cautious with identification information, and avoid high-risk locations.
4. Reporting suspicious Bitcoin ATMs can help combat illegal activities in the cryptocurrency space.

Bitcoin ATMs are one of the most convenient ways to buy and sell Bitcoin. Such machines resemble standard ATMs, where users can exchange cash for Bitcoin

and vice versa. But not all Bitcoin ATMs are compliant.

While the cryptocurrency market continues to expand, the number of illegal Bitcoin ATMs has also been on the rise. The global cryptocurrency market is projected to see significant growth, increasing from its 2021 value of $910.3 million to $1.902 billion by 2028, with an expected annual growth rate of 11.1%.

These illegal machines present a huge risk, not only financially but legally, too. If you’re involved in cryptocurrencies, being aware of what illegal Bitcoin ATMs are and how to stay safe is important.

What are Bitcoin ATMs?

To fully understand what an illegal Bitcoin ATM is, it’s crucial to first know what a Bitcoin ATM is and how it operates.

A Bitcoin ATM is a kiosk that enables you to buy BTC using cash or a debit card. Some machines even allow you to sell Bitcoin for cash. Resembling the traditional ATMs you use to withdraw your cash or place an order for a checkbook, these machines make it convenient to engage with cryptocurrencies.

Buying BTC on a Bitcoin ATM typically involves scanning a QR code from your Bitcoin wallet, inserting cash or swiping a card, and receiving Bitcoin directly into your wallet.

Did you know? The first Bitcoin ATM was installed in Vancouver, Canada in 2013. This marked a significant milestone in the adoption of cryptocurrency.

Illegal Bitcoin ATMs on the rise

With the growing popularity of cryptocurrencies, Bitcoin ATMs have become more common. But not all of these machines operate within the law. You may wonder, What makes a Bitcoin ATM illegal?

Just like traditional financial services, Bitcoin ATM operators are required to comply with regulations based on their location. When these laws are ignored or bypassed, the ATM becomes illegal. Understanding these regulations and the risks involved is crucial for anyone using these machines.

Regulations governing Bitcoin ATMs are designed to prevent money laundering and other unlawful activities. These usually include requiring ATM operators to register with financial authorities, introducing Know Your Customer (KYC) procedures and reporting suspicious transactions.

As illegal Bitcoin ATMs are set up without appropriate legal processes and approvals, they attract individuals looking to engage in unlawful activities, such as money laundering or tax evasion. These unlicensed and unsupervised machines allow you to make a transaction anonymously without recording your identity. Sounds risky?

Authorities worldwide have begun cracking down on illegal Bitcoin ATMs. For example, the United States Department of Justice took down several illegal Bitcoin ATMs across the US in 2023 as part of an effort to thwart money laundering activities. Similarly, in April of that same year, a London resident was charged with running a Bitcoin ATM without proper registration. Surprised by how widespread this issue is?

Scams are not limited to illegal Bitcoin ATMs

You’d be mistaken to think that scams involving Bitcoin ATMs are limited to those that are illegal. Scammers often use Bitcoin ATMs in creative ways to steal money. For example, they may contact you about suspicious activity or unauthorized charges on your bank account. They might also send fake security warnings on your computer, often posing as companies like Microsoft or Apple. These messages can be hard to ignore.

Once they have your attention, scammers put your money at risk or may even link your information to illegal activities like money laundering or drug smuggling. They may get a fake government or business agent on the line to mislead you about using a Bitcoin ATM.

Scammers often claim that depositing cash into a Bitcoin ATM will resolve the “fake” issue they’ve identified. Pretending to protect your money, they’ll instruct you to withdraw cash from your bank account and deposit it into a Bitcoin ATM, often directing you to a specific machine. They’ll send you a QR code to scan, and once you do, the cash goes straight into the scammer’s wallet.

Illegal Bitcoin ATMs and their associated risks pose a serious threat to your money. Let’s dive into the dangers of using these machines.

Risks of illegal Bitcoin ATMs

Operating illegal Bitcoin ATMs may have unforeseen legal and financial implications. Risks you could face include:

1. Legal consequences: Engaging with an illegal Bitcoin ATM can lead to severe legal trouble. You could find yourself under investigation if the machine is involved in money laundering or other illegal activities. Even if you’re unaware that the ATM is illegal, ignoring the law is not a defense. Being caught in a criminal investigation may lead to significant legal costs, including fines and imprisonment.
2. Financial risks: Illegal Bitcoin ATMs often charge inflated fees; even worse, they can defraud people out of their money. You could lose your funds if the machine malfunctions and fails to send Bitcoin after payment. Since these machines operate outside the law, there is no legal recourse if your transaction fails or you are scammed.
3. Privacy concerns: The lack of transparency in illegal Bitcoin ATMs can put you at risk. Personal information or documents you share with them aren’t secure without proper KYC processes and supervision. A dishonest operator might sell or misuse your data to third parties.
4. Scams: Illegal Bitcoin ATMs are often used for scams, which range from machines failing to send Bitcoin to tampering with transactions or overcharging users. Scammers might attach skimming devices to the machines, stealing users’ financial information. The absence of regulatory oversight only heightens the possibility of such scams going undetected.

Did you know? Bitcoin ATMs can be found in various locations, including convenience stores, shopping malls and even airports.

How to spot illegal Bitcoin ATMs

It may be tricky to spot an illegal Bitcoin ATM, but there are a number of warning bells, including:

1. Lack of licensing: Before using a Bitcoin ATM, it’s a good idea to check it on sites such as CoinATMRadar and LocalCoinATM. If you can’t find any information about the ATM operator or its legitimacy, it’s safer to avoid using that machine.
2. Locations: Illegal Bitcoin ATMs are located in back alleys or convenience stores with low supervision. Of course, not all ATMs in low-end locations are illegal, but the placement of a machine can be a warning sign.
3. No KYC: Legitimate Bitcoin ATMs are legally required to implement a KYC process. It means that you need to verify your identity to be able to transact. If an ATM lacks the KYC process, it’s a sign it might be functioning illegally.
4. Excessive fees: Illegal machines are likely to charge high fees. Depending on the ATM you use and its location, you may need to pay between 4% and 25% of the value of your transaction. If the fee is unusually high, it may indicate that the ATM is not legal.
5. Poor maintenance: Illegal Bitcoin ATMs are not usually properly maintained. Moreover, they are not associated with a regular Bitcoin ATM operator such as Bitcoin Depot or CoinFlip. Just a generic box with no branding elements, such as logo or operator information, should be a red flag.

How to stay safe from illegal Bitcoin ATMs

Staying safe with Bitcoin ATMs is a matter of caution and awareness. Here are some tips to stay safe from illegal Bitcoin ATMs:

1. Use ATMs provided by reputable providers: You should only use Bitcoin ATMs operated by reputable providers. Research well-recognized operators in your area and verify their machines’ locations through their official websites. Their ATMs are well-regulated, offering greater security.
2. Be cautious with your identification information: Bitcoin ATMs are legally required to complete the KYC process, which usually involves verifying your phone number and sharing a government-issued identification document. If the Bitcoin ATM requires any additional personal information, it will be better to avoid the transaction.
3. Avoid high-risk locations: Use Bitcoin ATMs in well-lit, secure locations and avoid those in secluded or shady areas. Opting for machines at reputable business locations reduces the risk of encountering an illegal ATM.
4. Take your time: Scammers often pressure you to act quickly. Seek advice from an online fraud expert before taking any action.
5. Avoid withdrawing cash on unsolicited suggestions: Never withdraw cash from your bank and deposit it in a Bitcoin ATM in response to an unexpected request. Scammers commonly use this tactic.
6. Be careful of a fabricated problem: Avoid being tricked into using Bitcoin ATMs, transferring money to protect your funds, or solving a manufactured problem. Legitimate businesses and government agencies will never ask you to do these things.

Did you know? In 2023, Bitcoin ATM scams surged past $100 million, according to a report from the Federal Trade Commission (FTC) Consumer Sentinel Network data. In the first six months of 2024, over $65 million got lost to Bitcoin ATM fraud.

How to report illegal Bitcoin ATMs

If you come across suspicious Bitcoin ATM operations, consider reporting them. Here’s how you can take action after identifying fake crypto ATMs:

1. How to report: Take note of the ATM’s location. Identify information such as operator details or machine ID and the nature of your concerns. Call your local financial regulatory authority or law enforcement agency to report the illegal Bitcoin machine. Many countries also have hotlines or websites for reporting suspicious financial activity.
2. Importance of reporting: Reporting fraudulent Bitcoin ATMs helps law enforcement agencies crack down on such unlawful activities and makes the crypto space safer for everyone. By doing so, you can help protect others from falling into the same trap.

Safeguarding your crypto

While illegal Bitcoin ATMs pose risks, staying informed and taking precautions can prevent you from falling victim to scams. Always research before using an ATM to protect yourself from Bitcoin ATMs; it’s better to spend a few seconds researching than fall for a scam.

While the world of cryptocurrency can be unpredictable, with the right knowledge and careful decision-making, you can navigate it safely.

Disclaimer：

1. This article is reprinted from [cointelegraph], Forward the Original Title‘What are illegal Bitcoin ATMs and how to stay safe?’, All copyrights belong to the original author [ Cointelegraph’s editorial staff]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.

2. Liability Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute any investment advice.

3. Translations of the article into other languages are done by the Gate Learn team. Unless mentioned, copying, distributing, or plagiarizing the translated articles is prohibited.