Nevada targets unlicensed cryptocurrency ATMs

By: - August 28, 2019 5:55 am
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In the market for some Bitcoin?  There’s an ATM for that. 

From obscure, bodega-type stores that cater to immigrants seeking an inexpensive means of sending money home, to convenience stores, to downtown Las Vegas casinos such as the Plaza Hotel and The D, crypto ATMs that trade in the volatile currencies are increasingly mainstream, and Nevada regulators are attempting to get a grip on the burgeoning industry.  

State lawmakers this year failed to approve a measure that would have required most cryptocurrency ATMs to be licensed. Now the Nevada Financial Institutions Division (NFID), which stayed licensing during the legislative session pending the possibility of a new statute, is imposing existing law, fees and surety requirements on the kiosks.

“Any entity that facilitates the transmission of or holds fiat or digital currency by way of brick-and-mortar, kiosk, mobile, internet or any other means, should contact the NFID to request a licensure determination,” spokeswoman Teri Williams said in a statement.

Nevada regulators admit they have no idea how many cryptocurrency ATMs are operating in the state.

Circle K announced in June it had installed 20 kiosks at stores in Las Vegas and several cities in Arizona.

“DigitalMint ATMs let consumers buy and trade up to $20,000 bitcoinethereum and litecoin per day. The company charges 12 percent of a transaction, though rate reductions are available according to the company’s website,” reported.

More than 3,000 of the world’s 5,000 crypto ATMs are in America, reported the publication Futurism in June under the headline “Who the hell is using the World’s 5,000 crypto ATMs?”.

Cryptocurrency ATMs allow customers to purchase Bitcoin or other iterations with a debit card or cash. The purchaser can receive a paper receipt, or transfer the funds to a public key on a blockchain. Some kiosks allow holders of virtual money to sell.   

Experts tout cyber ATMs as a means of providing financial services to those who lack traditional bank accounts. The World Bank estimates 1.7 billion people worldwide are unbanked. 

“In the U.S., our clients predominantly use our machines to buy bitcoin,” Matias Goldenhörn, director of Latin America operations for ATM operator Athena Bitcoin, told CoinDesk in January. “In Colombia for example, it’s the other way around, people use the ATM to withdraw cash.”

Facebook, which has 360 million global members, is getting into the business with its own currency called Libra.  The social platform’s reach is the envy of existing currencies which lack the built-in infrastructure to access merchants and consumers.  

But does a crypto-transfer via ATM or other technology instill the confidence of a transaction based on government-backed currency?

Not so far, according to some experts, who say virtual money has yet to catch fire. 

“You have this vicious cycle in which people are barely surviving, they can’t afford taxes, don’t want to use bank accounts, and because of that, accept only cash,” Adalberto Flores, the chief executive of Kueski, a Mexico-based financial-services startup, told the Wall Street Journal last week.  “They know the government will track their expenses and demand taxes.” 

Digital sales with crypto (much like emailing money or using a credit card online) are traceable.  ATM transactions are not, experts say.

But they can be costly.  In addition to transaction fees (which can be a fixed amount, like most conventional ATMs, or a percentage) kiosks also charge fees for buying and selling that can range from 8 to 30 percent.

Chip Meyers of Hilt Ventures says his company is the largest provider of virtual ATMs in the state and predicts an increasing reliance on the machines to provide financial services.  

“Millennials are not trusting of government,” says Meyers. “There’s a movement around the world to provide financial services to those who don’t have bank accounts and don’t want to pay high fees. All they need is a phone.”

Or if they don’t mind paying a little more, they can buy the anonymity of an ATM.

Meyers, who faces the prospect of licensing 30 crypto kiosks in Nevada, says the state’s requirement of a $5,000 surety bond per machine is more stringent than the requirements of FinCEN, the Department of Treasury’s Financial Crimes and Security Network.

The bond requirement is the same for all money transmitter licensees, including traditional ATMs, according to the state.

‘The criminal element’ 

Crooks are on track to steal $1.2 billion from cryptocurrency exchanges in 2019, with more than $356 million stolen in just the first quarter of the year, according to a report from CipherTrace, a firm that describes itself as “created to develop cryptocurrency and blockchain tracing and security capabilities.”

Crypto-currency kiosks are also a favorite means of laundering and transmitting ill-gotten gains.  

The mayor of Vancouver is calling for a ban after police called the machines “an ideal money-laundering vehicle.”

“Given the lack of a central authority, there is no controlling organization who can monitor or regulate the transfer of funds to ensure a legitimate transaction,” Sergeant Alvin Shum of the Vancouver Police Department wrote in a report. “This creates a prime opportunity for the criminal element to capitalize on remaining anonymous, as they work to defraud unsuspecting citizens, launder money, and make large-sum anonymous transactions.”

A spokeswoman for the Las Vegas Metropolitan Police was unaware of cryptocurrency investigations involving ATMs.

“A quantitative analysis of all the transactions on the 20 top cryptocurrency exchanges globally revealed that 97% of direct bitcoin payments from identifiable criminal sources were received by unregulated cryptocurrency exchanges.” according to another CipherTrace report

Speaking in Las Vegas earlier this month, the director of FinCEN said casinos need to report suspicious activity involving what the agency calls Convertible Virtual Currencies (CVCs).

“There is a misconception that just because FinCEN has not publicly issued enforcement action against a casino or card club since last year that FinCEN is not looking at this financial sector,” Kenneth Blanco said at the Anti-Money Laundering Conference on August 13, reported. “Let me assure you, this is not the case.”

Blanco said the agency has not received the amount of suspicious activity reports (SARs) related to virtual exchanges that it expected. 

Casinos are required to report suspected instances of potential money laundering, efforts to avoid reporting requirements, and “other illicit financing purposes” involving virtual money, according to regulatory guidelines issued by FinCEN this year.

Bianco said he hopes casinos create a “culture of compliance” and called compliance a “national security issue.”

“We know the kind of significant information that casinos are able to develop on gaming customers. This information is extraordinary and relevant,” he said, according to  

A spokesman for the Nevada Gaming Control Board, which does not routinely receive SAR reports but can gain access, says the agency has received no reports of suspicious activity involving virtual money.

Correction: This story originally misstated the World Bank’s estimate of unbanked people. 

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Dana Gentry
Dana Gentry

Dana Gentry is a native Las Vegan and award-winning investigative journalist. She is a graduate of Bishop Gorman High School and holds a Bachelor's degree in Communications from the University of Nevada, Las Vegas. Gentry began her career in broadcasting as an intern at Channel 8, KLAS-TV. She later became a reporter at Channel 8, working with Las Vegas TV news legends Bob Stoldal and the late Ned Day. Gentry left her reporting job in 1985 to focus on motherhood. She returned to TV news in 2001 to launch "Face to Face with Jon Ralston" and the weekly business programs In Business Las Vegas and Vegas Inc, which she co-anchored with Jeff Gillan. Dana has four adult children, two grandsons, three dogs, three cats and a cockatoo named Casper.