What Are Bitcoin ATM Regulations?

What Are Bitcoin ATM Regulations?

What are Bitcoin ATM regulations? With more and more people frequenting ATMs to access or acquire cryptocurrency on the go, this question has become a major talking point from both a personal and governmental perspective. As of January 2021, the number of Bitcoin ATMs worldwide reached an all-time high of nearly 14,000 kiosks; the majority of those ATMs are located right here in North America, representing about 83% of the total cryptocurrency kiosks in operation. With that number ever on the rise, new pressing questions have begun to circulate concerning ATM compliance standards and accountability. 

Though Bitcoin’s mass appeal is located in its universality, its rapid expansion, and, above all, its famously unregulated nature, the systems that govern Bitcoin’s usage and exchange on a more microcosmic level must comply with a vast infrastructure of local and national protocols. ATMs must demonstrate strict adherence to these bureaucratic procedurals in order to better keep crypto infrastructure safe, honest and profitable for the long haul. 

So, What Are Bitcoin ATM Regulations?

Some regulations are federally mandated compliance standards while others are issued state-by-state. Continue reading to learn more about the principles that keep Bitcoin ATMs up and running for ambitious investors like you.

Registering a Bitcoin ATM Nationally

First thing’s first. A Bitcoin ATM will need to be registered with the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN). As a money services business (a terminal for currency usage and exchange, abbreviated as MSB), all Bitcoin kiosks under the same operator must be registered as MSBs with FinCEN through their online portal. This registration must be completed within 180 days of the ATM’s establishment, and then must be renewed every two years. 

FinCEN’s responsibility lies mainly with upholding compliance to the Bank Secrecy Act, or BSA. Because Bitcoin ATMs have often been viewed as sites for illegal money laundering activities, the BSA mandates that registered providers establish and maintain anti-money laundering compliance programs (AML Programs) addressing the following components:

• Naming an official compliance officer whose duties involve overseeing day-to-day security procedurals and compliance with BSA protocol. This individual should act autonomously and without bias with responsibility first and foremost to national regulations rather than to the company itself. 

• AML staff training programs should instruct relevant personnel on the risks inherent to ATM operations regarding laundering, scamming, and theft. Such training should outline their individual responsibilities to security and compliance on an ongoing basis. 

• Internal policies and procedures, which are unique to each ATM company, should provide business-specific controls for remediating threats to the integrity of BSA regulations. This may involve threat reporting protocols and company-wide operational updates. 

• Regular independent audits conducted by contracted third parties or internal specialists should be used as a form of monitoring as well, identifying any existing gaps in compliance. 

• Know-your-customer (KYC) best practice helps preserve the financial integrity of Bitcoin ATMs nationwide. Keeping customer identity records helps proactively identify fraudulent and suspicious behavior. 

Licensing a Bitcoin ATM Locally

Once the initial registration process is complete, Bitcoin ATM operators will want to look into state-specific licenses and regulations that may be unique to their zone(s) of operation. Two of the most common extensions include money transmitter licenses (MTLs) and surety bonds.  

When Bitcoin is purchased, it may be through an exchange using non-crypto (fiat) tender—one of the main functions of a Bitcoin ATM. In some states, this transaction warrants the acquisition of a money transmitter license, designed to prevent fraudulent activity during the transfer or exchange of digital currency. When it comes to Bitcoin ATMs, state regulation has remained in flux for years and continues to change on a frequent basis; it’s crucial to remain up to date with MTL reporting deadlines and policy changes. 

Surety bond requirements are state-by-state as well. Surety bonds are basic liability contracts that promise financial reparations for any accrued debt, MTL compliance failures, and company default. State licensing fees may also be required for Bitcoin ATMs. Though MTLs and surety bonds are some of the more common state addendums, companies should further investigate any additional, more niche local requirements.  

Regularly Monitoring a Bitcoin ATM

Once Bitcoin ATMs are fully licensed and operational, it’s up to the ATM company to continue stringent monitoring practices. Keeping organizing records, filing reports including transaction reports and suspicious activity reports, and regularly reporting company data are all requirements encompassed by AML programming. 

Failing to hold the proper licenses or neglecting compliance standards constitutes a federal offense and is taken very seriously by both local and national governing bodies. In addition to internal AML programming, the IRS is sure to conduct its own audits and investigations—and is only getting more scrupulous as Bitcoin becomes more prolific. In 2019 the IRS issued a slew of subpoenas to suspect ATM companies; because these smaller companies don’t have the same resources as banks they fail to intensively keep records and inevitably take the fall later on. 

ATM users should also take initiative to monitor their own behaviors; companies that educate their customers on how to defend themselves against scams will have far less scandal on their hands, keeping them out of hot water with both the public and the IRS. Browse this helpful resource that details how to avoid common cryptocurrency scams. 

Staying Compliant with Pelicoin’s ATM Network

Overall, state and federal guidelines exist to provide a deregulated currency with a regulatory framework. Let Pelicoin handle the paperwork while you go paperless. 

When it comes down to the question, “What are Bitcoin ATM regulations?” Pelicoin not only has the answers but is proud to practice them on a daily basis. As the Gulf South’s largest cryptocurrency ATM network, our goal is to continually provide safe and efficient access to Bitcoin for thousands of local residents and investors. 

With all the proper certifications, administrative paperwork, and up-to-date licenses, our operations and kiosks are fully compliant; you’ll always know you’re procuring your cryptocurrency from a company you can trust. Visit the ATM location closest to you and see for yourself what Pelicoin has to offer.