Michigan Town Becomes First to Regulate Crypto ATMs with Anti-Fraud Measures

Grosse Pointe Farms Passes Groundbreaking Crypto ATM Ordinance

A small Michigan town has made history by becoming the first municipality in the state to regulate cryptocurrency ATMs, implementing comprehensive measures to protect residents from increasingly common crypto scams.

The city council of Grosse Pointe Farms, located just outside Detroit, unanimously passed an ordinance on Tuesday that establishes strict regulations for crypto ATM operators. The decision came after a local resident fell victim to a cryptocurrency scam at a nearby crypto ATM in St. Clair Shores.

Michigan Attorney General Issues Statewide Warnings

The regulatory action follows Michigan Attorney General Dana Nessel's statewide warnings about crypto ATM scams issued in April. Local media outlets, including the Detroit Free Press, have increasingly reported on cryptocurrency ATM fraud cases affecting residents throughout the region.

Council member Lev Wood emphasized the transparency issues surrounding crypto ATMs, stating that criminals often direct victims to deposit money into these machines in deliberately confusing situations. The new ordinance aims to enhance transparency and provide additional protection for residents.

Key Regulations for Crypto ATM Operators

Registration and Licensing Requirements

City attorney Bill Burgess outlined four main regulatory requirements that any future crypto ATM operators must follow:

All cryptocurrency kiosks must be registered with the Department of Public Safety, and operators must obtain proper business licenses before installation. This creates an official record of all crypto ATM locations and their operators.

Mandatory Consumer Protection Warnings

The ordinance requires operators to display mandatory warnings and written consumer protection notices about fraud risks and the irreversible nature of cryptocurrency transactions. These warnings must be prominently displayed on the machines.

Transaction Limits for New Users

Perhaps most significantly, the regulations impose specific transaction limits for new users during their first two weeks of operation. New customers face a $1,000 daily transaction cap and a $5,000 aggregate limit over the 14-day period.

After the two-week period, these limits are automatically removed, allowing users to conduct larger transactions once they become more familiar with the technology.

Industry Response and Prevention Efforts

Carson Gat, a representative from Chicago-based crypto ATM operator Coinflip, attended the council meeting to share his company's fraud prevention experiences. He described how his firm successfully prevented an elderly woman from being scammed and explained their internal policies for protecting vulnerable customers.

Coinflip has operated in Michigan since 2019 and received its official money transmitter license in April. The company has implemented its own limits and holding periods on first transactions, recognizing that new customers are most vulnerable to scams.

Growing National Trend of Crypto ATM Regulation

Grosse Pointe Farms joins a growing number of jurisdictions taking action against crypto ATM fraud. Several states have implemented similar measures this year, including Arizona, Nebraska, California, and Washington, each addressing the rising concerns about cryptocurrency-related scams.

The ordinance represents a proactive approach to consumer protection, as the town currently has no crypto ATMs installed within its boundaries. This preventative measure demonstrates how local governments are staying ahead of potential fraud issues.

Impact on Cryptocurrency Adoption

The new regulations balance consumer protection with cryptocurrency accessibility. By requiring proper registration, consumer warnings, and temporary transaction limits, the ordinance aims to reduce fraud without completely blocking legitimate crypto ATM usage.

The transaction limits specifically target the most vulnerable period when users are unfamiliar with the technology, while still allowing experienced users to conduct larger transactions after the initial learning period.

Future Implications for Michigan

As the first Michigan municipality to regulate crypto ATMs, Grosse Pointe Farms may serve as a model for other local governments throughout the state. The unanimous passage of the ordinance suggests strong local support for balanced cryptocurrency regulation.

The ordinance addresses the growing concern about crypto ATM scams while maintaining access to legitimate cryptocurrency services. This measured approach could influence similar legislation in other Michigan communities facing comparable challenges with cryptocurrency fraud.

Conclusion

The Grosse Pointe Farms ordinance represents a significant step forward in crypto ATM regulation, prioritizing consumer protection while preserving access to legitimate cryptocurrency services. As crypto ATM scams continue to rise nationwide, this proactive legislative approach may become a template for other communities seeking to protect their residents from financial fraud.