What You Need to Know about Bitcoin ATM Regulation

Just about two year ago, Bitcoin businesses were transacting hugely off the radar in almost all countries. The general attitude from governments and authorities was that of indifference!

But things are drastically changing. There is a lot of interest on the activities around the cryptocurrency now.

Some countries such as Bolivia, Iceland and Ecuador have reacted with outright bans and others have either remained cautious or gone ahead to start drafting a legal environment for it.

Nevertheless, regulation on ATM use, in particular, is to a large extent still a virgin territory across the globe. In the United States, however, there is some activity in working out some legal framework.

Bitcoin ATMs in the US as legally recognized as money transmitters

In this regard, Bitcoin ATMs have been lumped together with Bitcoin exchanges and other related enterprises.

On March 18, 2013, for instance, the Financial Crimes Enforcement Network (FinCEN), a body within the US department of treasury that is tasked with ensuring the financial system is not abused by criminals, issued guidance on running of exchanges and ATMs for virtual currencies.

This document officially classified Bitcoin ATMs and exchanges as Money Services Businesses (MSB) or money transmitters. This requires them to adhere to the Bank Secrecy act of 1970.

That means that every Bitcoin ATM running enterprise has to put in place anti-money laundering(AML) mechanisms, keep personally identifying information about its customers-Know Your Customer(KYC), as well as report any suspicious transactions to FinCEN.

Many interpreted this as an onslaught on the Bitcoin tenet of facilitating community members to carry out transactions anonymously.

Business entities that found these legal demands too difficult to observe had to rethink their business strategy.

A Bitcoin ATM operator has to look at all levels of legal requirements

The Federal laws are not the only ones you have to observe as a business running a Bitcoin ATM. There are also state level legal requirements, most of which have to do with license issuance, capital and surety bonds requirements.

Mainly, the legal and regulatory demands on Bitcoin ATMs can be broken down into:

  1. Consumer protection,
  2. Anti-money laundering and anti-terrorism
  3. Know your customer requirements

That said, if you are planning to run a Bitcoin ATM or any other Bitcoin related business, then your first line of defense is to do your homework thoroughly and find out the legal and regulatory requirements within the jurisdiction you operate or plan to operate.

This will keep you away from trouble and save you lots of money in terms of legal fees.