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North Dakota bill takes aim at crypto fraud with new consumer protections

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North Dakota bill takes aim at crypto fraud with new consumer protections

By Michael Achterling
North Dakota bill takes aim at crypto fraud with new consumer protections
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Josh Askvig, state director of AARP North Dakota, speaks during a committee hearing on digital currency kiosks on Jan. 22, 2025. (Michael Achterling/North Dakota Monitor)

A bill debated Wednesday by North Dakota lawmakers aims to protect residents from cryptocurrency scams.

House Bill 1447 would add new requirements for crypto kiosks – or ATMs for digital currency – such as daily withdrawal limits, fraud warning notices and a cap on fees.

Supporters say the proposal aims to counter a rise in scams involving cryptocurrency. The FBI reported $5.6 billion in crypto fraud losses in 2023, according to testimony submitted by Lisa Kruse, commissioner of the North Dakota Department of Financial Institutions. 

North Dakotans reported 103 digital currency scam complaints to the FBI in 2023, involving about $6.5 million in losses, Kruse said. 

North Dakota bill takes aim at crypto fraud with new consumer protections
Lisa Kruse, commissioner of the Department of Financial Institutions, speaks during a committee hearing on digital currency kiosks on Jan. 22, 2025. (Michael Achterling/North Dakota Monitor)

She told members of the House Industry, Business and Labor Committee she believes the actual losses are likely higher because people can be reluctant to report they have been scammed. 

The bill would require crypto kiosks to be licensed by the state. It also would limit the amount that can be deposited or withdrawn at a digital currency kiosk to $1,000 per customer, per day and require disclaimers on the machine alerting users to possible online scams.

The proposal would limit fees to $5 per transaction, or 3% of the transaction amount, whichever is greater.

Rep. Steve Swiontek, R-Fargo, retired president and CEO of Gate City Bank, is the prime sponsor of the bill. 

“Cryptocurrency ATMs are still relatively new, and we don’t have measures in place to ensure people are using them safely like we do for bank ATMs and more traditional money service businesses,” Swiontek, who serves as chair of Gate City’s board of directors, said in a statement. “Unfortunately, this has allowed criminals to exploit them for theft.” 

AARP North Dakota is among the bill supporters.

“(The bill) will create important consumer protections to save older North Dakotans from having their hard-earned money, sometimes their life savings, stolen by criminals misusing crypto kiosks, or ATMs, for fraudulent activity,” said Josh Askvig, state director of AARP North Dakota.

Industry representatives said they support some regulation, but oppose the fee and transaction limits.

Virtual currency kiosks operated by the company CoinFlip typically charge a fee of 8% to 20% of the transaction amount, according to Kevin Lolli, CoinFlip assistant general counsel and consumer protection officer. That’s because the kiosks have unique operational requirements, such as device hardware and maintenance, armored car services, rent payments to local businesses and blockchain analytics, he said.

“The proposed North Dakota fee limits do not take into consideration these unique operational costs and are a de facto ban of virtual currency kiosks in North Dakota,” Lolli told lawmakers.

CoinFlip already reports suspicious transactions over $2,000 and any currency transaction over $10,000 to the federal government, Lolli said. He added limiting transaction amounts would prompt customers to use multiple kiosks and would hinder anti-money laundering efforts already in place.

Kruse questioned why operators wouldn’t report suspicious transactions under $2,000.

“If they know about fraud, why would they not call on law enforcement, or report it? I think that is not a valid argument and it actually makes me kind of annoyed,” she said.

North Dakota bill takes aim at crypto fraud with new consumer protections
Rep. Ben Koppelman, R-West Fargo, speaks during a committee hearing on digital currency kiosks on Jan. 22, 2025. (Michael Achterling/North Dakota Monitor)

Jacob Rued, a fraud investigator for First Western Bank and Trust who testified in support of the bill, said he believes the transaction limit is the most important consumer protection.

Rued told lawmakers of a Minnesota man who had withdrawn $50,000 from his bank account and was trying to deposit the money into a digital currency kiosk to transfer to a scammer when he encountered a transaction limit of $2,000, which gave him second thoughts.

“Without that, he would’ve lost all $50,000,” he said. 

Rep. Ben Koppelman, R-West Fargo, said he anticipates the committee will work on some proposed amendments before taking action on the bill.