Angelika Hellweger of financial crime specialists Rahman Ravelli details the latest action taken by the UK's Financial Conduct Authority over cryptocurrency ATMs
Crypto ATMs allow people to buy or convert money into cryptoassets. Such ATMs are connecting the worlds of crypto and cash, helping to bridge the digital and paper money worlds - and they are on the increase.
There are more than 38,604 Bitcoin ATMs located globally. Most of these are in the United States, but they are also common in Canada, Spain and Australia. The number of Bitcoin ATMs in Europe has reached an all-time high, according to data from Coin ATM Radar. The figure stands at 1,459 as of October 2022. In the UK, there are currently 17 crypto ATMs - located in Birmingham, London, and Manchester. This represents a steep decline since March 2022, when there were more than 80.
As crypto ATMS are often installed at convenience stores, petrol stations, supermarkets, money exchange businesses and other outlets, they are a straightforward way for people to access crypto. It is this ease of use and accessibility that leads their supporters to point to them as facilitators of financial inclusion, providing digital financial services to those who are heavily reliant on cash and lack access to banks.
There are a number of leading providers of Bitcoin ATM services that have committed themselves to compliance with regulatory requirements, including anti-money laundering and counter financing of terrorism measures. But such ATMs can be used for illicit activity such as money laundering and fraud - where, for example, victims are manipulated into transferring their money to fake investment platforms. This is particularly the case where the Bitcoin ATM operators fail or refuse to comply with regulatory requirements.
Such non-compliance with regulatory rules has again happened in the UK. Currently, there are no crypto ATM operators registered with the Financial Conduct Authority (FCA), which they must be to operate legally . Recently, the FCA has inspected sites in Exeter, Nottingham and Sheffield as part of a crackdown on illegally-operated crypto ATMs.
The inspections were part of a joint operation with the South West and Humber Regional Organised Crime Units and Nottinghamshire police, targeting crypto ATMs operating without the necessary registration.
The FCA is working with the National Economic Crime Centre to plan and coordinate action against the operators of illegal crypto ATMs. This latest action follows similar operations in Leeds and East London.
The FCA will now review the evidence gathered during its inspections and consider taking further action where necessary. It carried out these visits using investigative powers under the Money Laundering Regulations 2017. All cryptoasset exchange providers - including crypto ATM operators - must comply with the Regulations. The FCA has previously warned operators of crypto ATMs in the UK to shut their machines down or face enforcement action.
The FCA's activities are not the first major regulatory action involving Bitcoin ATMs. Last year, the Monetary Authority of Singapore (MAS) prohibited the placement of crypto kiosks in public places in an attempt to protect consumers. Five years ago, European law enforcement agencies uncovered a money laundering ring that used Bitcoin ATMs to convert cash proceeds from drug sales in Spain into Bitcoin, which was then transferred to members of a drug cartel in Colombia.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.