Financial Regulator Warns Crypto ATM Users Risk Losing Money

A sign advertises a Bitcoin automated teller machine, ATM, at a shop in Halifax on February 4, 2020. Andrew Vaughan / The Canadian Press

People using unregistered cryptocurrency ATMs risk handing their money to criminals, a financial regulator has warned.

In a joint effort with law enforcement agencies, the Financial Conduct Authority (FCA) has disrupted 26 crypto ATMs, operating unlawfully across the country.

Users can buy and sell cryptocurrency in exchange for cash or with a debit card when using a crypto ATM. Although they resemble regular teller machines, crypto ATMs don’t connect to a bank account, but instead link with the user’s digital wallet to process the transaction.

Most ATMs will require the user’s phone number to verify their identity, while some request further verification.

None of the crypto ATMs in the UK have been registered with the FCA, which means they operate illegally. The FCA has warned users against trusting these machines with their assets to avoid scammers and losing money.

“If you use a crypto ATM in the UK, you are using a machine that is operating illegally and you may be handing your money over to criminals. You will not be protected if something goes wrong, and you could lose your money,” FCA’s executive Steve Smart said.

If something goes wrong with the user’s transaction, they are unlikely to receive help from the operator, he warned, as there are no “effective channels of communications.”

The FCA reported shutting down a crypto ATM in Sheffield, after a user paid £1,000 to buy cryptocurrency and ended up losing their money. The ATM reported that the transaction was not successful, but didn’t return the funds to the user. The user wasn’t able to contact the operator of the machine or return their money.

The ATMs are typically located in shopping centres, convenience shops, gas stations, and airports. Some can be found in pubs, bars, restaurants or barber shops.

Since the start of the year, the FCA has inspected 34 locations across the UK suspected of hosting crypto ATMs.

“We will continue to warn the public and take appropriate enforcement action against unregistered crypto ATM operators,” the regulator said.

The inspections were part of a joint operation with regional organised crime units and covered sites in London, Exeter, Nottingham and Sheffield among others.

Unregulated crypto kiosks are key to how criminals carry out money laundering and the movement of funds, said regional head of economic crime Ramona Senior.

The FCA has published an extensive list of UK businesses that appeared to be carrying on unregistered cryptoasset activity, which included dozens of venues in central London.

Since the list was published, the FCA estimated that 110 unregistered crypto firms were no longer operational.

These businesses did not comply with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 and have not registered with the FCA.

Not all crypto ATMs sell cryptocurrency, some only offer one-way transactions. This means that users can only purchase crypto. If a user wants to sell cryptocurrency, they will typically scan a QR code in their digital wallet in order to receive a chosen amount in cash from the ATM.

Retailers hosting crypto ATM machines would usually display symbols of various cryptocurrencies on the shops or the machines, including one of the most well-known currencies, Bitcoin.

Bitcoin ATM map indicates three cash ATM locations in the UK, which includes Milton Keynes, Manchester and Worcester.

Statistics website Statista has reported that as of Nov. 1, 2022, there were nearly 39,000 Bitcoin ATMs all over the world, with the majority located in the United States.

To tackle the use of crypto ATMs for money laundering purposes and scams, the FCA is working with the National Economic Crime Centre, having previously warned operators to shut down their machines or face enforcement action.