The California Department of Financial Protection and Innovation (DFPI) announced a significant enforcement action this Friday. The regulator imposed a Bitcoin ATM operator fine totaling $675,000. The sanctioned company is Coinhub, which operates commercially as LSGT Services, LLC. The penalty is due to multiple violations of the state’s digital assets law.
The DFPI’s investigation revealed a series of violations by Coinhub since 2024. Of the total amount, $105,000 will be allocated for direct restitution to affected California consumers. These users were harmed by markup fees that exceeded the maximum allowed by law.
Furthermore, the agency found that the company violated other key regulations. Coinhub accepted cash transactions that exceeded the stipulated daily limit of $1,000 per customer. It also omitted crucial information on transaction receipts. Finally, the company failed to provide users with the legally required disclaimers before they completed their operations.
This action is not an isolated event by the Californian regulator. It represents the DFPI’s fourth recent enforcement action against cryptocurrency ATM operators. The department is intensifying its oversight under the Digital Financial Assets Law (DFAL). For example, last June, the DFPI fined the operator Coinme $300,000 for similar violations. Of that fine, $51,700 was also designated for customer restitution. The companies operating crypto kiosks are facing increasing scrutiny.
Will Regulatory Pressure on Crypto ATMs Intensify?
On the other hand, regulatory pressure is not limited to California and is becoming a global trend. The city of Spokane, in Washington state, unanimously voted to ban cryptocurrency kiosks entirely. New Zealand took a similar measure in July, also banning these ATMs. Both jurisdictions cited growing concern over financial crime and scams.
In fact, warnings about the illicit use of these ATMs are increasing. Police in Massachusetts recently warned about a “missed jury duty” scam that cost two residents nearly $7,000 via Bitcoin ATMs. Additionally, the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) issued an urgent warning in August. FinCEN highlighted the use of these ATMs in scams specifically targeting the elderly.
DFPI Commissioner KC Mohseni issued a strong statement alongside the announcement. “Crypto kiosk operators in California are on notice,” stated Mohseni. The commissioner assured that they intend to root out bad actors and scammers who put consumers’ hard-earned money at risk.
Mohseni added that while they welcome legitimate operators, the DFPI “will not tolerate those who flout the law.” This Bitcoin ATM operator fine sets a firm precedent. It suggests that oversight of the sector will continue to intensify. Operators will need to ensure strict compliance to avoid similar penalties.
