Crypto ATMs: where old technology meets the new world
Just over 55 years ago, the first ATM in the world was installed at a Barclays branch in Enfield, London. Nowadays we think nothing of going up to a hole in the wall, at any time of the day, to withdraw cash, but until the late 1960s, getting hold of your cash meant a visit to the bank during office hours. With the growing popularity of cryptocurrency in recent years, it is no surprise that a technology invented for cash is being used to allow users to buy or sell crypto assets such as Bitcoin in exchange for cash or with a debit card.
Since 10 January 2020, businesses wishing to carry out cryptoasset activity in the UK need to be registered with the Financial Conduct Authority (“FCA”) under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs) and comply with the requirements of the MLRs. In March 2022, the Financial Conduct Authority (“FCA”) warned Prosecution Lawyers operators of crypto ATMs to shut their machines down or face enforcement action. This warning comes because no cryptoasset firm has been approved in the UK, let alone approved to offer crypto ATM services. This means that currently all crypto ATMs are operating illegally under the MLRs, and consumers shouldn’t be using them.
In a recent Upper Tribunal ruling against Gidiplus, it is reported that the FCA were not satisfied with the adequacy of Gidiplus’ AML systems and controls and its officer didn’t have the adequate knowledge, skills and experience in respect of Gidiplus’ obligations under the MLRs, hence why they rejected the application. Gidiplus wanted to continue trading pending the Upper Tribunal’s determination of its appeal for registration but the judge concluded that there was a ‘lack of evidence as to how Gidiplus would undertake its business in a broadly compliant fashion’.
This week, in a national first, West Yorkshire Police in partnership with the FCA inspected several sites around Leeds which were suspected of hosting illegally operated crypto ATMs. Cease and desist letters were issued to operators stating that any Prosecution Solicitors breach of regulations would result in an investigation under the MLRs. Unregistered crypto-asset activity falling under the MLRs carry a maximum sentence of two years in prison.
Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said:
‘Unregistered Crypto ATMs operating in the UK are doing so illegally. We will continue to identify and disrupt unregistered crypto businesses operating in the UK. Crypto businesses operating in the UK need to be registered with the FCA for anti-money laundering purposes. Class Action Lawsuit However, crypto products themselves are currently unregulated and high-risk, and you should be prepared to lose all your money if you invest in them.’ In addition to consumers losing their money, the government reported in 2020 that these crypto ATM’s are being used by money mules to launder illegally obtained cash. This is not surprising considering that these ATMs are used solely to buy or sell crypto assets in exchange for cash.