R.I. House bill would limit transactions, add warning labels to crypto kiosks

A sign advertising a CoinFlip crypto kiosk is seen in a business’ window on Atwells Avenue in Providence. Lawmakers and advocacy organizations like AARP are looking to tighten regulations to protect older adults from scams involving the machines. (Photo by Alexander Castro/Rhode Island Current)

Timmons Roberts of Providence has a Ph.D. But someone pretending to be a federal marshal over the phone still ended up scamming him out of $2,200 last year.

The scammer convinced Roberts to withdraw money from his bank, then feed the cash into a Coinstar machine. The supermarket fixture was once used to easily count spare change. More recently, the units have begun to double as cryptocurrency kiosks.

“It’s kind of shocking to me how many people don’t want to talk about it, and I certainly thought I would never be scammed,” the Brown University environmental sciences and sociology professor told the House Committee on Innovation, Internet and Technology on Tuesday. “It can happen to you.”

Roberts testified at the State House in support of a bill that would more tightly regulate cryptocurrency kiosks, which function like ATMs and allow people to convert cash into virtual currencies like Bitcoin. The crypto purchased as these machines can be traded to other users’ virtual wallets as well. Coin ATM Radar, a kiosk directory site, lists 113 units active in Rhode Island, although that site doesn’t list units owned by Coinstar.

Rep. Julie Casimiro, a North Kingstown Democrat, is lead sponsor of H5121, which would give the state’s Department of Business Regulation more purview over cryptocurrency kiosks by determining fees and daily transaction limits. 

Like most fledgling bills, Casimiro’s legislation was procedurally held for further study. But the lawmaker thinks the bill is improved from a similar one she submitted last year.

 “It’s a really good consumer protection bill,” she testified before the committee. “It’s a lot different than it was last year. We’ve worked with both the cryptocurrency vendors and AARP. I think we have a couple of more areas that we negotiate on, but I think it’s in place where we can have cryptocurrency vendors actually successfully running their business while still protecting our older population.”

Casimiro’s bill would establish the following rules for crypto kiosks across the state: 

• Daily transactions would be limited to $1,000 per customer, per day, across the state.
• Kiosk operators would need to cap transaction fees at $5 or 3%, whichever is higher.
• Victims of fraud who have never used a crypto kiosk before (“new customers,” in the bill’s language) would be eligible for refunds from the kiosk operator.
• Cryptocurrency companies would need proper licensing as money transmitters to continue operating kiosks in the state. Companies would also need to register with the Department of Business Regulation and submit quarterly reports that inventory the kiosks they own in the state.
• Crypto operators would need to add additional warnings and disclosures to the terminals’ interfaces to reduce the likelihood of fraud. Terms and conditions would also displayed before any transaction can be completed. Paper receipts would be supplied with each transaction with the intent of providing a bigger paper trail for investigators if fraud occurs.

In 2024, the Federal Trade Commission released data showing the sizable problem crypto ATMS have become, especially for older people. From January through June 2024, the FTC estimated fraud losses of $65 million via crypto ATM scams. People over age 60 were three times more likely than younger adults to report being victimized, and the median loss in this time period was $10,000.

In Roberts’ case, he was driving through Massachusetts when he picked up a phone call from an unknown number. The caller claimed to be a federal marshal and said that Roberts was under federal custody and being held in contempt because he hadn’t shown up for federal jury duty in Providence. The scammer told Roberts he would have to wait in “processing” at the courthouse for eight to 10 hours, but that the process could be expedited if Roberts paid a reimbursable, $2,500 fee ahead of time at a “federal payment kiosk” — in this case, a Coinstar terminal with crypto trading capabilities.

Roberts took out $2,200 at a Citizens Bank branch in a Sturbridge, Massachusetts, Stop and Shop, which also had a crypto-enabled CoinStar. Roberts withdrew and sent the money in two separate transactions per the scammer’s instructions — a means of evading federal fraud laws that trigger with transfers over $2,000. When Roberts approached the branch teller for more, the employee wondered why Roberts was on the phone and asked to talk to the man on the other end. The scammer maintained that they were a federal marshal, so the teller told Roberts to hang up. The clerk then informed the professor he had likely been scammed.   

“Looking back, of course, it seems absurd, but when you’re in this moment, you don’t know,” Roberts said. “It was only the teller at the bank that saved me from losing any more money.” A call later that day to the U.S. District Court in Providence, Roberts said, confirmed that other people had called in with details of the same scam.

Rep. David Morales, a Providence Democrat, thanked Casimiro for introducing the bill, and noted that last year one of his loved ones had lost $10,000 to a cryptocurrency scam that involved sending money via a kiosk, which he said did not display any fraud warnings.

“It’s been hard to have any form of accountability,” Morales said, and noted that the bill’s push for disclaimers when using crypto might have saved his loved one from losing $10,000 from her life savings.

After Roberts’ testimony, the bill’s hearing concluded, and Rep. John Lombardi, a Providence Democrat, came up to introduce a separate bill. “After that testimony, I don’t know what to do,” he said. “I don’t know whether to cry or start throwing punches.”

Much ado about refunds

While Roberts was the only scam victim to testify in person, a number of testimonies, both spoken and written, showed support for the bill. AARP Rhode Island submitted several supportive letters from both organization leaders and volunteers ahead of the hearing. Officials from the state treasurer’s office and Financial Crimes Unit of the Rhode Island State Police also attended to support Casimiro’s bill.

Support was matched by testimony from crypto industry representatives, who worried the legislation could essentially double as a ban on their business activities in the Ocean State. 

Larry Lipka, the legal counsel for the Chicago-based CoinFlip, testified in a letter and in person to the committee that his employer agrees with much in the bill, from proper licensing to the necessity of disclosures. There are six pages of fraud warnings which users must confirm before they can complete a transaction on CoinFlip terminals, Lipka said. The company has 15 kiosks in Rhode Island and 6,000 across the globe. 

“We all share the goal of protecting consumers from bad actors who can depart them from their hard-earned money, and that’s why we support about 95% of this AARP-drafted bill,” Lipka said. 

But CoinFlip was concerned about the refund provision which, as currently drafted, “goes beyond federal Reg E,” which guards consumers against fraudulent and unauthorized transactions, Lipka said.

“We already, as a company, voluntarily refund scam victims the fee that they pay to us, because we don’t want to profit off of bad actors, and we would support such a provision here in Rhode Island,” Lipka said. “If we must refund victims authorized transactions that results in a double loss to us, both the crypto we purchased and sent per the customer instructions and the cash the customer put into the kiosk. It would be like requiring Target to refund the purchase of a gift card if the customer later gives their gift card to a bad actor.”

The $1,000 daily limit was another point of contention for CoinFlip and could actually hamper money laundering and fraud prevention efforts, as it would encourage using multiple kiosk operators, thereby scattering evidence of criminal activity. The company would be OK with a potential daily limit for new users, but a $1,000 cap might deter repeat business return customers — who, Lipka pointed out, are allowed $10,000 a day under a recently passed Minnesota law, the same as the federal limit on total gift card transactions in a single day.

The Minnesota law caps new users at $2,000 a day, and was supported by the AARP.