Canada's Crypto ATM Problem: Fraud and Regulatory Concerns Mount
A CBC News investigation reveals that crypto ATMs in Canada are increasingly used for fraud, raising concerns about regulation and the exploitation of vulnerable individuals. Despite being legal, these machines have become a primary vehicle for fraudsters, prompting calls for stricter oversight.
Victims and Former Employee Accounts
Lewis Bell, a former customer support representative for Localcoin, a major crypto ATM company, recounts the distress of customers who were victims of fraud. "It's tough, basically breaking the worst news possible to someone," he said, highlighting the devastating impact on individuals who often lost their life savings.
Nearly a dozen former employees from four companies told CBC News that the issue of fraud is well-known internally. Some believe their employers would struggle to be profitable without fraudulent transactions.
"Without these scam victims, these victimizations, these companies wouldn't survive. These Bitcoin ATMs wouldn't exist." - Marc Grens, co-founder of a U.S. crypto ATM business.
The Prevalence and Cost of Crypto ATMs
Canada has the highest number of crypto ATMs per capita globally. According to TRM Labs analysis, there are approximately 91 ATMs per million people. These machines offer a fast way to buy cryptocurrency, but at a steep price.
Det. David Coffey with Toronto Police's financial crimes unit notes the high fees associated with these ATMs, ranging from 15 to 30 percent. He questions their legitimate use, given the availability of cheaper alternatives through legitimate exchanges.
Operators' Perspectives and Anti-Fraud Measures
While some companies like Localcoin did not respond to requests for comment, others, such as HODL Digital Services, claim to have measures in place to detect and prevent fraud. Sam Mokbel, president of HODL, stated that fraudulent transactions account for less than five percent of their overall business.
Bitcoin Depot and CoinFlip, other major operators, provided written statements outlining their anti-money laundering efforts, which they claim exceed FINTRAC requirements. These include transaction monitoring, customer support, and collaboration with law enforcement.
However, Marc Grens argues that enhanced anti-fraud measures by one company can be ineffective if the entire industry doesn't adopt them. He says his company's stricter compliance simply drove fraud victims to competitors with fewer restrictions.
The Regulatory Landscape and Challenges
Regulation of crypto ATM companies in Canada falls under federal anti-money laundering law, requiring registration with FINTRAC, reporting of large cash transactions, and adherence to Know Your Customer (KYC) rules for transactions over $1,000. However, there are no specific regulations governing fees or transaction limits.
Law enforcement agencies like the RCMP and Toronto Police face significant challenges in investigating fraud cases involving crypto ATMs, as funds can quickly move across the globe. The Canadian Anti-Fraud Centre (CAFC) estimates that reported losses from scams through crypto ATMs totaled $14.2 million in 2024, with losses on pace to surpass that in 2025.
Brenda Smith's Story: A Victim of Crypto ATM Fraud
Brenda Smith, a 76-year-old retiree from Calgary, lost over $12,000 in a scam involving crypto ATMs. She was directed to deposit cash into the machines, highlighting the vulnerability of individuals targeted by these schemes. "It was devastating, even though it was only $12,000," she said.
The Appeal and Risks of Crypto ATMs
Experts attribute the popularity of crypto ATMs among fraudsters to their convenience, speed, and accessibility. Andreas Park, a finance professor at the University of Toronto, notes that the low barrier to entry facilitates criminal activity.
Despite the convenience for some users, authorities and experts warn that these machines are a tool for fraud, preying on vulnerable communities who may not fully understand cryptocurrency.
