A Minnesota House committee is considering a drastic measure to curb a rising wave of financial exploitation: a total statewide ban on bitcoin ATMs. The proposal, HF3642, comes as law enforcement and state officials report that these machines have become a tool for scammers targeting the state’s most vulnerable residents.

During a hearing of the House Commerce, Finance and Policy Committee on Feb. 26, Woodbury police Detective Lynn Lawrence shared a harrowing account of a local senior who had been systematically defrauded for eight months. By the time police intervened, the woman had completed at least 10 transactions and was handing over 50% of her monthly income to scammers.

“She was already vulnerable with fixed income and food and housing insecurity,” Lawrence testified. “Adult Protection Services had to become involved… She was afraid she was going to have to live out of her car because she had no money left.”

According to Faribault Police Chief John Sherwin, residents in his city have lost more than $500,000 to kiosk-related scams since 2022—a figure he believes represents only a fraction of actual losses. State Rep. Keith Allen, R-Kenyon, noted that for rural communities, such losses drain millions of dollars that would otherwise support the local economy.

Officials believe scammers, often posing as government officials or romantic interests, direct victims to these machines and coach them to bypass existing security warnings. Once the cash is converted to cryptocurrency and sent, it reportedly moves to overseas accounts, making it nearly impossible for local police to recover.

Minnesota lawmakers noted that current safeguards—including a 2024 law that limited new customer deposits to $2,000—are being bypassed. Scammers now instruct victims to make multiple small deposits or even travel to neighboring states, like Wisconsin, to avoid Minnesota’s regulations.

However, the proposal to ban all 350 licensed bitcoin ATMs in Minnesota faces stiff industry opposition. Larry Lipka, general counsel for Coinflip, argued that a ban unfairly punishes legal businesses for the actions of external criminals.

“It is inappropriate to ban a legal product because fraud is happening. Not our fault,” Lipka told the committee. He suggested that stricter regulations, such as mandatory “cooling off” periods for transactions and revoking licenses of non-compliant operators, would be more effective than a total ban.

The bill, sponsored by Rep. Erin Koegel, DFL-Spring Lake Park, would only affect physical kiosks; Minnesotans would still be able to trade cryptocurrency through online platforms.

While some Republican members expressed skepticism about whether a ban would truly solve the fraud problem, there appears to be a rare bipartisan appetite for action. The committee has laid the bill over for further consideration, with co-chair Rep. Tim O’Driscoll, R-Sartell, indicating that both sides are working to find a compromise that can pass before the end of the session.

• What is HF3642? HF3642 is a proposed bill in Minnesota aiming to ban all bitcoin ATMs statewide to curb financial exploitation.
• Why are lawmakers concerned about bitcoin ATMs? They are seen as tools for scammers targeting vulnerable residents, leading to significant financial losses.
• What evidence was presented during the hearing? A Woodbury detective shared a case where a senior lost 50% of her monthly income to scams involving these ATMs.
• What is the response from the bitcoin ATM industry? Industry representatives argue that a ban unfairly punishes lawful businesses and call for stricter regulations instead.

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