Following unheeded warnings to stop operations, the U.K.’s Financial Conduct Authority (FCA) has shut down 26 digital currency ATMs for operating illegally.
The FCA’s action against the ATM operators was a collaborative effort with local law enforcement agencies across the country, Reuters reported. The FCA noted apart from failing to seek registration with the regulator, digital currency ATMs are a hotbed for facilitating fraud.
The agency swung into action after an unnamed individual deposited funds in an ATM to purchase digital currencies but fell victim to an elaborate scam that made away with his funds. FCA executive Steve Smart noted that law enforcement agents may be unable to recover funds deposited into digital currency ATMs, urging residents to avoid using them.
“If you use a crypto ATM in the UK, you are using a machine that is operating illegally and you may be handing your money over to criminals,” said Smart. “You will not be protected if something goes wrong, and you could lose your money.”
In February, the FCA issued a joint cease-and-desist order to digital currency ATM operators with the West Yorkshire Police following an inspection of sites suspected of housing the ATMs. The FCA warned that the operators did not have the prerequisite license to offer ATM services to the general public, saying that “any breach of regulations would result in an investigation under money-laundering regulations.
According to data from Coin ATM Radar, it appears that the affected ATMs are located around London, Nottingham, and Manchester regions.
Several public advisory warnings have cited digital currency ATMs as part of the playbook of scammers. Bad actors may impersonate tax or law enforcement authorities to trick unsuspecting victims into transferring large sums using digital currency ATMs, making it difficult to follow the money trail.
“The FBI has seen an increase in scammers directing victims to use physical cryptocurrency ATMs and digital QR codes to complete payment transactions,” a 2021 Federal Bureau of Investigation warning read.
FCA flexes its regulatory muscles
In line with the quest to rid the local digital currency industry of bad actors, the FCA has increased its regulatory activities.
In a July 4 letter to digital asset operators, the financial watchdog announced a new regulatory regime for digital currency promotions, unifying them with existing financial promotion standards. The FCA noted in its statement that failure to comply with the new advertising framework would result in criminal liability with the possibility of jail time.
As more firms jostle for operational licenses, the FCA continues to demand a high level of compliance from applying virtual asset service providers. Out of 90 applications received in the last 12 months, the FCA approved only eight firms as the crackdown against erring entities rolled on.
Watch: Blockchain regulation with Marcin Zarakowski
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