Cryptocurrency kiosk regulation advanced

A measure that would make operators of controllable electronic records, such as cryptocurrency, subject to regulation under the Nebraska Money Transmitters Act advanced from the first round of debate Feb. 11.

Lincoln Sen. Eliot Bostar, sponsor of LB609, said the use of gift cards and cryptocurrency kiosks has become a major avenue for fraud in recent years. Scammers convince victims to purchase gift cards or deposit money into kiosks, he said, which is then transferred to a digital wallet that is impossible to trace.

Among other provisions, LB609 would require kiosk operators to be licensed and submit quarterly reports to the Nebraska Department of Banking and Finance. Operators also would be required to:
• provide risk, fee and exchange rate disclosures;
• create and implement anti-fraud measures;
• offer refunds for fraudulent transactions;
• provide consumer warning; and
• abide by transaction limits.

Scammers stole more than $228 million from unsuspecting consumers in 2022 using these methods, Bostar said, and most victims never recover their funds.

“These measures aim to give consumers enough information to recognize and avoid scams before they become a victim and to help law enforcement investigate these crimes promptly,” he said.

A Banking, Commerce and Insurance Committee amendment, adopted 37-0, would increase the daily limit on kiosk transactions from $5,000 to $10,500 in certain situations. It also would
require the Consumer Protection Division of the Office of the Attorney General to develop and release model notice language.

Among other changes, the amendment also would add controllable electronic records as a type of property that may be seized in criminal investigations.

North Platte Sen. Mike Jacobson, committee chairperson, supported the amendment and the bill. Electronic records kiosks are effectively unregulated, he said, unlike banks and other financial institutions that currently must report transactions of $10,000 or more, for example.

Such regulations can help curb financial fraud, Jacobson said.

“This is a big improvement from what we have today,” he said. “It’s kind of the wild west right now and this is going to bring some structure to it.”

Senators voted 40-0 to advance LB609 to select file.