Some experts say that the number of Bitcoin ATMs in the United States is growing rapidly, and so is the threat of cybercrime. ATMs that handle Bitcoin are similar to cash: like any other ATM, there is a PIN code to punch in and withdrawal fees.
However, unlike cash ATM machines, High Value of Cryptocurrencies making them prime targets for hackers. So while a cash ATM hidden among gas station snack cakes and energy drinks might not attract much attention, Bitcoin ATMs come under more scrutiny from bad actors.
“It’s clear that these machines are particularly vulnerable to physical and cyber threats, making them prime targets for hackers and thieves,” said Timothy Bates, clinical professor of cybersecurity. at the University of Michigan School of Innovation and Technology.
Bitcoin ATMs may be vulnerable to attacks by hackers installing malware on the machines to capture private keys, steal funds or manipulate transactions, Bates said, which is “especially true for ATMs that may not receive regular software updates or security patches. It’s worrying.” Network vulnerabilities are also a weakness. “If the machine’s network communications are not adequately protected, an attacker can intercept the data transmission between the ATM and the server, resulting in data theft or unauthorized access,” Bates said.
Whether it’s hackers or scammers, governments are sounding the alarm on Bitcoin ATMs. Federal Trade Commission Report of the week Scams have increased 1,000% since 2020.
Ironically, the risks of Bitcoin ATMs are directly related to their advantages, said Joe Dobson, principal analyst at Mandiant. Google Cloud-owned cybersecurity company. Bitcoin is decentralized, permissionless, and immutable. “If funds are deposited to the wrong address, the transaction cannot be reversed or reversed,” Dobson said. While many cryptocurrency bulls find Bitcoin’s lack of governance attractive, this could cause problems at ATMs. “There is no governing body within Bitcoin that dictates who can or cannot operate a Bitcoin ATM, so many independent organizations operate ATMs,” Dobson said.
There are also age-old criminal tricks that may be reversible in traditional banking situations, but in the Bitcoin world, this is not the case. For example, someone might maliciously place personal deposit slips into a stack at a bank, tricking people into depositing money into their accounts. “Similar attacks are possible on Bitcoin ATMs,” Dobson said. “If an attacker compromises a Bitcoin ATM, they may change the receiving wallet address (or ‘account number’), effectively stealing user funds.”
But in addition to old tricks, Bitcoin ATMs pose new threats that cash ATMs don’t face. Many Bitcoin ATMs require personally identifiable information, such as ID or even Social Security number, to comply with the financial industry’s “know your customer” (KYC) requirements. If a Bitcoin ATM is stolen, this information may be at risk.
In Middletown, Ohio, at the Middletown Food Market at the Hollow end of town, a Bitcoin warehouse The ATM is located across from a regular cash ATM, with a mix of chips, bottled water and beer. Middletown has recently gained prominence as the hometown of Donald Trump’s running mate, Ohio Sen. J.D. Vance, who like Trump has reinvented himself as a pro-cryptocurrency crusader. The Middletown Food Market is located across the street from where Vance grew up.
“Elon Musk told me to do it.”
Sai Patel, whose family owns the Middletown Food Mart, said the Bitcoin ATM was not very busy.
“Maybe every month someone will come and use it,” Patel said. If you are new to the machine, Patel will patiently explain how the machine works. He also keeps an eye out for unusual activity. While the Bitcoin ATMs didn’t exactly draw the crowds, Patel said the number of seniors showing up at the kiosks was alarming considering the rise in Bitcoin ATM scams targeting seniors.
“Older people come in and use it,” said Patel.
He described an encounter where an old woman walked into his store, walked up to a Bitcoin ATM, and then tried to send a lot of money somewhere but had questions about using the machine. When Patel asked the woman a few questions, she said, “Elon Musk told me to do this.” Patel quickly realized she had fallen for a scam. “I told her, no, no, no, this is a scam,” said Patel, who stopped her from putting her life savings into the machine.
Alice Frei, director of security and compliance at blockchain communications and advisory agency Outset PR, said Bitcoin ATM fraud is costly and is exacerbated by the sometimes shady side of the cryptocurrency world.
“Cryptocurrencies are easily traded online, often without clear identification of participants. Criminals take advantage of this anonymity to move funds almost invisibly, often using technology such as cross-blockchain ‘bridges’ to further obscure transactions. ” she said.
In fact, ATM scams may not originate in the town where they occur. Frey added: “Many of the cryptocurrency exchanges involved in these activities are located overseas and beyond the jurisdiction of regulators, making it difficult to trace and recover stolen funds.”
Basic Steps to Avoid Bitcoin ATM Scams
To guard against these scams, users should be cautious and suspicious of any requests to pay via Bitcoin ATMs. Legitimate businesses rarely, if ever, ask for payment in Bitcoin through the machine.
“It is crucial to verify the legitimacy of the transaction and especially to check whether the recipient’s wallet is linked to a suspicious entity,” Frey said. He added that users should also use ATMs authorized by reputable operators to reduce risks. .
Frei said there are steps users can take to verify the ownership and legitimacy of a Bitcoin ATM or parties involved in a transaction.
“You can verify recipient addresses by checking for flagged activity on platforms like Chainabuse and running AML checks on the addresses using available tools,” she said. If these tools show a risk score above 70 percent, it’s recommended to avoid sending money. “Instead, contact the ATM operator or the person who provided the address to clarify the situation,” Frey added.
Frei said that data shows that nearly 74% of ATM machines in the world are managed by only 10 operators.
Bitcoin Depot, the largest Bitcoin ATM operator, operates more than 8,000 ATMs. CEO Brandon Mintz said the company’s machines are designed to thwart hackers. But he also disputed the idea that Bitcoin ATMs are a prime target for hackers.
“Bitcoin ATMs are generally not a high-priority target for cybercriminals because the hardware and Bitcoin wallet environment are separate,” Mintz said. Bitcoin Depot does not store any Bitcoin locally at Bitcoin ATMs, he said. And there are multiple layers of verification and approval processes to prevent unauthorized access to the Bitcoin Depot wallet.
In addition, Mintz said that most Bitcoin ATMs, including those at Bitcoin Depot, only accept cash, so this makes it impossible for criminals to use card skimmers like they can with traditional cash ATMs. However, he said users do need to be wary of scams, and some of the basic protocols that protect consumers from old-school financial scams also apply in the cryptocurrency world.
“Bitcoin ATM customers should never send Bitcoin or other cryptocurrencies to unknown digital wallets or individuals they do not know and do not trust. It is important to remain wary and suspicious of anyone requesting cryptocurrency payments, especially when The request comes with a sense of urgency or threat,” Mintz said.
As a market leader, Bitcoin Depot has been the target of lawsuits, and the company disclosed in a pre-IPO S-1 filing that its users “have been and may be targeted by cybersecurity incidents such as account takeovers.” South Carolina woman sues Bitcoin Depot after falling victim to it Alleged cryptocurrency scam. In another instance, Texas authorities intervened to return funds at a Bitcoin Warehouse ATM. Woman encounters fraud.
This points to a major irony of Bitcoin and Bitcoin ATMs, Dobson said, which is that they are technological products, but the most powerful weapon in the fight against fraud is not technology, but accountability. “In cryptocurrencies, user responsibility is paramount. If something goes wrong, there is little compensation. The responsibility to take action lies primarily with the user.”
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