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Bitcoin ATMs have become increasingly popular in the United States, and some experts say they are also a rapidly growing cybercrime threat. Bitcoin ATMs are similar to cash ATMs, requiring users to enter a PIN code and incurring withdrawal fees just like other ATMs.
However, unlike cash ATMs, Cryptocurrency is valuable This makes them a popular target for hackers, so while a cash ATM hidden among the snacks and energy drinks at a gas station might not attract much attention, a Bitcoin ATM comes under increased scrutiny from bad actors.
“These machines are particularly vulnerable to both physical and cyber threats and have clearly become attractive targets for hackers and thieves,” said Timothy Bates, clinical professor of cybersecurity. At the University of Michigan’s School of Innovation and Technology.
Bitcoin ATMs are subject to attacks where hackers install malware on the machines to steal private keys, steal funds or manipulate transactions. “This is a particular concern for ATMs that don’t receive regular software updates and security patches,” Bates said. Network vulnerabilities are also a weakness. “If the machines’ network communications are not properly secured, attackers could intercept data transmissions between the ATM and the server, leading to data theft or unauthorized access,” Bates said.
Whether it’s hackers or scammers, governments are sounding the alarm about Bitcoin ATMs. Federal Trade Commission Reported this week Since 2020, fraud cases have increased by 1,000%.
Ironically, bitcoin ATMs’ risks are directly related to their strengths, 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 says. Many crypto bulls find Bitcoin’s lack of governance attractive, but with ATMs, it can be a problem. “Bitcoin has no governing body that dictates who can or can’t operate a Bitcoin ATM, so many independent organizations operate ATMs,” Dobson says.
Some old criminal tricks might be reversible in traditional banking, but not in the bitcoin world. For example, someone could maliciously slip their own deposit books into a bank stack and trick people into depositing money into their accounts. “Similar attacks could happen with bitcoin ATMs,” Dobson said. “If an attacker compromises a bitcoin ATM, they could change the address (or ‘account number’) of the receiving wallet, essentially stealing the user’s funds.”
But in addition to old tricks, there are new threats posed by Bitcoin ATMs that cash ATMs don’t: Many Bitcoin ATMs require personal identifying information, such as your ID or social security number, to comply with the financial industry’s Know Your Customer (KYC) requirements. If a Bitcoin ATM is compromised, this information could be at risk.
At the Middletown Food Mart in a rundown part of Middletown, Ohio, Bitcoin Depot The ATM is located across from a regular cash ATM, mingling with potato chips, bottled water and beer. Middletown has recently gained notoriety as the hometown of Ohio Sen. J.D. Vance, Donald Trump’s running mate. Vance, like Trump, has reinvented himself as a pro-cryptocurrency advocate. The Middletown Food Mart is across the street from where Vance grew up.
“Elon Musk told me to do it.”
Sai Patel, owner of the Middletown Food Mart, said his bitcoin ATMs aren’t very busy.
“Maybe someone comes by once a month,” Patel says. And if it’s their first time, Patel patiently shows them how to use the machine. He also keeps an eye out for any unusual behavior. While the bitcoin ATMs don’t attract many visitors, Patel says he’s seen a surprising number of senior citizens come through the kiosks. That’s worrying, given the rise in bitcoin ATM scams targeting seniors.
“We have older people coming and using it,” Patel said.
Patel described an incident where an elderly woman walked into a store and went to a Bitcoin ATM to transfer a large amount of money somewhere, but had doubts about how to use the machine. When Patel asked the woman some reasons why, she replied, “Elon Musk told me to do it.” Patel quickly realized she had fallen prey to a scam. “I told her it was a scam,” Patel said, stopping her from putting her life’s savings into the machine.
Alice Fry, head of security and compliance at blockchain communications and consulting firm Outset PR, said Bitcoin ATM scams are becoming more costly due to the sometimes opaque world of cryptocurrency.
“Cryptocurrencies can be easily exchanged online, but often without the parties involved being clearly identified. Criminals exploit this anonymity, often using technologies such as cross-blockchain ‘bridges’ to move funds nearly invisibly and further obscure transactions,” she said.
Plus, there’s the fact that ATM fraud probably doesn’t even originate from the town where it occurred: “Many cryptocurrency exchanges involved in this activity are based overseas, outside the reach of regulators, making it difficult to trace and recover stolen funds,” Fry added.
Basic steps to avoid Bitcoin ATM scams
To protect themselves from these scams, users should be cautious and suspicious of requests for payment at Bitcoin ATMs, as legitimate businesses are unlikely to ask for payment in Bitcoin at a machine.
“It’s very important to verify the legitimacy of any transaction, especially if the recipient’s wallet is not connected to questionable entities,” Fry said, adding that users should only use licensed ATMs from reputable operators to reduce risk.
Frye said there are steps users can take to verify the ownership and legitimacy of a bitcoin ATM and the parties involved in a transaction.
“You can verify the recipient’s address by checking for flagged activity on platforms like Chainabuse and running AML checks on the address using available tools,” she said, adding that if these tools show a risk score above 70%, it’s best to avoid sending the money. “Instead, contact the ATM operator or whoever provided you with the address to verify the situation,” Fry added.
Frye said data shows that about 74% of the world’s ATMs are controlled by just 10 operators.
Bitcoin Depot, the largest operator of Bitcoin ATMs, operates more than 8,000 machines. Bitcoin Depot CEO Brandon Mintz said his company’s ATMs are designed to thwart hackers, but he also disputed the claim that Bitcoin ATMs are a prime target for hacking.
“Bitcoin ATMs are not typically a high-priority target for cybercriminals due to the isolation of the hardware and bitcoin wallet environments,” Mintz said. Bitcoin Depot does not store bitcoin locally on Bitcoin ATMs, and there are multiple layers of verification and authorization processes in place to prevent unauthorized access to Bitcoin Depot wallets, he said.
Additionally, Mintz said most bitcoin ATMs, including Bitcoin Depot, only accept cash, eliminating the possibility that criminals could use card skimmers like those that can be installed in traditional cash ATMs. But users should be aware of scams, and some of the same basic protocols that protect consumers from old-fashioned financial scams also apply in the crypto world, he said.
“Bitcoin ATM customers should never send bitcoin or other cryptocurrencies to unknown digital wallets or to unknown and untrusted individuals. It is important to remain vigilant and suspicious of anyone requesting a cryptocurrency payment, especially if there is any sense of urgency or extortion,” Mintz said.
Market leader Bitcoin Depot has been the subject of lawsuits, with the company disclosing in its pre-IPO S-1 filing that its users “have been and may be subject to cybersecurity incidents, including account takeovers.” A South Carolina woman has sued the company after she was the victim of a Bitcoin Depot scam. Suspected cryptocurrency scamIn another instance, authorities in Texas stepped in and returned money from a Bitcoin Depot ATM. The woman was a victim of fraud.
And this suggests a fundamental irony about bitcoin and bitcoin ATMs: they are products of technology, but the most powerful weapon against fraud is not technology, but responsibility, Dobson said. “User responsibility is paramount with cryptocurrency. There’s very little compensation if something goes wrong. The onus is primarily on the user to take action.”
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