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Could crypto ATMs be breeding grounds for fraud in Taiwan?

Could crypto ATMs be breeding grounds for fraud in Taiwan?

Source:Chien-Ying Chiu

A small machine known as a BTM can remit Bitcoin worth around NT$2 million in cash per transaction. Taiwan currently ranks 25th worldwide in the number of BTMs in place, raising the question of just who is running this new technology, which has become a breeding ground for fraud and money laundering.

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Could crypto ATMs be breeding grounds for fraud in Taiwan?

By Lisa Lin
web only

The machine is located in an old building in the bustling Ximending of Taipei. With its tiny display and cash dispenser slot, it resembles a claw machine in which one fishes for stuffed animals, but it is actually a kind of Automated Teller Machine, or ATM, only instead of New Taiwan Dollars, it deposits, withdraws, and remits Bitcoin.

Known as a “BTM”, it was a key focus of the National Police Administration’s March operations report. Taiwan currently ranks twenty-fifth worldwide in the number of installed BTM machines, and is one of the fastest-growing areas in terms of BTM volume in the Asia-Pacific region.

Insert NT dollar bills into the machine, and you can buy Bitcoin. Where do these machines come from? Who is running them? The BTM situation in Taiwan is replete with mystery.

BTMs can be found in all of Taiwan’s six major cities, with 16 points in Greater Hsinchu and Chiayi City alone, installed by around a dozen different operators.

At an arts and crafts materials shop in Banqiao there is a small BTM next to the register. Operator Chen Yu-min has been a Bitcoin investor for nine years, and is one of the few BTM operators to surface and become known.

Chen is sanguine about the future of Bitcoin. By regularly purchasing Bitcoin on overseas exchanges over the long term, then selling it via the BTM for about 10 percent higher than the local exchange, he makes his profits from the margins and service charges.

In 2013, the world’s first BTM appeared in a cafe in Vancouver, Canada in order to promote Bitcoin. As operation is simple, it resolved the first obstacle all first-time Bitcoin buyers face - opening accounts.

Trying it out for ourselves, we found that one can select the Buy Bitcoin option on the BTM screen. One can insert NT$100 or $1,000 notes, use a smartphone to open an encrypted currency wallet, scan the wallet’s QR code, and the machine then transfers Bitcoin to the wallet address.

(Source: Chien-Ying Chiu)

The type of BTM most common in Taiwan can accommodate up to around NT$2.2 million, meaning that one can show up with NT$2 million in cash, and transfer it to any encrypted Bitcoin wallet.

This goes well beyond the Regulations Governing Anti-Money Laundering and Counter-Terrorism Financing for Enterprises Handling Virtual Currency Platforms and Transactions (promulgated by the Financial Supervisory Commission in June 2021), under which transactions over NT$30,000 require identity verification. In the Financial Supervisory Commission’s (FSC) eyes, the anonymous nature of BTM machines makes them a potential breeding ground for money laundering.

Another thing that worries the FSC, National Police Administration, and Central Bank of Taiwan is the steep rise in investment fraud in 2021, to 4,904 cases. Among these, fraud mainly involving encrypted assets has become one of the top three most common types of fraud, and BTMs can very easily become an avenue for fraud.

(Source: Chien-Ying Chiu)

As most wallet holders are anonymous, scammers could make friends with people on the internet, and investment fraudsters could direct victims to use a BTM to purchase virtual currency and transfer it to the scam artists.

Even more aggravating is that BTMs are like street vendors; operators need not register, it is difficult to control at the source, and nobody actually knows about the cash flow behind the BTMs.

90 percent of operators are witnesses to scams or defendants

“We wanted to talk to those in the industry to understand the situation, but didn’t know who to notify,” admits Chuang Hsiu-yuan, director of the Banking Bureau of the FSC. The FSC wanted to place BTMs under the regulation of anti-money laundering laws, but did not know with whom to confer. So it looked to the Police Bureau for help.

Upon conducting a full reckoning, it was found that 90 percent of BTM operators were either witnesses or defendants in scams or money laundering operations. This raised authorities’ suspicions.

According to statistics from the Criminal Affairs Bureau, victims have been taken for over NT$3 million from BTM transfers since records have been kept. And customer service related to the BTM machine at the Dinghao shopping plaza, which has been a hot target for fraud, was redirected to Chen Yu-min, who has been a witness for multiple crypto currency fraud cases.

Chen relates that, even if there are good intentions to abide by the law, given the non-existence of regulations and authorities’ ambivalence, business owners have no idea where to draw the line. He did not even know he had to issue receipts for crypto currency transactions until the tax bureau informed him two years after he had been in operation.

In terms of fraud prevention measures, Chen says that he has installed four surveillance cameras, which he takes a peek at from time to time. He also asks customers about their intentions for purchasing Bitcoin in an effort to thwart organized scammers.

In response to the FSC’s requirements that BTM operators complete a money laundering prevention declaration, Chen states, “Of course I do KYC” (know your customer). However, what he claims to be identification verification consists of simply a pen and a piece of paper in a drawer next to the BTM machine for them to fill out on their own.

(Source: Chien-Ying Chiu)

Singapore bans BTMs; USA, UK, Germany and Japan want licensing

Certain countries have responded aggressively to concerns surrounding BTM-related crime. Singapore has banned BTM machines outright, while supervisory agencies in the United States, United Kingdom, Germany and Japan are asking for regulation through licensing. In the UK, in which there were no licensed operators, all machines were shut down as of March. Meanwhile, the U.S. government requires that all transactions of US$10,000 or more be declared.

At present there is no supervisory authority overseeing crypto currency operators in Taiwan, and the FSC merely requires adherence to the regulations of the Money Laundering Prevention Act. However, as the emergent BTM financial technology has ostensibly become extraterritorial, the FSC should stop avoiding the issue and start aggressively confronting new technology.


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Translated by David Toman
Edited by TC Lin
Uploaded by Penny Chiang

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