Spokane, Washington, has already taken a remarkable step, becoming the first city in America to completely ban crypto kiosks. The reason? An increase in crypto fraud, with people in Washington losing an astonishing $141 million just in 2023. The problem is getting worse. The FBI already reports nearly $5.6 billion lost nationwide through scams facilitated by kiosks. Council Member Paul Dillon, who introduced this resolution, says these kiosks have morphed into a “preferred tool” for scammers. On paper at least, it appears to be a clear victory for stopping financial crime. Let’s take a closer look below the surface, would you?

This intent of this ban, though admirable, seems like swatting a fly with a sledgehammer. It’s an example of a knee-jerk reaction that doesn’t address the subtleties of the problem and, quite frankly, might actually do more harm than good. Here's why:

1. Scamming Goes Underground, Untracked

Banning kiosks doesn’t remove the public demand for crypto scams, it only forces the scams into more lightly-regulated, harder-to-track venues. It’s literally the classic balloon squeeze – you just create the issue in another location. Think about it: online exchanges, peer-to-peer transactions, and even in-person meetups arranged through encrypted messaging apps. These avenues are already rife with fraud.

The FBI’s Internet Crime Complaint Center 2023 annual report filled with crypto complaints clearly demonstrates that these investment scams, when perpetrated—almost all—remotely, are at least crypto-related. Banning kiosks doesn't address the root of the problem: the persuasive tactics and emotional manipulation used by scammers. These tactics are equally effective whether the point of sale is online or at the local retail store. It’d be akin to closing liquor stores to address alcoholism – addicts will simply seek out alternative sources for their vice. They’ll either need to rely on bootleggers or brew it at home resulting in far deadlier effects.

2. Punishing Legitimate Users Unfairly

Let's be honest: crypto has a PR problem. That doesn’t mean that everybody who uses it is a criminal or an idiot. Millions of consumers—especially Americans underserved by big bank interests—depend on kiosks for fast, easy access to cryptocurrency. They may use it for remittances (sending money to family overseas), online purchases, or just as a better store of value than what’s available in their local economy.

Consider this: a 2021 study by the FDIC found that 5.4% of U.S. households are unbanked. As a result, these folks pay through the nose with high fees and little access to financial services. Crypto kiosks—though far from a flawless implementation—provide a more practical approach. Bans on them not only take away one option, they send new users back out into the wild to find a more dangerous or less convenient alternative. It’s the proverbial case of throwing the baby out with the bathwater. By doing this we’re penalizing legitimate users and we’re doing it so that we can look tough on crime.

3. Ignoring Bigger Crypto Fraud Culprits

The focus on kiosks is strangely narrow. As bad as they are, they are not even close to the biggest vector for fraud. That’s a drop in the ocean compared to the deep blue sea of online crypto scams.

Phishing attacks have become increasingly complex and targeted. Developers leaving crypto projects soon after raising capital result in rug pulls and Ponzi schemes presented as decentralized finance (DeFi) platforms. Unlike kiosk fraud, these scams currently can pull in millions—in some cases billions—of dollars and reach a significantly broader audience. According to data from Chainalysis, rug pulls by themselves were responsible for more than $7.7 billion in losses in 2022. Where is the ordinance against that?

By focusing all their energy and attention on kiosks, Spokane is naively putting a band-aid on the disease and missing the real cure. That’s akin to putting a band-aid on a gunshot wound.

Instead of outright bans, Spokane should focus on:

  • Increased regulation: Implement stricter licensing requirements for kiosk operators, including mandatory ID verification and transaction limits.
  • Consumer education: Launch public awareness campaigns to educate residents about common crypto scams and how to avoid them.
  • International cooperation: Work with law enforcement agencies to track and prosecute scammers operating overseas.
  • Supporting Victims: Provide resources and support for those who have fallen victim to crypto scams, helping them navigate the complex recovery process.

Look, I get it. For the conservative Spokane City Council, this meant doing something, anything to protect its citizens. But this ban is a dangerous and misguided attempt to solve a very complicated problem. Instead, it’s a textbook case of policymaking driven by unfounded fear instead of facts.

The road to hell, they say, is paved with good intentions. Spokane’s well-intentioned ban could have some massive unintended consequences. It would drive scam operations further underground, penalize the overwhelming majority of legitimate crypto users and businesses, and not address the underlying causes of crypto fraud.