Treasury warns on rising losses

In its latest assessment of digital asset risks, the U.S. Treasury warns that crypto atm scams are rapidly gaining ground as a favored channel for fraudsters.

Crypto ATMs flagged as growing fraud vector

The new Treasury report underscores a sharp rise in fraud involving digital asset kiosks, commonly known as crypto ATMs, which let users convert cash into cryptocurrency with ease. Moreover, officials stressed that these machines are often used under high-pressure scenarios that limit victim scrutiny.

Treasury officials warned that these ATMs have become an attractive tool for criminals who push victims to send funds quickly with minimal oversight. That said, the machines themselves are not inherently illicit, but lax controls and limited transparency can create openings for abuse.

According to data cited in the report, the FBI received more than 10,900 complaints related to crypto ATM fraud in 2024, with total reported losses reaching approximately $246.7 million. However, the Treasury noted that real losses could be higher, given that many victims never file formal complaints.

Scammers frequently instruct victims to deposit cash into the kiosks and send cryptocurrency to wallets controlled by fraudsters, often as part of impersonation schemes or bogus investment offers. Moreover, criminals use scripted instructions and social engineering to keep victims isolated from banks or family members who might intervene.

The report noted that older individuals are disproportionately targeted in these schemes, reflecting a broader trend in financial fraud cases involving digital assets. However, younger and more tech-savvy users are not immune, especially when lured by promises of quick returns or “guaranteed” crypto investments.

Other high-risk crypto channels highlighted

Beyond the focus on ATMs, the Treasury also flagged several other areas where digital asset technology can be exploited for illicit finance. These include transaction mixers, decentralized finance protocols and cross-chain bridges, which can be used to obscure the movement of stolen or illicit cryptocurrency across multiple networks.

Officials warned about specific transaction mixing risks, where services blend funds from many users to make tracing origins more difficult. Moreover, some mixers and privacy tools advertise anonymity as a feature, drawing both legitimate users and criminal actors seeking to hide on-chain footprints.

The report also referenced broader decentralized finance risks, including protocols that facilitate lending, swaps and derivatives without traditional intermediaries. That said, Treasury acknowledged that not all DeFi usage is problematic, but stressed that weak or absent know-your-customer standards can create blind spots for regulators.

Cross-chain tools and complex laundering chains

Cross-chain bridges and swapping services were cited as another mechanism that can complicate investigations. Criminals can move assets quickly between networks and tokens, layering transactions to disguise origins. Moreover, combining these tools with mixers and ATMs can produce highly complex laundering chains.

The report noted that some criminals exploit regulatory differences between jurisdictions, routing funds through platforms with weaker controls. However, international cooperation and better data sharing are slowly improving the ability of authorities to follow these cross-border flows.

Emerging technologies to strengthen compliance

Alongside the risks, Treasury highlighted several innovations that could reinforce anti-money-laundering and counter-terrorism financing controls. Tools such as artificial intelligence, blockchain analytics, digital identity solutions and application programming interfaces (APIs) were all cited as promising avenues.

The report specifically mentioned the value of advanced blockchain analytics tools that map wallet clusters, trace illicit funds and identify high-risk counterparties. Moreover, combining these analytics with off-chain data and sanctions lists can help institutions automatically flag suspicious activity.

Enhanced digital identity frameworks can also support stronger onboarding and ongoing monitoring. That said, the Treasury stressed that any such systems must balance fraud prevention with privacy and data protection obligations, especially as biometric and behavioral data become more common.

AI, APIs and automated risk monitoring

Artificial intelligence models are increasingly used to detect anomalous patterns in payments, such as unusual ATM deposits, sudden spikes in transaction size or rapid cross-chain movements. Moreover, AI can help institutions adapt faster as criminal typologies evolve, rather than relying solely on static rule sets.

APIs allow financial institutions and crypto service providers to integrate real-time risk signals, sanctions checks and identity verification into their platforms. However, the Treasury noted that technology alone is insufficient without adequate training, governance and clear escalation procedures for alerts.

Regulatory approach and industry feedback

The agency reviewed more than 220 public comments from industry participants, financial institutions and technology providers while preparing the report. Moreover, respondents highlighted both the opportunities and the challenges in implementing advanced compliance solutions across traditional and crypto-native platforms.

Treasury emphasized that regulators should maintain a technology-neutral approach to compliance, allowing financial institutions to adopt different tools depending on their risk profiles and business models. However, it also underlined that outcomes matter more than specific technologies, especially when dealing with high-risk segments such as crypto atm losses and complex laundering structures.

The report briefly referenced ongoing policy debates around oversight of digital asset kiosks and other retail-facing services, amid concerns about consumer protection and rising fraud complaints. Moreover, lawmakers in some jurisdictions are considering tighter registration rules and enhanced disclosure requirements for operators.

Lawmakers weigh new frameworks for digital assets

The findings arrive as U.S. lawmakers continue to debate new frameworks for digital asset oversight under the GENIUS Act. The proposed legislation aims to encourage financial innovation while strengthening safeguards against illicit finance and enhancing clarity for market participants.

Some policymakers have raised questions about whether additional rules are needed specifically for crypto atm scams, or if existing anti-money-laundering standards can be better enforced. However, industry stakeholders argue that clear, consistent regulation is essential to avoid stifling innovation while addressing genuine consumer and security risks.

In summary, the Treasury’s analysis paints a nuanced picture: crypto ATMs, DeFi platforms and cross-chain tools present clear vulnerabilities, yet the same technology stack offers new ways to detect and deter illicit activity when paired with strong governance and modern compliance infrastructure.