Sterling Heights has passed new rules regulating virtual currency machines like this one at The Wine Garden on 19 Mile Road.
Photo by Gary Winkelman
STERLING HEIGHTS — New rules aimed at preventing individuals from losing money in a growing category of fraud have been adopted in Sterling Heights.
City Council members voted unanimously Jan. 6 to add licensing and other operational regulations for virtual currency machines to its code of ordinances.
The action comes after Sterling Heights police reported more than 20 incidents where victims have lost more than a half-million dollars to scam artists. A majority of victims have been senior citizens.
Officials were set to pass an ordinance amendment last month but postponed action in order to strengthen regulations, which now include daily and monthly transaction limits at cryptocurrency kiosks located throughout the city.
Victims are typically pressured and misled into depositing cash in the machines, which is converted to digital currency and placed in electronic “wallets” controlled by the scammers. The lost funds are virtually impossible for authorities to retrieve.
“I think it’s a shame that we have had over $400,000 worth of fraud at these virtual currency machines and I think this is a small step for our city to fix this problem,” Councilman Mike Radtke said.
Cryptocurrency fraud is a growing crime nationally and locally. The new Sterling Heights ordinance follows in the footsteps of similar regulations passed in Grosse Pointe Farms and Harper Woods. Other area communities have begun discussing the issue as well and Sterling Heights officials have previously noted that the matter needs to be addressed at the state government level.
Background material provided by the city states that the ordinance “aims to strike a balance between innovation and consumer convenience, on the one hand, and public safety and financial protection, on the other. Licensing and operational standards will deter the fraudulent use of cryptocurrency machines while ensuring that legitimate operators can continue to serve residents in a transparent and accountable manner.”
Specifically, the city’s new rules mandate that business owners where machines are located be licensed with the city and also obtain a specialty license endorsement in order to maintain a machine on-site. Licenses must be obtained from the city clerk’s office by March 31.
Virtual currency machines will also require photo identification for transactions, include display disclosures and fraud warnings, produce receipts and maintain a customer service hotline. A daily transaction limit of $1,000 is set for new customers and $2,000 for all other customers. The monthly cap for all users is $10,000.
The city will be able to conduct inspections before and after licensing to ensure compliance, with violations subject to suspension, revocation or denial of a license. Operators must also maintain daily transaction logs and service records for at least 90 days.
There are approximately 27 cryptocurrency or bitcoin ATMs in Sterling Heights. The Police Department established a task force to focus on the issue.
Cassie Thierfelder, manager of advocacy for AARP Michigan, told City Council members that their attention to crypto kiosk fraud is “a big step forward.”
“Thank you so much for the revisions that you made to this ordinance. It’s going to provide so much more protection to the residents of Sterling Heights by adding those daily and monthly transaction limits,” she said. “You’re helping to prevent someone from losing their entire life savings in one act of fraud.”
Mayor Pro Tem Liz Sierawski, in turn, saluted AARP for the information and feedback it provided to officials.
“Your input and the perspective that you brought really … helped us make good decisions and helped us craft this ordinance to where we think it’s going to be very impactful to the residents,” she said.
Mayor Michael Taylor thanked City Attorney Marc Kaszubski and his fellow elected officials for crafting an ordinance that is “as good as we think it can possibly be.”
“Most importantly, we want to do anything that we can to protect vulnerable populations, and this is certainly a huge step in the right direction,” he said. “It’s a great victory for the people of Sterling Heights and hopefully it will pass on to others around us in the state of Michigan and beyond.”