California Proposes Crypto ATM Regulations Amid Rising Fraud

In a bid to curb the rising tide of fraudulent activities, California lawmakers have introduced a measure termed “Digital Financial Asset Transaction Kiosks.” The measure advocates for a daily withdrawal limit of $1,000 from cryptocurrency ATMs. Furthermore, the bill proposes a cap on operators’ fees at $5 or 15%, whichever is greater, effective from the year 2025. If enacted, the implementation of these regulations is slated to commence on January 1, 2024.

The legislation came on the heels of a visit by legislative members to a cryptocurrency automated teller machine (ATM) in Sacramento. During the visit, they unearthed markups on certain cryptocurrencies that were as much as 33 percent higher than their values on cryptocurrency exchanges. A subsequent investigation by the legislators revealed that the fees levied by a cryptocurrency ATM oscillate between 12% and 25% on average.

Moreover, government authorities discovered ATMs with withdrawal limits soaring as high as $50,000, propelling them to initiate regulatory action to truncate such elevated premiums and withdrawal limits. With over 3,200 automated teller machines accepting Bitcoin dotted across California, as per Coin ATM Radar, the necessity for regulation becomes increasingly palpable.

An additional facet of the law mandates companies dealing in digital financial assets to obtain a license from the California Department of Financial Protection and Innovation by July 2025. The nature of transactions at crypto ATMs—exchanging physical cash for cryptocurrencies—has turned these kiosks into fertile grounds for frauds and exploitations, whilst also being a favored avenue for consumers to trade cash for their preferred cryptocurrency.

The lack of a substantial paper trail in each transaction, compared to traditional bank and wire transactions, further exacerbates the potential for fraudulent activities. Recently, numerous locals have been ensnared in scams where fraudsters persuade victims to deposit cash at nearby cryptocurrency ATMs in exchange for cryptocurrencies.

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Visa Announces $100 Million Fund for Generative AI in Commerce and Payments

On October 2, 2023, Visa Inc., a global leader in payment solutions, announced a $100 million fund dedicated to generative artificial intelligence (AI). The fund is designed to invest in startups and established businesses that are at the forefront of developing generative AI technologies and applications, particularly those that have potential applications in commerce and payments.

Visa Ventures, the corporate investment division of Visa, will be responsible for overseeing the fund’s investment activities. Established in 2007, Visa Ventures has a history of backing innovative projects in the payment and commerce sectors. David Rolf, Head of Visa Ventures, expressed enthusiasm about the initiative, stating, “Generative AI has the potential to be one of the most transformative technologies of our time. We are excited to expand our focus to invest in some of the most innovative and disruptive venture-backed startups in the fields of generative AI, commerce, and payments.”

The Capabilities of Generative AI

Generative AI is a type of artificial intelligence that can produce a wide array of content, from text and images to audio and synthetic data. The technology has already shown its capabilities through major AI chatbots like OpenAI’s ChatGPT and Google’s Bard, which can generate text that closely resembles human writing. This opens up new avenues for how AI can be utilized in various sectors, including commerce and payments.

Visa’s Long-standing Commitment to AI

Visa has been a pioneer in the adoption of artificial intelligence technologies. As early as 1993, the company implemented AI-based systems for risk and fraud management. In 2022, Visa Advanced Authorization, the company’s real-time fraud monitoring system, was credited with preventing approximately $27 billion in fraudulent activities. Last year, Visa also launched VisaNet +AI, a suite of AI-based services aimed at helping financial institutions tackle challenges related to daily settlement operations.

Beyond its investments in AI, Visa has also been exploring other technological frontiers. The company has shown a positive stance on the incorporation of blockchain technology, particularly Bitcoin, into payment systems. Jack Forestell, Chief Product and Strategy Officer at Visa, believes that generative AI holds significant promise in reshaping the financial landscape.

The $100 million fund is a significant step in Visa’s broader strategy to stay ahead in the rapidly evolving technological landscape. It not only reinforces the company’s leadership in AI but also signals its intent to be at the forefront of future innovations that could redefine commerce and payments.

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Blockchain’s Adoption & Capabilities Increase against Fraud in Public Finance Sector

Based on blockchain’s inherent capability of tackling fraudulent transactions, this cutting-edge technology is expected to continue being adopted in the banking and financial services sector, according to HashCash Consultants CEO Raj Chowdhury.

Chowdhury pointed out:

“Innovations such as blockchain empower public finance managers with greater visibility and control of public fund utilization in real-time. Efficient use of public money will lead to improved services for the public, economic boost, and improvement of the community as a whole.”

With research forecasting that the worldwide blockchain expenditure will clock $67.4 billion by the close of 2026, the banking and financial services industry is expected to remain the top spending area in the blockchain space, contributing to nearly 30% of the total expenditure. 

Chowdhury stated:

“The performance of decentralized blockchain architecture is proportional to the number of available network members.” 

He added:

“The underlying crypto platform offers real-time transaction visibility based on permissioned access along with hassle-free provisions for eKYC and auditing, leading to improved overall service.”

Not only does blockchain technology prompt fraud prevention it also instigates transparency, smart contract enforceability, capital optimization, and instant settlements.

Fraud prevention becomes a reality based on blockchain’s secure data encryption that utilizes multiple security layers. 

Chowdhury had previously acknowledged that the banking infrastructure required blockchain technology to meet the needs of the rapidly changing fintech environment. 

Meanwhile, the global blockchain technology market in the banking, financial services, and insurance (BFSI) sector is expected to hit $4.02 billion by 2026, thanks to a surge in FinTech spending, Blockchain.News reported. 

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