1
Confidential
03/12/2024
House Commerce Finance and Policy Committee
Minnesota House of Representatives
100 Rev. Dr. Martin Luther King Jr. Blvd.
Saint Paul, MN 55155
Re: Opposition to H.F. No. 4717 as written
Chair Stephenson, Vice-Chair Kotyza-Witthuhn, and honorable members of the Commerce
Finance and Policy Committee. Thank you for the opportunity to express our concerns on H.F.
4717. CoinFlip opposes H.F. 4717 as currently written but welcomes the opportunity to work with
the Minnesota legislature on improving the bill to enhance consumer protection.
CoinFlip Company Background
Incorporated in December 2015 and headquartered in downtown Chicago, CoinFlip operates over
4,500 Bitcoin Automatic Teller Machines (“BATMs”) across 49 states, the District of Columbia,
Puerto Rico, Canada, Australia, Panama, Brazil, Italy, and South Africa. These kiosks allow
customers to purchase Bitcoin and other select virtual currency with physical fiat currency. The
Company sells its own stores of virtual currency directly to customers, charging a markup as well
as a blockchain fee. CoinFlip does not custody customer funds or virtual currency.
Culture of Compliance
CoinFlip is a money service business (“MSB”) registered with the Financial Crimes Enforcement
Network (“FinCEN”). As an MSB, CoinFlip is subject to the Bank Secrecy Act (“BSA”), the
United States PATRIOT Act, and their implementing rules and regulations. CoinFlip is required
to develop and maintain Know Your Customer (“KYC”) and anti-money laundering (“AML”)
policies and procedures that align with its risk profile. CoinFlip’s BSA/AML policies, dedicated
resources, internal controls, and training program are designed to ensure compliance with all
applicable BSA regulations and are reviewed and updated on a regular basis to account for both
changes in regulations and changes in CoinFlip’s business model. As an MSB, CoinFlip also
maintains enhanced due diligence policies, including policies and procedures aimed at identifying
and protecting senior citizens.
CoinFlip embraces licensing regimes as an effective means to create baseline requirements for
operations, as well as effective oversight. CoinFlip currently holds approximately 14 money
transmitter licenses or virtual currency licenses associated with its kiosk business and numerous
additional applications currently pending. As a licensee, CoinFlip is required to undergo periodic
audits in each jurisdiction with reviews of its compliance, finance, and cybersecurity programs.
2
Confidential
Consumer Protection
As a company, one of CoinFlip’s key priorities is consumer protection. Our company will not
succeed unless our customers believe we provide them with a safe and secure platform from which
to transact virtual currency. CoinFlip’s compliance and consumer protection efforts are currently
overseen by its Chief Legal Officer, General Counsel, BSA Officer, and Consumer Protection
Officer. To effectively manage the risks associated with its operations, CoinFlip implements both
traditional consumer protection efforts such as clear disclosures and warnings, as well as state-of-
the-art technology to detect and prevent fraudulent transactions.
When transacting with a CoinFlip kiosk, customers are warned numerous times regarding scam-
related activity prior to initiating every transaction. The customer must attest that they were not
sent to the kiosk in order to make a payment; that they are transacting with a digital wallet they
own; and that they understand all transactions are final and irreversible. This screen is
customizable and is updated with warnings about common scams to alert customers and help
prevent fraud.
Additionally, CoinFlip has 24/7 live customer service and lists its number both on the physical
kiosk as well as its transaction screens. Customers are instructed to call CoinFlip in the event a
third-party sent them to transact at the kiosk. CoinFlip customer service receives training at least
twice annually on AML/BSA requirements and how to be the first line of defense in compliance
efforts. As a result of these efforts, between December 2023 and February 2024 alone, CoinFlip
halted over 300 transactions due to our customer service identifying a potential scam.
Traditional consumer protection efforts, such as highly visible, consumer alerts prior to initiating
and completing transactions, are effective. However, CoinFlip believes it is essential that virtual
currency kiosk operators also implement technology solutions to prevent fraud before it can occur.
CoinFlip implements state-of-the-art blockchain analytics and compliance tools to block
fraudulent transactions and investigate suspicious activity. It is a technology that works. Since
April 2022, CoinFlip has automatically blocked more than 1,230 transactions using blockchain
analytics. In addition to blocking transactions, CoinFlip permanently blacklists digital wallet
addresses to prevent those high-risk digital wallets from ever being used at a CoinFlip kiosk again.
Implementing these technology measures, in conjunction with highly visible consumer alerts are
important and highly effective tools in preventing fraud at digital currency kiosks.
Lastly, it is imperative that an MSB continuously monitor patterns in fraud. As a result, CoinFlip
appointed a Consumer Protection Officer whose job includes managing and maintaining its
Consumer Protection Policy. As part of these efforts, CoinFlip periodically conducts cross
functional meetings between its legal, compliance, and fraud investigation teams to monitor
customer behavior and to identify any consumer protection issues. As any financial institution can
3
Confidential
attest to, consumer protection and compliance require continuous effort and cannot be left to static
policies and procedures.
H.F. No. 4717
Minnesota recently introduced H.F. No. 4717 in order to regulate virtual currency kiosk
disclosures, transaction limits, and transaction fees. Unfortunately, H.F. 4717 relies on faulty
policies such transaction limits, fee caps, and refund language that create a false sense of consumer
safety while not addressing the root cause of scams and fraud.
First, the proposed transaction limits do not adequately consider existing federal reporting
requirements. Arbitrarily low transaction limits create an unintended consequence of encouraging
the structuring of transactions to further obscure federal reporting requirements, creating less
transparency and information being reported to law enforcement. Current federal reporting
requirements require the filing of Suspicious Activity Report (“SAR”) for any suspicious
transaction over $2,000 and a Currency Transaction Report (“CTR”) for any transaction over
$10,000. CTRs specifically are implemented for physical currency deposits and are required for
not only single transactions, but the aggregation of currency transactions as well. These reports
allow law enforcement to quickly and efficiently request supporting documentation that can be
essential in quick moving investigations. However, virtual currency kiosk operators (and law
enforcement) will be unable to determine if a customer transacted more than $2,000 or $10,000
across multiple operators. As a result, virtual currency kiosk operators will be less able to detect
suspicious activity, worrisome transactions will be spread over multiple operators, and federal
reporting requirements will not be triggered.
Second, the addition of fee caps does nothing to prevent customer fraud and in combination with
transaction limits, inadvertently creates incentives for less transparency. At this time, it is unclear
how the 10% proposal was determined and whether it took into consideration the unique costs of
virtual currency kiosk operators. Unlike an exchange, virtual currency kiosk operators must
purchase, install, and operate physical equipment; pay rent to small businesses to host their kiosks;
pay armored car services to service their kiosks; and maintain an inventory of virtual currency to
sell to customers. Similar to other virtual currency businesses, virtual currency kiosk operators
must also pay for bank fees, blockchain network fees, BSA/AML compliance tools and employees,
customer service, cybersecurity tools and employees, and transaction monitoring tools. Put
simply, virtual currency kiosk operators have more operational expenses than other virtual
currency companies.
Lastly, the refund provision displays a misunderstanding of blockchain technology and creates an
unintended consequence, as scam artists will seek to game the refund period and defraud virtual
currency kiosk operators. Virtual currency kiosk operators allow for the purchase of virtual
currency via physical fiat currency rather than any previously authorized transaction. Despite this
fact, the Minnesota statute mistakenly suggests that customers be allowed to “stop payment of a
preauthorized virtual currency transfer…” The statute further confusingly requires virtual
4
Confidential
currency kiosk operators to disclose that transactions are irreversible while simultaneously
instructing kiosk operators to refund specific transactions. It is noted there are no qualifications
or requirements for the customer to receive a refund.
The current proposed language makes virtual currency kiosk operators the insurer of all first-time
transactions. Customers are given a non-discretionary 72-hour period to determine whether they
still want the purchased virtual currency, and do not have to return the virtual currency if they do
request a refund. CoinFlip is unaware of any other institution that has similar requirements. In
fact, the legislation goes as far as to encourage wrongdoers to defraud virtual currency kiosk
operators by purchasing virtual currency, sending it to their own digital wallet, and requesting a
refund so they can keep both the virtual currency purchased and the cash used to purchase it.
Proposed Consumer Protections
Despite disagreements over the contents of H.F. 4717, CoinFlip is committed to working with
Minnesota in order to implement further consumer protections. The following is a brief overview
of proposed changes that CoinFlip believes will implement consumer protections in a meaningful
manner:
1. Require Licensure with the State. Although the proposed Minnesota legislation
repeatedly refers to a “virtual currency kiosk licensee,” there is this nothing in the
proposed legislation or current Minnesota law that requires virtual currency kiosk
operators to be licensed. CoinFlip encourages language be added to the bill that would
require virtual currency kiosk operators be licensed for proper oversight, including
obtaining a Money Transmitter License (“MTL”). The MTL would implement
baselines requirements similar to other financial institutions operating in the State. It
additionally would allow state oversight and periodic audits to determine the adequacy
of compliance, finance, and cybersecurity programs.
2. Require a Focus on Compliance. Require virtual currency kiosk operators to directly
employ an in-house Chief Compliance Officer that does not have a large ownership
interest in the company.
3. Require Disclosures. Require virtual currency kiosk operators to clearly display, at the
physical location and on any electronic screens, prior to the initiation of a transaction,
information about potential scams. Require operators to provide a Customer Service
phone number that is clearly displayed at the location.
4. Require Fee Disclosures. Require digital currency kiosk operators to clearly disclose,
prior to completion of a transaction, all fees associated with the transaction. Require
operators to provide a receipt (physical or digital) of the transaction details.
5. Require Blockchain Analytics. Require the use of blockchain analytics technology in
order to prevent fraud before the customer transaction by automatically blocking
transactions that are attempting to be sent to wallets flagged as high risk because of an
association with criminal or fraudulent activity. Since April 2022, CoinFlip has
automatically blocked more than 1,230 transactions using blockchain analytics.
5
Confidential
6. Require Robust Policies and Procedures. Require an Anti-Fraud Policy and
Consumer Protection Policy that outline specific risk areas of the virtual currency kiosk
operators, how they will protect against such risks, and a company refund policy.
7. Require Live Customer Service: Virtual currency kiosk operators are required to
implement live customer service for a minimum of 8:00 AM – 10:00 PM CST in order
to identify and prevent fraud. Between December 2023 and February 2024, CoinFlip
customer service halted transactions for over 300 customers before they could occur
due to indications the customer was involved in a scam.
8. Tiered Transaction Limits: In the event the legislature still believes transaction limits
are appropriate, a distinction should be made between new customers and existing
customers. Transaction limits are based on if you are a New Customer or an Existing
Customer. These limits provide protection for a new customer who may be the victim
of a scam by limiting the amount they can transact, while allowing an existing customer
who has transacted with the company additional purchasing access once they are no
longer at an increased scam risk. These limits should be in line with federal reporting
requirements for Suspicious Activity Reports ($2,000) and Currency Transaction
Reports ($10,000).
Conclusion
Whether it’s phone, email, text or an online pop-up, scammers repackage the same old tactics and
utilize whatever methods they have at hand – Venmo, PayPal, Zelle, Gift Cards, MoneyGram or
Bitcoin ATMs – to dupe people out of their money. The best defense for consumers is to be well-
informed and well-alerted at the point of transaction. The best defense for companies is to have
the tools in place to help identify and prevent fraud and help law enforcement catch the bad actors.
It is more important than ever that we do not simply treat the symptoms but attack the root of
financial fraud and arm consumers with the knowledge they need to stay one step ahead of the
scammers.
Unlike some others in the industry, CoinFlip believes smart regulation is good for business. We
believe that a regulatory framework is necessary to protect consumers and encourage innovation.
CoinFlip and Minnesota share a similar goal: consumer protection. CoinFlip looks forward to
continuing to work together with Minnesota in order to best determine how to achieve that
common goal.
Sincerely,
/s/ Larry Lipka
Larry Lipka
General Counsel
Enclosures
March 12, 2024
Commerce, Finance, and Policy Committee
Minnesota House of Representatives
100 Rev. Dr. Martin Luther King Jr. Blvd.
Saint Paul, MN 55155
RE: HF 4717, an act concerning virtual currency
Committee Chair Zack Stephenson, Co-Chair Calie Kotyza-Witthuhn and Members of the Committee,
RockItCoin, LLC (“RockItCoin”, or “the Company”) applauds the legislature’s efforts to properly define
expectations and regulations for the cryptocurrency kiosk operators in the state. Unfortunately, HF4717
appears to borrow heavily from a bill passed in Connecticut last year. The Connecticut law
demonstrated a lack of understanding of the cryptocurrency kiosk business, and its attempts to
strengthen consumer safety and knowledge in this space, ironically, did the exact opposite.
HF4717 should take the opportunity to correct and enhance the Connecticut law, otherwise HF4717 will
have a negative effect on the emerging crypto industry, fail to properly address consumer safety, place
undue burdens on the small businesses running the kiosks, and penalize consumers wishing to purchase
cryptocurrency.
Please note RockItCoin fully supports regulation in this space. We have met personally with individuals
across the country in an effort towards substantive dialogue and mutual understanding about our
industry. Independent of governmental guidance, our Company has developed a strong compliance
program that includes customer interactions and interruptions of transactions as methods to best
protect our customers.
Arbitrary limits do not protect the customer - communication, education, and interaction do.
We work with law enforcement to combat the negative actors in our space, offering insights and
guidance. We identify risk typologies and proactively involve ourselves with customers prior to a
transaction being consummated, speaking with them directly and at times holding transactions
altogether until definitive discussions can be had. Transactions that are not deemed legitimate are
refused and money, if collected, is returned.
As an example, RockItCoin’s protocols interrupted a $5,800 transaction by a customer until extra due
diligence could be performed. Such intervention is critical to identify and contain possible scam victims
and fraudulent transactions. It was determined the customer was indeed the victim of a scam, and
Letter to the Commerce, Finance, and Policy Committee
RE: HF 4717, an act concerning virtual currency
March 12, 2024
Page 2 of 11
consequently the transaction was refused by RockItCoin which resulted in the entire $5,800 being
returned to the customer.
Kristen McKnight, a member of the US Secret Service Task Force in Louisiana, observed in an email to
the Company,
“If RockItCoin did not have the protocols in place, the victim could have potentially lost those
funds and not been recovered. I would like to note that four different Bitcoin ATM companies
were involved in the scam and only one, RockItCoin, suspended the victim’s transaction. Thank
you RockItCoin for your protocols in place, which prevented additional loss to my victim.”
As McKnight explained in her email, the victim used multiple operators to perform her large transaction,
but only RockItCoin interrupted its transaction. If the other operators exercised a similar level of
diligence or a law had been in place mandating such actions, perhaps this victim would have been made
whole. It is here where the illusion of transaction caps fail the customer – they can simply visit as many
different operators as they choose. Customers will continue to be at risk without proper framework
around the operators, such as intervention, education, and communication.
Kristofer Carlson of the Minnesota Commerce Fraud Bureau similarly praised the protocols developed
and utilized by RockItCoin. After observing the Company’s diligence and processes, he said in an
unsolicited email:
“Thank you for your due diligence. As a sworn member in law enforcement investigating these
crimes and seeing the devastation and significant financial impact it’s having, it’s reassuring to
know that we’ve got support in combating this in companies like RockItCoin. Please pass along
to whomever you can and want to that the law enforcement community sees and appreciates
the work you’re doing.”
And we know the protocols described above are workable solutions that can be adopted by operators –
because RockItCoin is doing it now, going well beyond what is regulatorily required to do what is right.
Rather than legislating arbitrary caps and controls that stand to stifle and choke the very businesses it is
aiming to regulate, a well-crafted law can instead encourage growth and investment while protecting
the customer.
Ironically, by introducing transaction and fee caps the bill as written disincentivizes the protection of the
customer. By capping revenue and inadvertently pushing transaction thresholds below reporting
requirements, operators will gravitate towards lower standards which consequently exposes customers
to the very dangers the bill hopes to eliminate. It is better to raise the floor to a higher standard and
hold operators accountable than lower the ceiling and push everyone towards lower standards and
fewer protections.
Letter to the Commerce, Finance, and Policy Committee
RE: HF 4717, an act concerning virtual currency
March 12, 2024
Page 3 of 11
Three operators in our space, Bitcoin Depot, CoinFlip, and ourselves, testified last week in front of the
Connecticut Joint Committee on Banking and yesterday met with representatives from the Connecticut
State Police and the Department of Banking to further discuss our findings and concerns. The meeting
was quite productive, with industry submitting proposed changes for committee consideration.
The Connecticut law and the Minnesota counterpart here require corrections too numerous and
important to leave for a future legislative session. It is worthy of attention and discussion prior to
passage in order to provide an opportunity to strengthen the bill by including some of the protocols and
best practices developed by RockItCoin. An enhanced bill would go a long way towards the protection
and safety of your constituents while simultaneously giving the industry the guidance, direction, and
framework it desperately needs.
Every kiosk operator that does not address the safety of the customer and instead does the bare
minimum required puts customers at risk and our industry’s reputation on the line. Bringing
expectations up to a defined standard is something we should strive to do.
And looking beyond Minnesota, RockItCoin envisions such a law serving as a template for other states as
they try to address cryptocurrency in general and specifically the kiosks found within their own borders.
RockItCoin so believes in our compliance model that we would welcome it to be implemented
nationwide.
Inconsistencies and Issues Within HF 4717
Kiosk operators do not have accounts with their customers.
Sec 5, Subd 2 addresses opening "accounts" with customers, which a kiosk operator does not
do. We do not act as custodians of any customer assets or cryptocurrency, nor do we hold them
for the customer’s future use. This section of the law demonstrates a general lack of
understanding about what the kiosk aims to do, which is to provide a cryptocurrency retail
solution. This is precisely what the regulatory departments in Minnesota already know about
what we do - if the kiosk operators were holding money or assets of the customer, they would
be under the jurisdiction of other laws in the state.
With no accounts, how can kiosk operators provide “statements”?
Sec 5, Subd 2,(2)(ii) requires the kiosk operator to give the customer periodic statements and
valuations of the non-existent accounts described in Sec 5, Subd 2. As there are no “accounts”
with the customer, here the legislature has confused the kiosk operators with custodial
exchanges. The wallets presented at the kiosk are the customers’ wallets and under their
control, not the kiosk operator’s. The kiosk operator does not have any insights into the
acquisitions and activities of the customer’s personal wallets being used at the kiosks, and
certainly would be unable to provide “periodic statements and valuations.”
Letter to the Commerce, Finance, and Policy Committee
RE: HF 4717, an act concerning virtual currency
March 12, 2024
Page 4 of 11
A “stop payment” feature is not a possibility in a cryptocurrency transaction.
Sec 5, Subd 2,(2)(i) addresses a "virtual currency transfer" without ever having defined such a
term. This is significant because whatever assumptions have been made about this “transfer”
have a great impact on the kiosk operator. Specifically, this section creates a customer's right to
the "stop payment" of a transfer. It appears at a minimum the law is requiring kiosk operators
to do something that can't be accomplished in the crypto world: undo or claw back a
transaction after it has been authorized or set in motion on the blockchain.
The law requires a warning to the customer that transactions cannot be undone once executed, in
direct conflict with the prior “stop payment” requirement.
Paradoxically, Sec 5, Subd 3,(4) requires kiosk operators to warn the customer that once a
transaction is executed it cannot be undone.
Undefined term aside, under this law kiosk operators are required to disclose to the customer
that a transaction cannot be undone, but yet the customer has the right to "stop payment" of
one. This confusion will certainly lead to problems (consumer expectations of rights or actions
that cannot exist) if not further defined. It again demonstrates the misunderstandings of the
law’s supporters and illustrates exactly why such a law needs to be addressed in the raised bill
currently pending.
The bill places prohibitions on the collection of fees for our service.
Sec 5, Subd 5 is concerning. It places a cap on the amounts the kiosk operator may charge. The
service provided by the kiosk operators carries many unique costs such as inventory
procurement, kiosk deployment and maintenance, cash logistics providers, customer service
interactions, and compliance requirements, to mention a few. The definition of a maximum
revenue potential without regard to a Company’s costs puts the power to shut an entire
industry down with no input from nor protection or rights offered to the kiosk operator.
The law establishes a daily limit on transactions a customer can do, to our knowledge unprecedented
in the retail or investing community.
Sec 5, Subd 3,(5) establishes an arbitrary daily limit an individual can transact at the machine.
This seems like a figure hastily put in place to "protect" consumers while negatively affecting
those who transact higher amounts safely. Kiosk operators are unaware of other industries
similarly targeted and, lacking context on the decision-making process, do not understand why
its activity is curtailed. We cannot see similar limits placed on consumer-based retail or
investments, and as such believe this portion of the law can be interpreted as discriminatory.
The law creates a wholly unworkable and unrealistic situation wherein a first-time customer under
certain circumstances can request a “refund” of a cryptocurrency transaction.
Despite demonstrating an understanding that cryptocurrency transactions cannot be undone
(see Sec 5, Subd 3,(4) wherein kiosk operators have to warn such a fact), the bill attempts to
magically legislate into existence a “refund” scenario.
Letter to the Commerce, Finance, and Policy Committee
RE: HF 4717, an act concerning virtual currency
March 12, 2024
Page 5 of 11
Sec 5, Subd 6 places many unworkable and unreconcilable scenarios in play. First, it gives the
right of the first-time customer to "cancel and receive a full refund for the virtual currency
transaction", which again is in direct conflict with earlier warnings. That issue aside, it fails to
define what a "refund" would look like – does the kiosk operator get its cryptocurrency back
when money is returned to the customer, or is the kiosk operator expected to simply hand over
money and let the customer keep both the crypto and the cash? The latter option is most
decidedly not a refund by any standard definition.
Such a “refund,” unprecedented in the cryptocurrency space, creates a moral hazard.
Most concerning is the bill places the cost of such a “refund” squarely on kiosk operator. Again,
in Sec 3(h) it states (emphasis added), “A virtual kiosk licensee must, at the licensee’s cost and
within seventy-two hours after a virtual currency transaction, allow the person to cancel and
receive a full refund…” With no accountability or cost associated to the customer (it having
been borne entirely by the operator per the language), abuse of such a provision is a real
possibility.
Thus, the “refund” scenario creates a moral hazard. Allowing the customer 72 hours to decide
whether or not they wish to keep an asset whose price fluctuates is decidedly unfair to the kiosk
operator. Imagine a scenario wherein an investor can purchase Google stock, but then have
three days to observe price direction and decide whether or not they wish to keep their
purchase.
And paradoxically, should bad actors understand that Minnesota will not be seeking justice from
them and will instead hold the operator liable for all “refunds”, the likelihood of scam activity
actually increases.
Even worse, the “refund” criteria is created within another fundamental misunderstanding of how the
cryptocurrency space operates.
The criteria for being eligible for this "refund" contains an interesting "and" in the bill which sets
up yet another conflict: the transaction must be to "a virtual currency wallet or exchange
located outside of the United States." The bill’s authors are clearly unaware that the physical
location of, or the exchange affiliation with, a particular wallet address is simply not known with
certainty.
Aside from being impossible to know each time and difficult to “prove,” such a situation would
be in violation of our Terms of Service. Oddly, this portion of the law sets up a scenario wherein
a customer can violate our Terms of Service and be rewarded for doing so by becoming eligible
for a refund which we warned them couldn’t happen, but we are required to make it happen,
again with no protections for ourselves, the kiosk operator.
Letter to the Commerce, Finance, and Policy Committee
RE: HF 4717, an act concerning virtual currency
March 12, 2024
Page 6 of 11
Ways to strengthen HF 4717
We have attached a markup of the proposed legislation to this document as “Exhibit A.” Rather than
restate all of our comments here, please see the exhibit for both our redline suggestions and
commentary.
Working through the bill, you will note that we first address several of the required warnings and
attestations. Some are inapplicable and should be removed while others need modified to bring them
more in line with the industry. Some of the “disclosures” are also problematic, as what they describe
cannot be accomplished in the cryptocurrency world.
The transaction cap in the bill has the appearance of consumer safety in that on the surface it appears to
limit the amount a consumer can be scammed. However, in practice it is not as effective as one would
believe and has other implications as well. Instead of an individual being limited to the “safety” of a cap,
they can merely visit another operator’s kiosk and continue to transact, as described earlier. Even a
diligent operator will never see the overall transaction pattern that could suggest intervention is
needed.
And no Federal rules exist requiring the specific identification of the customer for a $1,000 transaction.
Larger transactions, such as $3,000, require, per Federal code, not only photo identification verification
but also the collection of the social security number of the individual transacting. These are vital pieces
of information for law enforcement but are now not required to be collected under a $1,000 cap.
Currency Transaction Reports (CTRs) are filed with the IRS for a currency transaction(s) individually or
cumulatively exceeding $10,000 in a day. These reports carry identifying information of the individual
transacting. Law enforcement uses these reports as documented evidence of a suspect spending cash.
The $1,000 transaction cap prevents the CTR threshold from being reached and consequently prevents
CTRs from ever being filed, depriving law enforcement of possible documented evidence.
Circumvention of the CTR reporting requirements would necessitate a Suspicious Activity Report (SAR)
filing with FINCEN, but without the ability to see the full customer activity, it cannot be done. Previously
reportable activity is now unreported. Customers are forced to return day after day, transacting $1,000
each time, to purchase larger amounts of cryptocurrency. Therefore, the proposed Bill obscures what
would otherwise have been a large transaction reportable via a CTR or perhaps a SAR.
The law puts the operators in the impossible situation of guessing whether or not the customer activity
should be interpreted as a circumvention of Federal reporting rules or that it simply was a product of
the customer following the laws of the State of Minnesota. The proposed Bill would diminish the
effectiveness and validity of a previously effective process.
Letter to the Commerce, Finance, and Policy Committee
RE: HF 4717, an act concerning virtual currency
March 12, 2024
Page 7 of 11
Therefore, a $1,000 transaction limit obscures true customer activity, reduces the amount of
identification information required to be collected, and eliminates valuable intelligence heading to law
enforcement – all things that truly protect consumers.
The ineffectiveness of a transaction cap is also evident in California, where a $1,000 kiosk transaction
cap has now encouraged kiosk manufacturers to produce a one way “safe” instead of a kiosk in an effort
to circumvent the rules. The product is marketed specifically as a work around of the California law.
Other kiosk operators in California have instead opted to open actual storefronts where people can
transact. Instead of protecting consumers with rational, well thought out solutions, the law passed in
California simply fails those consumers that need protection the most.
We need to address a very small subset of customers who find themselves at risk among the literally
thousands upon thousands of transactions processed each day by the cryptocurrency kiosk industry.
Inconveniencing the entire group for the protection of this subset by limiting transactions or access is
not an effective solution.
The most effective form of customer safety is intervention and communication. Our proposals include
mandates for this: new customers need contacted if transacting over a certain threshold and elderly
customers need contacted prior to their first transaction being consummated. A live customer service
staff is required for operators to communicate with customers, not text messages and chatbots. Robust
compliance policies and procedures, run by actual employees of the company and not disinterested
third parties, should be part of any true plan for customer safety.
All FINCEN registered MSBs are required to have a risk-based approach to customer due diligence and
transaction monitoring. Such a risk-based approach to money laundering would necessitate focusing on
higher dollar transactions. Our proposal addresses this fact by requiring more direct consumer
interactions and protections. A cap on fees is addressed in a similar manner - those required to allocate
more resources towards customer protections should be permitted to charge a higher fee to pay for it.
The model that both sets and incentivizes the compliance of the operator by allowing both larger fees
and transactions is a solution that we can support. An impossible scenario would be to place transaction
and fee caps on the operators while simultaneously requiring the additional compliance protections.
Customers being safe would find themselves needlessly inconvenienced while the industry would find
itself with an unfunded mandate – a position detrimental to the growth and investment in what we
believe to be the future of payments, peer to peer transactions, and wealth storage.
Bitcoin Kiosk Industry
Based upon the Connecticut law and the proposed Minnesota bill’s inconsistencies and flaws within it,
we have reason to believe the legislature does not fully understand what the kiosk operators do.
Letter to the Commerce, Finance, and Policy Committee
RE: HF 4717, an act concerning virtual currency
March 12, 2024
Page 8 of 11
Please see the kiosk operator Flow of Funds diagram below:
Moving left to right, the kiosk operator bank account sends USD to a crypto exchange to purchase
crypto that is sent to the kiosk operator’s wallet inventory for use in the kiosks. Note the Armored
Logistics Provider takes money from the kiosks (obtained through customer crypto purchases) and
deposits it back into the bank account, and vice versa for money dispensed from the kiosk (to pay for
customer crypto sales to the kiosk operator).
Moving right to left, a customer approaches the machine and either purchases or sells cryptocurrency
and only interacts with the kiosk. This transaction is contained within itself and does not include third
parties per our Terms of Service and customer attestation. The transaction represents the customer’s
entire relationship with the Company’s kiosk.
Upon approaching the kiosk, the customer must identify themselves, declare how much they wish to
buy or sell, and provide whatever KYC documentation is necessary. The customer must present a digital
wallet that they attest is theirs and under their control. This wallet is immediately screened by a
blockchain analytics company that alerts RockItCoin if it has been involved with suspicious or sanctioned
activity. Upon satisfaction of the requirements, the customer can then determine if they wish to
proceed. Customers who purchase cryptocurrency insert cash into the kiosk to pay for their purchase
and in turn receive the cryptocurrency on the wallet they presented, and customers intending to sell
cryptocurrency instead send cryptocurrency to the kiosk and receive cash dispensed from the machine
as payment for the cryptocurrency.
It is critical to understand the transaction is consummated at the machine and that the kiosk operator is
NOT:
1. Holding customer funds for future use.
2. Holding cryptocurrency for the benefit of the customer.
3. Transacting with anyone else but the identified customer at the kiosk.
The bitcoin kiosk industry arose out of the need for individuals to obtain cryptocurrency.
Letter to the Commerce, Finance, and Policy Committee
RE: HF 4717, an act concerning virtual currency
March 12, 2024
Page 9 of 11
Acquiring crypto from online exchanges takes time – funding an account, purchasing, and moving crypto
for use is historically fraught with delays and roadblocks for the consumer. First of all, funding has to
come from an established account through wire or ACH, which immediately eliminates the underbanked
and poses logistical challenges for others. After funding, many online exchanges have a grace period
before you can use the deposited funds as a way to combat fraud, but this simply increases the
inefficiencies of the process. Lastly, many online exchanges require yet another grace period after
acquiring crypto before you can use or move it from the exchange.
To the individual wanting to make a purchase or pay for a service in the short term, online exchanges
offer a service that does not mesh with the needs of the consumer. RockItCoin fills that gap with its
cryptocurrency kiosks.
In crypto’s early days, people would meet in parking lots and exchange cash for their crypto. This is
neither safe nor efficient and most importantly, outside of regulatory purview. RockItCoin kiosks are the
solution to acquiring cryptocurrency quickly, in person, and most importantly, under regulation.
The negative news associated with exchange failures like FTX and crypto lenders such as Celsius is not a
reflection on our business. As mentioned previously, kiosk operators do not take custody of customer
funds or assets and therefore the possibility of customer loss from company malfeasance is small. Quite
simply, although we all deal in cryptocurrency, our businesses are not the same because we do not have
control over our customers’ assets.
Legitimate cryptocurrency kiosk operators, such as RockItCoin, desire regulatory oversight and welcome
the opportunity to operate under clear guidelines and true customer protections that are well thought
out and fair to all parties. Such rules serve to enhance, protect, and grow the space; contradictory or
flawed Bills stifle, confuse, and choke the growth out of an industry.
Company Background
RockItCoin operates a nationwide network of approximately 2,300 cryptocurrency kiosks in 48 states
and Puerto Rico. These kiosks allow the customer to purchase, and in some cases sell, cryptocurrency in
person and directly with the Company. While the Company’s operations began in Chicago, Illinois, in
late 2015, our first kiosk in Minnesota went live in February, 2020.
Michael Dalesandro founded RockItCoin with the vision to bring cryptocurrency to the masses. For
many, and especially those in the underbanked community, cryptocurrency access is quite limited and
available only through third parties. RockItCoin solves this by allowing customers to purchase
cryptocurrency immediately, in person, without minimums, and with the cash they have in their
pockets.
Letter to the Commerce, Finance, and Policy Committee
RE: HF 4717, an act concerning virtual currency
March 12, 2024
Page 10 of 11
Customers approach a kiosk and identify themselves with a phone number and valid state identification.
At increasing levels of activity, we require additional information including social security numbers,
source of funds documentation, various attestations, and enhanced due diligence.
On a federal level, RockItCoin is a registered money service business (MSB). With that comes the
necessary requirements for having a robust Anti-Money Laundering policy that is independently audited
annually, an education program targeted for employees, the designation of an AML officer at the firm,
the creation of risk-based customer monitoring processes, and the filing of Suspicious Activity Reports
and Currency Transaction Reports – all of which we do.
States make their own determination on licensing, and several require money transmission licenses for
our kiosk activity. We carry licenses in 21 states, all of whom conducted due diligence on our activities
and business plan. RockItCoin has also undergone and passed two MSB Title 31 Examinations (in 2017
and 2021) conducted on behalf of FINCEN by the Internal Revenue Service. We are proud of our
commitment to, and our track record of, compliance.
We proactively combat fraud, interrupting transactions and speaking directly with customers whom we
believe are at risk for being scammed. The approaches we take are not mandated by regulation but
rather guided by our own internal policies. We have identified risk typologies and actively seek to
protect our customers from harm.
Additionally, RockItCoin has a live customer service department available to answer phones between
7:00 am and midnight CST Monday through Friday and from 8:00 am to 10:00 pm on the weekends. We
understand crypto can be confusing and requires information resources. We strive to be that resource
and foster a trusted relationship with our customers.
RockItCoin Kiosks in Minnesota
In late 2018 and prior to RockItCoin’s first Minnesota kiosk installation, we requested a licensing
opinion. We were given guidance that our business activity did not require licensure. We repeatedly
sought updates from Minnesota on this guidance.
RockItCoin applied for a money transmission license in September, 2023 based upon further guidance.
As we await the approval of our application, we carry a $250,000 surety bond for our Minnesota activity.
Enforcement
It is our hope that any enacted legislative regulation runs parallel with an enforcement framework.
Operators in the cryptocurrency space that purposely choose to ignore or operate outside the rules
Letter to the Commerce, Finance, and Policy Committee
RE: HF 4717, an act concerning virtual currency
March 12, 2024
Page 11 of 11
should be held accountable for the protection of the consumer, integrity of the law, and reputation of
the industry.
Conclusion
It is the Company’s firm belief that cryptocurrency is game changing and here to stay.
For Minnesota to simultaneously protect its citizens, encourage participation, and be at the forefront of
this potentially world-changing industry, a fair, proper, and thought-out regulatory framework is
necessary. RockItCoin is willing to help the legislature identify, address, and perfect both processes and
best practice requirements by which Minnesota can safely embrace the cryptocurrency space with kiosk
operators.
True engagement and eventual success must begin through conversations and commitments to listen,
learn, and lead. Amending and enhancing HF 4717 prior to passage is a proper first step to clear the way
for the development of effective laws, not unfair, emotionally driven, contradictory rules that will serve
to confuse the consumer and kiosk operator alike. I would be happy to discuss my thoughts further in
person or meet via Zoom at your convenience.
Thank you in advance for your time, and I look forward to hearing from you.
Sincerely,
John Carroll, CCO
RockItCoin, LLC
enclosure
Exhibit A
A bill for an act
relang to commerce;
dening terms relang to virtual currency;
adding addional disclosure requirements for virtual currency transacons;
amending Minnesota Statutes 2023 Supplement, secon 53B.69, by adding subdivisions;
proposing coding for new law in Minnesota Statutes, chapter 53B.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Secon 1. Minnesota Statutes 2023 Supplement, secon 53B.69, is amended by adding
a subdivision to read:
Subd. 3a. Transacon hash. "Transacon hash" means a unique idener made up of a string of
characters that act as a record of and provides proof that the transacon was veried and added
to the blockchain.
Sec. 2. Minnesota Statutes 2023 Supplement, secon 53B.69, is amended by adding a
subdivision to read:
Subd. 6a. Virtual currency address. "Virtual currency address" means an alphanumeric idener
represenng a desnaon for a virtual currency transfer that is associated with a virtual currency
wallet.
Sec. 3. Minnesota Statutes 2023 Supplement, secon 53B.69, is amended by adding a
subdivision to read:
Subd. 10. Virtual currency kiosk. "Virtual currency kiosk" means an electronic terminal acng as
a mechanical agent of the licensee to enable the licensee to facilitate the exchange of virtual
currency for money, bank credit, or other virtual currency, including but not limited to by (1)
connecng directly to a separate virtual currency exchanger that performs the actual virtual
currency transmission, or (2) drawing upon the virtual currency in the possession of the
electronic terminal's licensee.
Sec. 4. Minnesota Statutes 2023 Supplement, secon 53B.69, is amended by adding a subdivision to
read:
Subd. 11. Virtual currency wallet. "Virtual currency wallet" means a soware applicaon or
other mechanism providing a means to hold, store, or transfer virtual currency.
Sec. 5. [53B.75] VIRTUAL CURRENCY KIOSKS.
Subdivision 1. Disclosures on material risks.
(a) Before entering into an inial virtual currency transacon for, on behalf of, or with a
person, the virtual currency kiosk licensee must disclose in clear, conspicuous, and
legibly wrien English all material risks generally associated with virtual currency. The
disclosures must be displayed on the screen of the virtual currency kiosk with the ability
for a person to acknowledge the receipt of the disclosures. The disclosures must include
at least the following informaon:
(1) virtual currency is not backed or insured by the government, and accounts
and value balances are not subject to Federal Deposit Insurance Corporaon,
Naonal Credit Union Administraon, or Securies Investor Protecon
Corporaon protecons;
(2) some virtual currency transacons are deemed to be made when recorded
on a public ledger, which may not be the date or me when the person iniates
the transacon;
(3) virtual currency's value may be derived from market parcipants' connued
willingness to exchange at currency for virtual currency, which may result in the
permanent and total loss of a parcular virtual currency's value if the market for
virtual currency disappears;
(4) a person who accepts a virtual currency as payment today is not required to
accept and might not accept virtual currency in the future;
(5) the volality and unpredictability of the price of virtual currency relave to
at currency may result in a signicant loss over a short period;
(6) the nature of virtual currency may lead to an increased risk of fraud or cyber
aack;
(7) the nature of virtual currency means that any technological dicules
experienced by the licensees may prevent access to or use of a person's virtual
currency; and
(8) any bond maintained by the licensee for the benet of a person may not
cover all losses a person incurs.
(5) Virtual currency transacons are irreversible and are used by scammers,
including those impersonang loved ones, threatening jail me, stang your
identy was stolen, insisng you withdraw money from your bank account and
purchase cryptocurrency, or alleging your personal computer has been hacked.
(b) The virtual currency kiosk licensee must provide an addional disclosure, which must
be acknowledged by the person, wrien prominently and in bold type, and provided
separately from the disclosures above, stang: "WARNING: LOSSES DUE TO
FRAUDULENT OR ACCIDENTAL TRANSACTIONS MAY NOT BEARE NOT RECOVERABLE AND
TRANSACTIONS IN VIRTUAL CURRENCY ARE IRREVERSIBLE."
Subd. 2. New account disclosures. When opening an account for a person a virtual currency
kiosk licensee has not previously opened an account for, and before entering into an inial
virtual currency transacon for, on behalf of, or with the person, a virtual currency kiosk licensee
must disclose all relevant terms and condions generally associated with the products, services,
and acvies of the licensee and virtual currency. A virtual currency licensee must make the
disclosures in clear, conspicuous, and legibly wrien English, using a reasonable size and type
fontat least 48-point sans serif type font. The disclosures under this subdivision must address at
least the following:
(1) the person's liability for unauthorized virtual currency transacons;
(2) the person's right to:
(i) stop payment of a preauthorized virtual currency transfer and the procedure
to stop payment;
(ii) receive periodic account statements and valuaons from the licensee;
(iii) receive a receipt, trade cket, or other evidence of a transacon at the me
of the transacon; and
(iv) prior noce of aconsent to a change in the licensee's rules or policies prior to
performing a subsequent transacon;
(3) under what circumstances the licensee, without a court or government order,
discloses a person's account informaonThe owner or operator’s mandated privacy
policy to communicate what customer informaon may be disclosed to third pares;
and
(4) other disclosures that are customarily provided in connecon with opening a
person's
account.
Subd. 3. Prior to transacon disclosures. Before each virtual currency transacon for, on behalf
of, or with a person, a virtual currency kiosk licensee must disclose the transacon's terms and
condions in clear, conspicuous, and legibly wrien English, using a reasonable size and type
fontat least 48-point sans serif type font. The disclosures under this subdivision must address at
least the following:
(1) the amount of the transacon;
(2) any fees, expenses, and charges, including applicable exchange rates;
(3) the type and nature of the transacon;
(4) a warning that once completed, the transacon may not be reversed, if applicable;
(5) a daily virtual currency transacon limit of no more than $1,00015,000;
(6) the dierence in the virtual currency's sale price versus the current market price; and
(7) other disclosures that are customarily given in connecon with a virtual currency
transacon.
Subd. 4. Acknowledgment of disclosures. A virtual currency kiosk licensee must ensure that each
person who engages in a virtual currency transacon using the virtual currency licensee's kiosk
acknowledges receipt of all the disclosures required under this secon. Addionally, upon a
transacon's compleon, the virtual currency licensee must provide a person with a receipt,
virtual or physical, containing the following informaon:
(1) the licensee's name and contact informaon, including a telephone number to
answer quesons and register complaints;
(2) the type, value, date, and precise me of the transacon, transaconal hash, and
each virtual currency address;
(3) the fee charged;
(4) the exchange rate, if applicable;
(5) a statement of the licensee's liability for nondelivery or delayed delivery;
(6) a statement of the licensee's refund policy; and
(7) any addional informaon the commissioner of commerce may require.
Subd. 5. Fees. The licensee of a virtual currency kiosk is prohibited from collecng fees, whether
direct or indirect, from a person related to a single digital nancial asset transacon that exceeds
the greater of either:
(1) $5; or
(2) ten twenty percent of the United States dollar equivalent of digital nancial assets
involved in the transacon, according to the publicly quoted market price of the digital
asset on a licensed digital nancial asset exchange at the me the person iniates the
transacon.
Subd. 6. Cancellaon and refund. A virtual currency kiosk licensee must , at the licensee's cost
and within 72 hours aer a virtual currency transacon, allow the person to cancel and receive a
full refund for the virtual currency transacon if the virtual currency transacon is:
(1) It is the person's rst virtual currency transacon with the licensee; and
(2) The customer returns the purchased cryptocurrency back to the owner or operator;
and to a virtual currency wallet or exchange located outside of the United States.
(3) No more than 72 hours have passed since the virtual currency transacon occurred.
Subd. 7. Addional Requirements. A virtual currency kiosk licensee must:
(1) obtain government issued idencaon for all customers, regardless of transacon
size.
(2) have restricons in place that prevent two customers from using the same digital
wallet.
(3) have the ability to blacklist or prevent designated wallets from use at the kiosk.
(4) preempvely perform blockchain analycs from an established third party company
specializing in such tasks to idenfy and prevent high risk scored or sanconed
wallets from being used by a customer at the kiosk.
(5) have dened in their policies and procedures a risk-based method to monitor
customers on a post-transacon basis.
(6) oer, between 8 AM and 10 PM EST Monday through Friday, live telephone-based
customer support from a number prominently displayed at or on the kiosk.
(7) idenfy and communicate with any new customer over 70 years of age prior to
performing a rst transacon. During this communicaon, the owner or operator
must 1. Reconrm kiosk aestaons, 2. Discuss the transacon, and 3. Discuss scam
typologies. Approval of the customer to transact is dependent upon the owner or
operator’s assessment of the answers given.
(8) idenfy and communicate with any new customer aempng to perform, either
once or cumulavely, a transacon that breaches a predesignated large transacon
amount before such transacon can be released to the blockchain. During this
communicaon the owner or operator 1. must posively idenfy the customer, 2.
review the stated purpose of the transacon, and 3. discuss scam typologies.
Approval of the customer to transact is dependent upon the owner or operator's
assessment of the answers given.
(9) use a blockchain analycs soware in order to assist in the prevenon of sending
purchased virtual currency from a virtual currency kiosk operator to a virtual
currency wallet known to be aliated with fraudulent acvity at the me of a
transacon.
(10) designate and employ a compliance ocer with the following consideraons:
(a) the individual must be qualied to coordinate and monitor compliance with this
Act and all other applicable Federal and State laws, rules, and regulaons;
(b) the individual must be employed full-me by the virtual currency kiosk operator;
and
(c) the designated compliance ocer cannot be any individual who owns more than
20% of the virtual currency kiosk operator by whom the individual is employed.
(11) ulize full-me employees of the licensee for compliance responsibilies required
under Federal and State laws, rules and regulaons.
(12) use a properly registered armored car carrier to handle the collecon and
transportaon of cash from the kiosk to the licensee’s banking soluon.