Recently, the Department of Financial Protection and Innovation (DFPI) in California issued a consent order against Coinme Inc., a company operating digital financial asset kiosks, commonly known as Bitcoin ATMs, across the state. This order comes after findings that Coinme violated several provisions of the California Consumer Financial Protection Law (CCFPL) and the Digital Financial Assets Law (DFAL). Notably, this is the first enforcement action taken under the DFAL and signals that DFPI is focused on trying to prevent scammers from taking advantage of Californians.
Background
The Commissioner of Financial Protection and Innovation holds jurisdiction over entities offering consumer financial products or services in California, including those managing digital financial asset kiosks. Under the CCFPL, it is unlawful for covered persons to engage in unfair, deceptive, or abusive practices concerning consumer financial products. The DFAL, enacted to mitigate risks associated with digital financial asset transactions, imposes specific requirements on kiosk operators, such as transaction limits and disclosure mandates.
Findings and Terms of Consent Order
Following an investigation, DFPI found that Coinme had accepted transactions exceeding $1,000 per customer per day and failed to include necessary disclosures on transaction receipts. These actions were deemed violations of both the CCFPL and DFAL.
The terms of the Consent Order include the following:
- Desist and Refrain Order: Coinme is ordered to cease accepting transactions of more than $1,000 from a customer with the same name on the same day and ensure transaction receipts include the digital financial asset exchange used to determine the spread.
- Restitution: Coinme must pay $51,700 in restitution to affected consumers within 10 business days from the effective date of the consent order.
- Administrative Penalty: Coinme is required to pay a $300,000 penalty, with a credit for restitution payments.
- Compliance and Reporting: Coinme will implement policy changes to ensure compliance and provide periodic reports to the Commissioner.
- Waiver of Hearing Rights: Coinme waives its rights to hearings and appeals, consenting to the order’s finality.
