The big risks of bitcoin ATMs

Bitcoin ATMs are a rapidly growing presence in the United States and, some experts say, a rapidly growing cybercrime menace. ATMs dealing in bitcoin are similar to their cash cousins: there are PINs to punch and withdrawal fees, just like any other ATM.

Unlike cash ATMs, though, the high value of crypto makes them prime targets for hackers. So, while a cash ATM tucked away between the snack cakes and energy drinks at a gas station may not draw much attention, a bitcoin ATM gets more scrutiny from bad actors.

“It’s clear that these machines are particularly vulnerable to both physical and cyber threats, making them a prime target for hackers and thieves,” said Timothy Bates, clinical professor of cybersecurity at the University of Michigan’s College of Innovation and Technology.

Bitcoin ATMs can be susceptible to attacks where hackers install malware on the machines to capture private keys, steal funds, or manipulate transactions, which Bates said is “especially concerning for ATMs that may not receive regular software updates or security patches.” Network vulnerabilities are also a weak spot. “If the machine’s network communications are not adequately secured, attackers can intercept data transfers between the ATM and the server, leading to data theft or unauthorized access,” Bates said.

Whether it’s hackers or scammers, the government is sounding the alarm about bitcoin ATMs. The Federal Trade Commission reported this week that scam incidents have risen by 1,000% since 2020.

Ironically, a bitcoin ATM’s risks are directly related to its strengths, according to Joe Dobson, principal analyst at Mandiant, a Google Cloud-owned cybersecurity company. Bitcoin is decentralized, permission-less, and immutable. “A transaction cannot be reversed or recalled if funds are deposited to the wrong address,”  Dobson said. And while many crypto bulls find bitcoin’s lack of governance appealing, that can be problematic in ATMs. “There is no governing body within bitcoin dictating who can or cannot run a bitcoin ATM, hence many independent organizations operate the ATMs,”  Dobson said.

There are also old criminal tricks that might be reversible in a traditional banking situation, but in the world of bitcoin, that is not so. For example, someone could maliciously slip their personal deposit slips into the stack at the bank, tricking folks into depositing money into their account. “A similar attack can happen with bitcoin ATMs,” Dobson said. “If an attacker compromises a bitcoin ATM, they may change the receiving wallet address (or ‘account number’), effectively stealing user funds.”

But in addition to old tricks, there are newer threats bitcoin ATMs introduce that cash ATMs do not face. Many bitcoin ATMs require personally identifiable information, such as an ID or even a Social Security number to comply with financial industry Know Your Customer (KYC) requirements. This information could be at risk if a bitcoin ATM is compromised.

In Middletown, Ohio, at the…