Future state law requires more regulation on virtual currency

SIOUX FALLS, S.D. (Dakota News Now) - According to the AARP, in South Dakota, over $246 million of virtual currency fraud is reported by Americans every year.

This year, state lawmakers passed a bipartisan bill to provide safeguards to South Dakotans.

At least 170 virtual currency kiosks can be found around the state, but with a lack of regulation, bad actors have been able to take advantage of people like never before.

“These crypto kiosks are legitimate businesses; however, these bad actors do prey on people to get them to take their hard-earned money, take it to these kiosks, and funnel money to them,” Karl Adam, the President of South Dakota Bankers Association, said.

South Dakota has seen plenty of notable cases of crypto scams, including false jury duty fines and the impersonation of law enforcement, and these efforts are constantly evolving.

“There’s always fraud and scams we will want to make our members aware of, but putting some guardrails on cryptocurrency machines is a good first step to addressing some cryptocurrency scams that were happening in this area, particularly,” Erik Nelson, the Advocacy Director for South Dakota AARP, said.

According to Clark Police Chief Jeremy Wellnitz, cryptocurrency is nearly impossible to reverse, and unlike traditional wire transfers or checks, which can take days to process, crypto transactions are completed in seconds, allowing fraudsters to make money disappear quickly.

“Cryptocurrency is decentralized and pseudonymous; there is no central institution to contact. Once funds are transferred to a fraudulent wallet, they can be moved through multiple international accounts within minutes. While blockchain analysis tools are improving, recovery remains rare and requires immediate reporting and multi-agency coordination,” Wellnitz said.

Senate Bill 98 aims to make these scams as difficult as possible by establishing mandatory licensing for virtual currency kiosk operators, setting daily transaction limits of $1,000, requiring licensees to post fraud warning notices and refund fraud victims, plus other regulations.

“Once legislators learned what the issue was and learned that this was not an anti-crypto currency bill, but a consumer protection bill, we had good buy-in from legislators across the state,” Nelson said.

“We all need to take a role in trying to protect individuals from these types of scams, and this is a way for us to pass this legislation to help the public and have others have some accountability as well,” Adam said.

Chief Wellnitz said there are many signs of a potential cryptocurrency scam, including:

• Requests for payment exclusively in cryptocurrency. 
• Unsolicited investment opportunities promising guaranteed or unusually high returns. 
• “Romance” contacts who eventually steer conversations toward crypto investment platforms. 
• Urgent requests to send crypto to “protect” your existing assets. 
• Any instruction to keep a transaction secret.

Senate Bill 98 goes into effect at the beginning of July, giving operators time to implement these changes.