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Bitcoin ATMs being used for drug-money laundering in Spain, as dealers exploit loophole in existing EU law

Spanish police believe bitcoin ATMs are being widely used for illicit drug payments, Bloomberg writes. The authorities have now highlighted a gap in anti-money laundering controls within the European Union (EU) which do not cover cryptocurrency ATMs, meaning users at Spain’s 89 bitcoin cash machines do not need to be properly ID’ed.

In April 2018, police in Spain shut down a drug operation where bitcoin ATMs were “crucial.” It arrested eleven people who reportedly transferred more than 8 million euros ($9 million) in bitcoin to drug traffickers in Colombia and other countries, purchasing the cryptocurrency in cash from the ATMs. The group allegedly hired two bitcoin cash machines and set them up in their Madrid office. They claimed to be running a remittance and cryptocurrency trading centre, meaning large money transfers used to top up the machines with bitcoin went unnoticed.

While cryptocurrency exchanges and custodians will be monitored by new EU regulation coming into force next year, these do not extend to cryptocurrency ATMs. Authorities fear this will allow sophisticated dealers to continue exploiting bitcoin ATM and to slip under the radar.