There is an ominous growth in Bitcoin ATMs across the United States, and some experts have claimed they are also one of the biggest cybercrime threats to the country. As with other ATMs, Bitcoin ATMs share a few characteristics with their cash counterparts: there are PINs to punch, and there are withdrawal fees as well.
However, unlike cash ATMs, crypto ATMs have a high value, making them prime targets for hackers who are looking for ways to steal data.
The problem is that whereas the location of a cash ATM at a gas station may not draw much attention, the location of a Bitcoin ATM gets more scrutiny from fraudulent individuals.
The UK's National Crime Agency has reported in an article published by CNBC on September 8 that Bitcoin ATMs have proven to be one of the most popular ways for individuals to buy and sell cryptocurrencies, although they have additionally evolved into a prime target for hackers and scammers.
There is no difference in the operation of these machines from traditional ATMs; however, thanks to the significant value of cryptocurrencies, they can be very attractive to cybercriminals, who will exploit both physical and digital vulnerabilities to their advantage.
According to Timothy Bates, an assistant professor of cybersecurity at the University of Michigan, these machines are especially vulnerable to hacking due to the lack of security measures that are often part of the software used in these devices.
According to Bates, Bitcoin ATMs can be infected by malware, which allows hackers to steal private keys and manipulate transactions through the use of malware. As well as this, an ATM can be compromised as a result of weaknesses in the security of the network, which may allow criminals to intercept communications between the ATM and its server, potentially allowing data theft to take place.
As a result of malware installed by hackers on Bitcoin ATMs, they can be compromised, steal private keys, or manipulate transactions.
It is especially concerning for ATMs that may not receive regular updates or security patches to prevent hackers from stealing funds or capturing private keys. A weakness in the network is also a weakness in the network security system.
A compromised machine's network communications can be intercepted by attackers if the ATM's network communications are not adequately secured. Consequently, stolen data can be accessed or the server could be accessed by unauthorized persons, Bates explained.
Bitcoin ATMs need to be taken seriously because of the threat posed by both hackers and scammers. Since 2020, according to a report released by the Federal Trade Commission this week, the number of scamming incidents has increased by 1,000%.
In a curious twist, the risks associated with Bitcoin ATMs are directly proportional to their strengths, according to Joe Dobson, the principal analyst at Mandiant, which is owned by Google Cloud and a company that specializes in cybersecurity.
There are three main characteristics of Bitcoin: decentralization, permissionlessness, and immutability. There is no way to reverse or reverse a transaction if funds are deposited to the wrong address, according to Dobson. Although many crypto bulls are attracted to Bitcoin because of its decentralization and lack of governance, it is a problem when used in ATMs. There are no regulations in the Bitcoin community that dictate who can run a Bitcoin ATM and who cannot, so independent organizations operate Bitcoin ATMs without any interference from the Bitcoin community," said Dobson.
In addition to this, some old criminal tricks might be reversible in a traditional banking system, but not so in the Bitcoin world, which comes with its own set of unique challenges. It is possible for someone, for instance, to maliciously place their deposit slips into the bank stack, which can lead to folks being tricked into depositing money into their accounts unknowingly.
According to Dobson, "there is the possibility that Bitcoin ATMs could also be subject to a similar attack."
According to Dobson, "If an attacker compromises an ATM, they will be able to change the recipient wallet address (or "account number"), which in turn will steal the money of the user." Bitcoin ATMs, however, continue to spread old tricks as well and they also introduce newer threats that are not encountered by cash ATMs. Several Bitcoin ATMs require that users provide personally identifiable information, such as their ID number or even their Social Security number to satisfy "Know Your Customer (KYC)" requirements that are necessary in the financial industry.
Depending on the level of security that exists on a Bitcoin ATM, this information could be at risk.
The Middletown Food Mart, located on the fringes of the town, in a hollowed-out section of the town near the town's main road, has a Bitcoin Depot ATM running alongside a regular cash machine, which blends in with the potato chips, bottled water, and beer on sale.
Those who live in Middletown know that it is the hometown of Donald Trump's running mate, Ohio Senator J.D. Vance, who, similar to Trump, has refashioned himself as a crypto-advocate and has been speaking out against the adoption of Bitcoin. It is just a few blocks away from the Middletown Food Mart where Vance grew up where he works.
Among the best ways to avoid these scams is to be cautious and sceptical about any requests from users who want to make payments through a Bitcoin ATM. It is rare that legitimate businesses if they exist, will request payment in Bitcoin via a machine for their services.
During a transaction, users must verify the validity of the transaction, particularly checking the recipient's wallet for references to questionable entities," Frei said, adding that an additional precaution can be taken by using licensed ATMs from reliable operators.
Users will be able to follow certain steps to make sure they are dealing with a Bitcoin ATM or party that is legitimate and owned by someone reputable.
Adding to Frei's warning, he stressed the importance of being cautious and not sending bitcoins to unknown wallets. A platform like Chainabuse can help validate the legitimacy of the transaction by examining the risk score of the recipient's wallet, which can help verify their legitimacy.
In the U.S., Bitcoin Depot operates over 8,000 ATMs, making it the country's largest operator of Bitcoin ATMs. Its chief executive, Brandon Mintz, assured CNBC that the company's software and hardware are designed to deter hackers, although he cautioned consumers not to fall victim to scams or be deceived by them. There seem to be just 10 operators worldwide who manage about 74% of ATMs in the world, as per Frei's analysis of data.
