Vermont committee weighs tighter rules, refunds and hold periods for cryptocurrency kiosks

The Vermont House Committee of Commerce & Economic Development heard detailed testimony and member discussion on Feb. 25 about whether and how to regulate cryptocurrency “kiosks,” devices that let people buy cryptocurrency with cash.

The discussion matters because the devices have been linked to fraud in other states, Vermont currently enforces a statutory moratorium and some committee members urged either a ban or strict consumer protections. Deputy Commissioner Aaron of the Vermont Department of Financial Regulation told the committee the agency’s report lacked state-specific data on trafficking or other criminal activity and that DFR had been enforcing requirements since the moratorium became law: “No. No. That we did not have information on that to to put in the report,” he said when asked whether Vermont-specific evidence existed.

CoinFlip, the largest operator that testified, defended its operations and described compliance systems the company uses. Larry Lipka of CoinFlip said the company monitors transactions, maintains 24-hour customer service, and has refunded at least one Vermont customer after a reported scam: “We've had 1 scam victim in Vermont since this moratorium went into place. And we refunded that victim the entire amount,” Lipka said. He also described identity‑verification steps at kiosks: “Each time you do a transaction, a photograph is taken of you,” Lipka said, and said operators file federal reports when thresholds are met.

Why this matters: committee members said they are balancing consumer protection with access for people who use cash or do not want to transact through exchanges. Some members argued the kiosks are primarily used for legitimate purposes such as investing or remittances; others pointed to risks from social‑engineering scams and laundered funds. Representative Tony (first name only) summarized the range of options: “Either kick it down the road or we take the additional time we need to to add additional regulation or we ban it,” he said.

Key discussion points and evidence - Fraud and reporting: CoinFlip and DFR both acknowledged at least one fraud report tied to a kiosk in Vermont; CoinFlip said it refunded fees and the transaction amount for that case. DFR said its initial report did not include state‑level analysis of trafficking or large‑scale criminal patterns. - Controls and analytics: CoinFlip described “blockchain analytics” to track where crypto moves after a transaction and said such analytics help identify transfers to wallets flagged as high risk. Lipka also described biometric/photo capture, ID collection above certain dollar thresholds, and customer‑service availability as tools to deter or respond to scams. - Refunds and hold periods: Committee members repeatedly requested a strong refund mechanism for scam victims. CoinFlip signaled willingness to accept a carefully drafted refund requirement but said prior statewide refund language in other states has produced implementation problems. The company described testing hold periods (24–72 hours) for new customers to allow time to detect and stop scams, but warned that a legally mandated, publicized hold length could be used by scammers to time their schemes. - Interjurisdictional concerns: Several members noted Vermont’s proximity to other states and countries and asked whether strict Vermont rules could push problematic activity across borders. CoinFlip and others warned an outright ban could push customers to meet peer‑to‑peer sellers or travel out of state.

Next steps and committee direction The committee did not vote on new statutory language. Members directed staff and counsel to keep working with DFR, CoinFlip and industry counsel to draft refund language and to consider DFR’s earlier recommendations and models used in Minnesota and Connecticut. The committee agreed to continue discussions and to share draft language with Senate counterparts; Maria Royal of Legislative Council confirmed that an updated draft (1.4) exists and that the bill vehicle (H.137) could be used to carry kiosk provisions. The group discussed using the Minnesota model (72‑hour new‑user period plus limited refund windows) as a starting point and asked DFR and CoinFlip to refine hold‑period testing and language for coordinated reporting between law enforcement and operators.

What remains unresolved Committee members sought data on usage patterns—how long funds remain in recipient wallets and whether transfers move quickly to wallets previously identified as high risk—and asked DFR and CoinFlip for that analysis. CoinFlip said it can produce analytics but would need days to compile the new data. The moratorium and decal process administered by DFR were discussed as interim controls: the department must approve kiosk decals, which limits new placement even if the moratorium lapses.

The committee scheduled continued drafting and follow‑up with DFR, CoinFlip and Legislative Council; no formal vote or policy change occurred on Feb. 25.