Regulatory Standards Bill: Minister considers compensation for owners of banned crypto ATMs

Associate Justice Minister Nicole Mckee (left) and Deputy Prime Minister David Seymour. Photo / Mark Mitchell

The Regulatory Standards Bill has not yet returned to the House from the select committee, but there are signs that it is having an impact on the Government, with Associate Justice Minister Nicole McKee taking advice on whether she should compensate the owners of cryptocurrency ATMs (automated teller machines), which she plans to ban.

One of the standards for good regulation in the bill is that “fair compensation” is paid to those whose property is impaired or taken by regulatory changes.

Last week, McKee, who is an Act MP, announced she would ban cryptocurrency ATMs (often called digital currency ATMs) on the advice of the Ministerial Advisory Group on Transnational, Serious and Organised Crime.

There are concerns people can launder money through these ATMs by depositing cash and turning that cash into a digital currency such as Bitcoin.

However, the ban might fall within the reach of the principles outlined by the Regulatory Standards Bill. If the bill were law, it might advise McKee to compensate the owners of the ATMs. McKee would still be able to reject that advice – nothing in the bill forces the Government to pay compensation for regulatory changes.

McKee is living up to the principles before they are even law.

McKee told the Herald she has “asked ... officials to undertake further analysis of the implications of this reform to understand whether appropriate penalties and whether fair compensation should be given”.

Penalties may pay for compensation, rather than the Crown.

“I share the Ministerial Advisory Group’s concerns about criminals taking advantage of cash and virtual assets to expand criminal enterprise,” McKee said.

Labour’s regulations spokesman Duncan Webb said he was “gobsmacked” by the news.

“I’m gobsmacked that in a cost-of-living crisis, they are considering compensating crypto traders. This is a prime example of the kind of clog the Regulatory Standards Bill would cause on good lawmaking,” Webb said.

“If every time we make law changes, we have to check if we should compensate someone, good government would be paralysed.”

According to a report produced by the Ministerial Advisory Group on Transnational, Serious and Organised Crime earlier this year, there are approximately 200 of these ATMs across New Zealand, usually in small supermarkets, convenience stores, vape stores, petrol stations and laundromats.

“Many of these machines enable the purchase of cryptocurrency by depositing cash. A small number dispense cash for deposited cryptocurrency,” the report said.

“Criminals can use these ATMs to purchase cryptocurrency and transfer that cryptocurrency within minutes to offshore criminals to fund drug imports or to make payments associated with scams.”

The independent advisory group noted these ATMs were made illegal in the United Kingdom in 2022 and recommended virtual current ATMs be banned “as a critical step in disrupting organised crime operations”.