The Controllable Electronic Record Fraud Prevention Act in Nebraska

The Controllable Electronic Record Fraud Prevention Act has been signed into law in Nebraska. The law regulates cryptocurrency automatic teller machines (ATMs) and establishes conditions for operating crypto ATMs while providing consumer protections for ATM users.

The bill passed the state’s 49-member nonpartisan, unicameral legislature on March 6 with 48 votes in favor and one legislator excused from voting. Governor Jim Pillen signed the bill on March 11.

The act makes ATM operators liable for some fraud

Under the new law, crypto ATM operators must have a money transmitter license. They are required to make their fees known in advance and post clear warnings about potential scams and other risks associated with cryptocurrency. New customers will be limited to $2,000 a day in transactions, while established customers will be allowed $10,500 daily.

Operators must have a refund policy for customers who report fraud within 30 days. New customers are eligible for a full refund on funds lost to fraud, while existing ones would get fees returned.

Operators will also need a full-time compliance officer and an anti-fraud policy supported by blockchain analytics software. Live customer service must be available on weekdays from 7:00 a.m. to 9:00 p.m., along with a dedicated communication method with law enforcement.

The governor framed the new law as support for the crypto industry, stating, “We’ve been working hard to build Nebraska into a cryptocurrency leader. An important part of these efforts is to make sure that we have guardrails to prevent criminals from taking advantage of Nebraskans.”

According to the American Association of Retired Persons (AARP), Nebraskans reported 239 scams involving cryptocurrency in 2023, resulting in losses of $14.6 million. Real losses are likely much higher due to unreported cases, the AARP noted.

Legislative Background

The bill was introduced by Eliot Bostar in January and will go into effect three months after the legislature adjourns for Spring. As per Bitcoinlaws.io, there is no other Bitcoin-related legislation currently being considered in the state.

However, there is a bill introduced at the governor’s request to impose a 2.5-cent per kWh excise tax on cryptocurrency mining operations consuming over 1,000 kWh annually and to allow public power districts to require financial assurances from these operations. That bill is currently undergoing hearings.

Bostar also introduced the Adopt the Blockchain Basics Act, intended to regulate cryptocurrency mining, custody, and trading, in 2023. That bill has been carried over into 2024 but has been “indefinitely postponed” since April.

Nebraska is home to Telcoin Bank, an issuer of the eUSD stablecoin, chartered as the state’s first Digital Asset Depository Institution in February after applying in December. Telcoin’s founder, Paul Neuner, mentioned, “The Nebraska charter creates an actual bank charter and the first that is explicitly authorized to connect consumers to DeFi (decentralized finance).”

The concept of a Digital Asset Depository Institution was introduced in the Nebraska Financial Innovation Act of 2021, which established a regulatory framework for digital asset depositories and allowed existing state-chartered banks to operate digital asset divisions, aligning state legislation with the Uniform Commercial Code.

Additionally, Nebraska was one of the 18 states that sued the Securities and Exchange Commission (SEC) and its then-chair Gary Gensler in November, alleging “gross government overreach.”