The UK financial watchdog has written to the providers and operators of crypto ATMs telling them to shut down or face punishment.
There are currently 81 functioning Bitcoin ATMs controlled by at least eight operators, none of which are licensed by the Financial Conduct Authority (FCA).
Most of the machines are in supermarkets and convenience stores, according to Coin ATM Radar, which tracks these machines globally.
The ATMs let users deposit cash which is then exchanged into Bitcoin for transfer into online wallets.
Concerns have been raised by the FCA over the background checks conducted by the machines, especially over smaller deposit amounts.
According to the Telegraph, the regulator raised the possibility of users taking advantage of the system to launder money during a legal appeal by an operator this week.
“Crypto ATMs offering cryptoasset exchange services in the UK must be registered with us and comply with UK money laundering regulations,” the FCA said.
“None of the cryptoasset firms registered with us have been approved to offer crypto ATM services, meaning that any of them operating in the UK are doing so illegally and consumers should not be using them.”
Increasingly, operators of ATMs who are being shut down are selling the machines to eastern Europe, where the checks are much less strict, according to the Telegraph.
The FCA has always held a firm line on digital tokens, requiring companies that allow people to buy, sell or trade cryptocurrencies to pass checks to allow them to be a part of the register.
Currently, 33 firms sit on the cryptoasset register, with a further 22 on the temporary list which allows them to trade until the end of the month, compared to 110 who continued to operate without a license before being shut down.
The chief executive of Blockchain.com, Britian’s biggest crypto company, has crisitcised the regulator, adding its harsh stance meant the UK was falling behind on innovation compared to the rest of Europe.