Any idea why the concept of crypto ATMs failed ? It failed to become big ?
Do you mean BTC ATM? If you mean BTC ATM, it is untrue that it has failed already.
There are still thousands on BTC ATM around the world. People still can use the BTC ATM which are installed in some areas around the world. I know most of them are placed in USA, but it may spread out in more countries in the future. Although the adoption of BTC ATM isn't quite massive in all countries, it possibly grows toward the raise of the popularity of BTC.
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https://coinatmradar.com/countries/Is it because of strict goverment regulations ?
Besides the factor of regulation made by the government, the high fees is also a big obstacle of the use of BTC ATM. People prefer to use CEX for any transaction since it offers cheaper fees. If the fees on BTC ATM is getting lower, people may use it more often in the future.
IMO, CMIIW..