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Online gambling is officially licensed and regulated across the world. The majority of the gambling authorities have strict guidelines in place and this ensures player safety amongst other security factors. Casino and betting customers can now enjoy online gambling without the worry of personal data being hacked and whether they are playing unfair games.
Fast forward to crypto gambling and the topic of regulation becomes a lot more clouded. At the moment, there is very little coordination amongst global regulators and only a handful of countries have taken the first steps to try and regulate the use of cryptocurrency in online casinos. Countries such as the Netherlands, Belgium, Greece, Belgium, Italy and the UK have all made that first step but will they ever be able to fully regulate the crypto market?
The issue lies within the foundation of cryptocurrency. It was created to remove the regulations and control that the banks currently have over the fiat currencies. More and more people want full control of their money without third parties charging fees and telling them what they can and can’t do with it. It’s this very reason that crypto gambling is starting to take hold. Minimal fees, fast transactions, full transparency and full control is exactly what punters want.
We’ll take a look at the technology in more detail but the one problem that governments face across the world is how do they regulate crypto when it is not officially recognised as a legal currency? The next question is if the governments do find a way of controlling cryptocurrencies then will people continue to use it? They would have lost the one feature that attracted them to crypto money in the first place which is user control.
It’s a tricky subject and one that might take some time to solve. But for now, many players are taking advantage of this grey area in countries where gambling is illegal, due to crypto not being recognised as official currency. Crypto casinos keep popping up and they will keep on doing so, as more people start to notice the benefits and advantages when using cryptocurrencies such as Bitcoin and Ethereum.
Crypto Gambling Technology
If we look at the technology behind this modern digital currency then we can start to shed some light on the major issues that governments face across the world. Crypto gambling is, in summary, the use of cryptocurrencies to fund gambling accounts online. This is being used instead of the regulated and official fiat currencies such as the euro, the pound coin and dollar.
How does this technology work and why is it so hard for the governments to control? Cryptocurrency uses blockchain technology and this is broken down into what is known as either off-chain or on-chain. Off-chain technology is used by both physical and online gambling platforms that accept cryptocurrency such as Bitcoin. Third-party companies are used to convert currencies like Bitcoin into a local fiat currency so that players can place their bets.
On-chain technology is an advanced style of crypto that uses a coded transaction consisting of smart contracts via a decentralised app (commonly known as a Dapp). A smart contract uses backend code within a blockchain network as an alternative to the usual centralized server such as third-party currency exchange companies. This makes on-chain technology a lot more secure than its off-chain counterpart.
Ethereum is the leading on-chain crypto platform and we have already seen the potential that this has given not only online gambling but the financial world as well. As this technology gets more advanced, the governments will find it increasingly difficult to ignore.
How are Governments trying to Regulate Cryptocurrency Gambling?
Many governments continue to regulate the wider online gambling industry by simply banning the IP address of rogue websites. If they use this same tactic on crypto casinos then it’s much easier to tackle the platforms using off-chain technology due to the centralised setup. Off-chain users can move around these IP address bans by simply using a VPN to access other regions in which the ban is currently not placed. It’s a tedious workaround but people are willing to do this to continue gambling with cryptocurrency.
The advanced on-chain crypto technology, however, is proving a lot more difficult to control due to its decentralised nature. These platforms are not bound by a particular IP address so this makes it near impossible for governments to physically ban. The on-chain technology is hosted via multiple computer servers located in different parts of the world; this is the exact reason why countries will struggle to regulate crypto gambling as a whole.
Country Case Study – Crypto Gambling Regulation Rules
The UK
Let’s look at the UK to begin with, as it’s a nation with a long history of online and offline gambling. The UK government is one of the first to try and put some regulations down on the use of cryptocurrency in the gambling environment, however, the problem lies in the fact that it’s still not recognised as legal tender. Yet the UK government did decide to bring a law in during 2016 that agreed to UK gambling license holders to accept cryptocurrencies.
It’s no secret that the UK gambling commission is extremely strict and licenses are very hard to acquire for casinos and gambling platforms. The one agreement that the few licensed platforms had to settle on was that the standard AML and KYC procedures stood in place. This means that anyone trying to use crypto at a licensed casino would still need to submit the necessary documents to prove their identity. Therein lies the one big issue for crypto users which is identity.
Cryptocurrency, as mentioned earlier, was designed so that users could be anonymous and this is what makes it so popular. Will gambling customers still use it if the casinos and authorities are able to track their transactions? Some customers will be ok with it because crypto still offers a cheap way of moving money around, but many will raise the question about the intrusion of their crypto privacy.
The USA
The USA is slowly starting to legalise online gambling but there is still not much being mentioned in regard to online casinos, and this means that crypto casinos will not see much backing in the future. In fact, gambling has always been a complicated matter and you can find countless articles circulating the internet about the legalities of gambling online in the US. The summary is that online gambling is not technically illegal in the eyes of the federal law, however, the major detail to note is that Americans are not allowed to make financial transactions with gambling sites located in the US or websites with online casino lists in NJ, PA, NV or other states where gambling is legal and specifically targeting users in a US state.
What is the current situation regarding crypto gambling and what does the future look like for US players? Bitcoin continues to be disregarded as a currency and so there are no issues in line with the current laws, but cryptocurrency is regarded as a commodity and this brings tax into the equation. Players can access and gamble with Bitcoin, for example, but any profits will be taxed.
This is a general summary because there are small changes to the laws within each state and these are continually being updated. The upshot is that Bitcoin continues to be deregulated and so players can use it to gamble online, but a close eye should always be kept on new laws being introduced.
Japan
Japan is a huge gambling nation but it is also famous for extremely strict regulations. Crypto gambling sits under their strict gambling rules but recent law changes have been made to introduce physical casinos in the future. Many believe that Japan opening up to physical gambling in the form of casinos might pave the way for online gambling and perhaps crypto gambling as well.
This strict stance on cryptocurrency was recently made evident when Tron (TRX), the popular decentralised crypto platform, made an agreement with the Japanese government to refuse Japanese players access to their gambling Dapps. This was huge news in the crypto world as it was looking a lot like governments could not hold any power over this on-chain crypto technology. This ban on Japanese users wasn’t clear cut though as workarounds could still be made by using a VPN.
Japan offers huge potential for crypto gambling and their current stance does seem to be easing slightly, so all eyes will be on the Japanese government and the decisions they make over the coming years. The decentralised technology of on-chain cryptocurrency still makes it possible for users to work around laws though, so there are still many talks to be had if this modern digital currency is to become fully regulated and accepted.
Summary
It comes as no surprise that the current crypto gambling rules are somewhat blurred across the world. It’s a grey area and it will take time for governments and gambling companies to find some agreement. Make no mistake, it is a hard decision for countries to accept the idea of trading with cryptocurrency, but the clear growth in this sector might force them to accept it in the long run.
Crypto casinos are fairly free in their operations at the moment but if authorities do decide to clamp down then they could quickly disappear altogether. The best route for crypto casinos would be to work alongside gambling authorities for now and meet the regulatory standards through the Know Your Customer and Anti-Money Laundering schemes. If they keep on the right side of these authorities then if or when the time comes for governments to accept cryptocurrency as a legal tender, at least they will be on agreeable terms with the people that matter.
At the end of the day, customers might lose out on some of the privacy that cryptocurrencies offer but they can still enjoy many other benefits. Namely the cheap fees and quick transactions. Not to mention the possible route of the zero-edge Ethereum casinos that are appearing with their transparent and risk-free casino gaming. Present-day crypto gambling is blurry but the future definitely looks bright, it needs everyone to pull together and make the necessary legal decisions that will be required for crypto to become an official trading currency.
