Cryptocurrencies have moved closer to becoming a mainstream payment option in 2021 after being adopted by large corporations. The end of 2020 saw digital coins being accepted at online payment processors PayPal and Square, while other big companies such as Visa are integrating them further into their business models. The gambling sector was one of the first to embrace digital money, but they are likely to be found at non-UK casinos.
The UKGC has been tougher on British firms in recent years with one of the new restrictions being a ban on credit card funding. This was done to protect problem gamblers but only sent many UK punters into the arms of non-UK firms and these can be used as a loophole around the UKGC rules.
Using Cryptocurrencies at Non-UK casinos
The year of the pandemic saw Bitcoin at lows near $3,300 but a year later it had rallied to $60,000. Along the way, the price was driven by some high-profile support for cryptocurrencies. This year also saw the first ETF investment product available on Wall Street.
Using digital coins at casinos requires purchasing the coins first with cryptocurrency exchanges such as Binance or Kraken. Users can buy and sell cryptocurrencies with these providers, which is done using a form of fiat money ‘on-ramp’ such as wire transfers or payment cards. Once you have acquired a coin, you are now in the digital domain, and it can be swapped for other coins. The coins can then be sent to a third-party wallet using a blockchain address. For example, a casino company will have a dedicated Bitcoin wallet address that will accept the same cryptocurrency.
Holders of digital currencies should first consider whether they are making good use of the original technology. One of the design ideas for Bitcoin was for the anonymity of transactions, which is negated by KYC requirements.
Non-UK Casinos have been more welcoming to support the use of cryptocurrency and these sites will have lighter rules for KYC. Overseas casinos have been expanding their services beyond Bitcoin and will provide a range of coins such as Litecoin or Dogecoin. Many coin holders are looking to use profits earned in the bull run and they can also avoid expensive exchange fees incurred when withdrawing their coins to a bank. UK banks have frowned upon the use of cryptocurrencies over the last two years and many also want to keep clear of crypto transactions.
How Are Cryptos Regulated at UK Casinos?
According to experts at non-gamstop-casinos.com, the UKGaming Commission first designated rules in 2016 for Bitcoin to be used at online casinos. At that point, it was another niche payment, but the traditional finance companies have feared the rise of digital coins since then and the larger UK gaming providers have avoided them because of the inherent risks. The ban on credit cards in the UK removed another payment option and UK punters have seen their options diminish.
Many gamblers have used credit cards as a means to separate gambling transactions from their bank statements. This is done to avoid the stigma of betting when they are applying for a loan. Removing credit card deposits can help problem gamblers, but it also punishes the larger audience who can handle the temptation. For example, the UKGC puts the problem gambling rate at a ‘stable 0.4%’ in the UK. Many of the 96.6% have simply looked to the non-UK gambling sites where credit cards and cryptocurrencies are readily accepted, and this only hurts the UK companies.
Financial regulators are still undecided on how they will tackle blockchain money, but the bull run of Bitcoin has them concerned. The European Central Bank called for global regulation, while the United States has also been moving towards further regulation and taxation. The Bank of England even talked of Bitcoin’s ‘threat to financial stability in a recent report.
Without further clarity on the matter, UK gambling firms will continue to avoid cryptocurrencies and casinos, not on GamStop will continue to have an advantage, but there is the risk that they can be used as a GamStop loophole for the 0.4%.
Cryptocurrencies at Non-UK Casinos
Non-UK casinos are the betting sites that are set up overseas, with Europe and South America being common destinations. The casino industry used to be a ‘bricks and mortar world, but they no longer need a physical presence and companies can benefit from a better climate and tax rules. European firms are usually more regulated and will have strict identity checks, however, they may allow easier crypto withdrawals than the UK. The South American firms operate in an easier regulatory environment and UK punters can often set up an account without the need for ID or proof of address. These sites would be a better use for the anonymity of crypto transactions, but it would be advisable to treat them with care when selecting a site.
Should Casinos Track Cryptocurrencies?
Using cryptocurrencies with KYC rules defeats the design purpose of decentralized money. Bitcoin was created near the end of the 2008-09financial crisis, in direct response to the actions taken by governments and central banks. By bailing out the financial system and slashing interest rates, they punished savers and taxpayers. The goal was to create a new monetary system without central planning and regulation. It is the choice of the casinos to decide how they tackle cryptocurrencies, but governments are already circling the sector with strong action by countries such as China and more recently, Turkey.
The trend seems to be that central banks will create their own digital currencies (CBDCs). The Bank of England even proposed that ministers should vote later on whether the coins can be programmable. That would mean that the government could ban deposits to casinos, or other outlets based on social concerns. Giving governments a vote is a whitewash because they would support the power of the centralized financial system.
We are unlikely to see CBDC in the next two to four years and non-UK casinos will continue to take advantage of the current situation. Credit card deposits and untraceable crypto deposits are giving people what they want until regulation follows.
Non-UK casinos have been growing in popularity with British gamblers who are feeling restricted by the UKGC rules. It is fair that regulators protect problem gamblers, but the problem affects only 0.4% of the population, and clamping down on the entire industry seems heavy-handed. It would have been easier to implement the GamStop rules and also ask casino firms to flag problem behaviour, alongside the self-exclusion.
Cryptocurrencies are not generally accepted at the UK sites due to a lack of regulation, but once they are, we will be getting closer to programmable and tracked transactions, which defeats the purpose. Until then, overseas sites have an advantage and will continue to accept digital money, while their acceptance of credit cards is another win for UK gamblers. Unfortunately, it is a loophole for the GamStop rules but there is only so much the UKGC can do.