The lie of the land: the future of cryptocurrency on gaming

There can’t be many people left who have yet to hear about bitcoin, given the extensive news coverage it receives in the mainstream media.

(Written by: Inter Game for Gioco News magazine) While reporters excitedly detail the rise and fall in valuation of the cryptocurrency, there is also a queue of experts lining up to have their say. Nuance is rare. Bank of England governor Mark Carney described his belief that bitcoin is heading for a “pretty brutal reckoning” in a speech calling for regulation, while in the United States, Goldman Sachs CEO Lloyd Blankfein talked of it being “a vehicle to perpetrate fraud”. Former World Bank chief economist Joseph Stiglitz called for bitcoin to be “outlawed”. On the other side of the fence, Silicon Valley venture capitalist Tim Draper described cryptocurrencies as “the greatest technology since the internet”, forseeing a future in which people across the world will purchase their daily coffee using virtual coins. Prophecies aside, banks are starting to embrace forms of blockchain technology and in terms of igaming payments, some operators are offering players a chance to pay their way using a host of cryptocurrencies. Here, we talk to payment and security providers about the challenges that the emerging technological landscape presents for their business. INTERGAMINGi: What are the major challenges, from a payments and security perspective, concerning cryptocurrencies, and how much potential do virtual currencies have to revolutionise online gambling? Oluwaseyi Akin-Olugbemi, senior sales manager at Dimoco: “The much-hyped revolutionary benefits of cryptocurrencies for payments have not yet been realised. For instance, from a risk perspective, one of the major challenges is the ‘unknown’ element in terms of unknown customer behaviour and unknown spending activity. There are rarely available references about the ‘typical’ cryptocurrency customer. So, the main challenge will be to aggregate know-how as quickly as possible about the behaviour and spending of a genuine and trustworthy customer, which can for example be done through daily detailed transaction monitoring. The collation of all customer details and in-depth knowledge about igaming will be more vital than ever. “Blockchain technologies on the hand could represent a significant shift where decentralised sports betting platforms like www.wagerr.com use blockchain to execute betting contracts.” Are regulators getting to grips with the challenges surrounding cryptocurrencies? John Basquill, editor at PaymentsCompliance: “Yes and no. There is some work underway within the EU to bring cryptocurrencies under some kind of regulatory control, but with none of that work complete the payments technology is still operating in a legislative 'Wild West’. “Exchange platforms, which allow users to trade fiat currencies for the likes of Bitcoin, Ethereum or thousands of alternatives, will be brought within the scope of the revised Anti-Money Laundering Directive, known as the 'fifth AMLD'. They will be required to carry out customer due diligence and monitor for suspicious activity. Certain wallet providers will also become regulated, and relatively broad definitions have prompted some to suggest trading platforms could also be dragged under national authorities' oversight. “However, amending that directive has proven a painstaking and time-consuming process, and though EU legislators struck a deal on the final text it is unlikely to be formally approved until May this year at the earliest. It would then become effective in November 2019. “Some other initiatives have also targeted cryptocurrencies. Current drafts of a new directive aimed at combatting payment fraud and counterfeiting have cited the technology as a fraud risk and would empower supervisors to take action against individuals deemed to be duping others into parting with their funds.” Jan Stupka, payments manager at Coingaming Group: “Some regulators are getting to grips with the challenges and we are currently working with such regulators from Malta, Curacao and Estonia.  It’s wonderful to build relationships with these regulators that are open-minded and hassle-free when it comes to cryptocurrencies. For example, the Estonian tax authority (which also regulates gaming licenses) has a solid view on cryptocurrencies as assets, with tax guidelines in place. Also, we’re thrilled to follow Malta Gaming Authority’s efforts working on new regulation and building national strategy around blockchain and cryptocurrencies.” How far will the acceptance of crypto currencies by operators be driven by consumer demand? Akin-Olugbemi: “Acceptance of cryptocurrencies will be driven by consumer demand which in turn will be driven by wider consumer adoption of cryptocurrencies. The regulations for igaming and cryptocurrencies will come into force to manage this consumer demand.” Have financial institutions started to embrace blockchain and is bitcoin seen as a threat by some? Joe Ewens, editor at GamblingCompliance: “To put it bluntly, Bitcoin is not seen as a threat to the traditional financial system. The process of verifying and completing transactions is slow, costly and consumers vast amounts of energy – while at the same time remaining vulnerable to extreme fluctuations in value. Although that is not necessarily true of all cryptocurrencies, there is not yet one that is widely available as a retail or B2B payment instrument. “Blockchain, its underlying technology, has been the subject of intense focus from banks around the world. There are still doubts about its viability in the payments space, but advocates cite its potential to improve efficiency and cost by cutting out intermediaries – particularly for cross-border transactions.