Cryptocurrencies not hitting the right notes with the gambling industry

bitcoin

Cryptocurrencies have gathered momentum in the past few years and some big industries have started to see the potential. Companies in food, tourism, gaming and financial tech industries have started to warm to one or more of the major cryptocurrencies, with Bitcoin being the benchmark currency. 

PayPal, Microsoft, Coca Cola Amatil and KFC Canada, for instance, are all accepting Bitcoin. Meanwhile, Starbucks has been testing out cryptocurrency payments and eBay are considering the possibility of accepting them in the future.

Companies in the gambling industry are more reluctant, however. Larger operators are preferring to stay away from cryptocurrencies just now, although some smaller operators are welcoming digital currency as a way to get ahead.

Small operators are open to cryptocurrencies 

Many smaller operators have embraced cryptocurrencies because of the freedom they provide the holders. Edgeless Casino is the world’s first Ethereum-powered crypto casino. They even use their own tokens as branded gaming currency, which is featured on the Ethereum blockchain.

As their name indicates they provide casino games without cutting a profit (edge) from each win! Their profit comes from the expected rise in value of their branded token currency. 

Since they accept only their own crypto currency (which is based on the blockchain technology and Ethereum smart contracts) then each player is a registered user and thus they can conform to regulations as there is no real anonymity here.

Not only this, but digital currencies can help the casinos themselves to operate smoothly and more responsibly. Their players don’t have to go through complicated processes to receive their winnings, nor do the casinos process them. 

The casinos can also operate safely. Blockchain technology, although not infallible, helps to protect them more easily against fraud.

Risks of accepting cryptocurrencies

Risks of accepting cryptocurrencies

Most large online casino operators don’t accept cryptocurrencies as a payment method.

For all the benefits of cryptocurrencies, operators who do accept them have to contend with substantial risks. 

For this reason, many big operators are choosing to hold back on accepting cryptocurrencies. 888 Casino is one of the largest online casino operators that hasn’t succumbed to the charms of cryptocurrency. 

This requires them to perform age verifications in order to avoid minors playing at the casino. In addition, they must ask high rollers for their source of funds and thus preventing money laundering. All the above-mentioned reasons are directly against the anonymity of cryptocurrencies. The company also has established a solid reputation as a responsible and highly trusted online casino site.

Money laundering

Money laundering

Money laundering is a big concern for online casino operators.

The anonymity that protects users is something of a double-edged sword. 

One of the biggest problems online casinos must contend with is the issue of money laundering – the process of making ‘dirty’ money clean. Players can gamble with money they’ve acquired by illegal or dishonest means and gradually, through their winnings, transform it into ‘clean’ money that they’ve earned legally.

Despite requesting users for ID to authenticate their account, the anonymous nature of cryptocurrencies means online casinos can’t trace fraudulent usage back to anyone. This is because there is no bank account linked to the player. The ID the account holder submits could also be fake.

Legal age requirements

Depending on the age requirements of the country, players must be at least 18 years or 21 years to play at an online casino. 

Responsible operators follow these laws as part of creating a safe environment for players. Not allowing under-aged gambling is also a major factor in allowing the operator to receive a license.

Again, the anonymous nature of cryptocurrencies makes it incredibly difficult to confirm the age of the creator of the account. 

The younger generation are very technologically savvy and although they may not be rushing into the cryptocurrency market itself, they may be able to take advantage of the anonymity cryptocurrency offers to swerve around the age restrictions for playing at an online casino.

Operators that fail to prevent under-age players from using their services could face some harsh consequences, including fines or worse still, the loss of their licenses. 

Geo-legal considerations

In some states of America, and in some countries, online gambling is illegal. 

The anonymity of cryptocurrency yet again comes into play here. Online operators won’t knowingly allow people to break state or national laws. 

Unfortunately, the anonymity of cryptocurrency makes it possible for players to gamble from within their state or outside of it, which, depending on the laws of the state, can be illegal. The online operator could face a fine or the loss of their license for allowing it. 

Cryptocurrencies experience a sharp drop in value

Cryptocurrencies experience a sharp drop in value

Bitcoin, Ethereum and Dogecoin all took a big hit in value recently.

Cryptocurrencies have a reputation for being highly volatile, fluctuating immensely in value. Holders can see investments in cryptocurrency experience huge gains or losses in value in the day. 

Recently, some of the major cryptocurrencies lost hugely in value on the market. Bitcoin plummeted to $35,000, almost 22%, and wiped off some $500 billion from the currency at its market peak value. 

Ethereum and Dogecoin also had a bad week at the office. They lost 40% and 45% respectively.

Activity on social media from entrepreneur Elon Musk has fueled the volatility, which is not to say he’s solely to blame for the developments. An announcement by People’s Bank of China that digital tokens can’t be used as a method of payment have also helped to intensify the sell-off. 

Will cryptocurrency ever gain popularity with large operators?

Large gambling site operators have a reputation to protect, which may be the reason they’re reluctant to embrace cryptocurrencies. Despite the benefits of cryptocurrencies — including the fact they can be cheaper to operate — the risk they pose to the operator as a business is immense.

The volatility the crypto market has experienced in May could give them further cause for concern. The fact that cryptocurrency doesn’t have the support of fiat currency and is purely digital won’t allay their fears. 

Cryptocurrencies, in the world of online casino operation, are a double-edged sword. The qualities that can help players and operators to feel safe in how they use the site can also, in the case of the operators, burn them badly if the player abuses cryptocurrency. In other words, they accept them at their own substantial risk.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.