Writing an in-depth piece for SBC News, Hilary Stewart-Jones – technology and digital consultant for Harris Hagan – explained why gambling operators must provide the utmost transparency when it comes to facilitating cryptocurrency transactions. 

This comes in light of the release of the gambling White Paper issued by the UK government last April, which mentioned the role of cryptoassets in the wider gambling sector and the vulnerabilities that come with them. 

Whilst the UK continues to make progress in developing a realised crypto regulatory bill, the security of cryptocurrencies remains a fiercely debated issue, with Conservative MP Harriet Baldwin even calling for crypto and digital assets to be governed in the same form as gambling, which was recently dismissed by HM Treasury

The Department for Culture, Media and Sport (DCMS) acknowledges that there are no specific laws which preclude a customer’s use of cryptoassets to fund gambling, but indicates that it has thus far relied upon the Gambling Commission taking a “rigorous stance” against their use to date where: (i) they are used by end users as a means of depositing into online gambling accounts; (ii) the operator accepting the cryptoasset payment has raised funds via the issue of cryptoassets; or (iii) the business owners’ source of funds includes ownership and trading of cryptoassets.  

The net result, unsurprisingly, has been that currently, the Government does not feel the need to intervene further with legislative changes, because there already exists a de facto ban for gambling usage. 

Sadly, this was a missed opportunity to oversee and probe the Gambling Commission’s application of its discretion, all the more so given that cryptoassets will be fully financially regulated in Great Britain in the not-too-distant future, and where their burgeoning use in offshore gambling will be another deterrent for end users in Great Britain to only wager with Gambling Commission licensees.

Plainly, the discretion afforded to the Gambling Commission on licence applications can give it a multitude of reasons to decline licence grants, only one of which may be a business plan/funding which includes cryptoassets. 

To that point, the Gambling Commission states in its Blockchain technology and cryptoassets guidance that its approach to assessing a licence applicant’s source of funds is to be sure that the business is not being funded by proceeds of crime and it needs the same level of assurance for all licence applications. The Gambling Commission further emphasises its position in this guidance: 

“If you are considering using [cryptoassets] to fund a gambling business, we recommend that unless you are able to provide a full and complete history of [source of funding] with your application, do not submit as we will not consider Operating Licence applications with a crypto funding element without this evidence provided in full at application stage.”

For existing licensees, the Gambling Commission’s controls are set out in licence conditions (“LCs”). LC 5.1.1 requires that:

“Licensees, as part of their internal controls and financial accounting systems, must implement appropriate policies and procedures concerning the usage of cash and cash equivalents (e.g. […] digital currencies) by customers, designed to minimise the risk of crimes such as money laundering, …”

“Licensees must ensure that such policies and procedures are implemented effectively, kept under review, and revised appropriately to ensure that they remain effective, and take into account any applicable learning or guidelines published by the Gambling Commission from time to time.”

Read the full article here