The crypto market has been evolving since its infancy stages and the introduction of Bitcoin more than a decade ago. Volatile values and the lack of any deposit security safety nets have however brought a wave of scepticism, contributing to the space being viewed by some as a risky investment.
On the other hand, there are those who have found the concept of digital assets necessary for societal progression. Cryptocurrencies for them are the foundation of tomorrow’s global economy and financial independence.
And perhaps because of that, or perhaps because of the convenience a crypto transaction offers, high public interest in relevant crypto products and services has caused an explosion in market offering.
Gambling operators are also jumping into this trend, looking for ways to integrate crypto as another payment rail that can potentially unlock new opportunities for both operators and customers.
To examine this trend, SBC Leaders spoke with Michael Dawson, Law Enforcement Liaison at fraud prevention specialist GeoComply, about the implications of crypto payments adoption driven by a global regulatory shift.
Dawson boasts an impressive résumé in financial crime fighting, having joined the US Secret Service in 1999 as a member of the Electronic Crimes Task Force and going after online bad actors for 23 years. He started when the internet was still in its infancy, on his way becoming a recognised guest lecturer on fraud, money laundering, cryptocurrencies and organised crime.
Part of his responsibilities included being the lead case agent for a multi-agency Priority Transnational Organised Crime investigation called ‘Operation Crypto Runner’, which focused on identifying, mitigating, seizing, arresting and disrupting cybercrime money laundering globally.
Today he shares this experience with the GeoComply Risk Services team in an effort to provide customers with a more robust response to the constant shifts affecting the crypto market.
In terms of the popularity among gambling operators of tools related to crypto processing, Dawson underlined that market demand is being driven by the practicality of the payment option and how easy it is to do it.
“Cryptocurrencies offer a more comprehensive range of payment options for customers,” he said. “Individuals who do not have access to traditional banking options can now place a wager.
“Also, customers who prefer to utilise their current cryptocurrency assets for sports betting now have another payment option. It further provides a potential tax benefit for all parties Involved.”
And with tax comes security, with Dawson explaining that there are strong Know Your Customer (KYC) and anti-money laundering (AML) checks in place, using blockchain technology to analyse the origin of the crypto payment and the legitimacy of the transaction without interfering with the speed and simplicity of the process, which usually outperform those of payments in fiat.
Another thing to note is that operators themselves can reject private unknown crypto wallets because they are often associated with criminal activity, such as hiding illegally-gained proceeds, Dawson explained.
“Money laundering and fraud will occur in any payment structure. Introducing cryptocurrency in an operator’s payment ecosystem could potentially increase the threat of money laundering and fraud. However, illicit funds can be stopped or seized faster for an overall safer transaction with blockchain technology and tracing,” he said.
“With proper AML controls deployed by operators to include KYC and geolocation data, cryptocurrency’s transparency as a payment platform could potentially be safer and faster in detecting fraud and money laundering.”
The crypto space has also been evolving globally in terms of regulations and how big a part regulatory bodies play in it. March last year saw the Biden administration take action in favour of a crypto strategy that outlines the country’s approach to crypto currencies.
Part of the executive order’s content stated that federal agencies are to be given permission to map out any regulatory changes they deem necessary by assessing the economic implications and risk to national security from integrating digital assets into the financial system.
“Crypto regulations and political viewpoints around the world see cryptocurrency in numerous ways. Some are fully embracing cryptocurrency, while some global regulators are banning the use of cryptocurrency altogether,” Dawson said, referring to the drastic moves made by the likes of China, Qatar and others.
“The future is unclear in many countries. However, a middle-of-the-road approach to regulations, which benefits the industry and government, will allow a roadmap for a safe cryptocurrency environment in the gaming and financial sectors.”
For operators looking to globally expand their crypto offering, the main challenge will be allowing specific transactions geographically based on country-specific laws, added Dawson.
“You will excuse the shameless plug, but this is where GeoComply comes in. I worked in the US Secret Service, tracking down criminals using cryptocurrencies for money laundering and other cybercrimes. If I had access to GeoComply’s technology, it would have made my investigations far easier,” he said.
“Geolocation technology was the determining factor in enabling the rollout of state-by-state online sports betting and igaming in the US. Similarly, it can create comfort for governments and regulators that crypto payments in gaming, the finance industry, and elsewhere are safe and viable.”
GeoComply is working with Dawson to increase the adoption rates of crypto payments by operators, ensuring that their tool is in full compliance with crypto regulations as they continuously evolve.
“Operators can deploy various Know Your Customer (KYC) and geolocation compliance steps to ensure they are processing transactions from genuine registered account holders and acceptable jurisdictions,” he explained.
“Operators utilising GeoComply’s geolocation technology will quickly reject payments from OFAC-sanctioned countries or other restricted gambling areas.
“Further, operators should have a clear framework for taking deposits from only reputable cryptocurrency exchanges and not unknown private wallets typically used to assist criminals in laundering illicit cryptocurrency.”
Dawson finished by reiterating that the speed, simplicity, and potential tax benefits of crypto payments open a whole new payment structure for operators, especially those in igaming, and that this could lead to new opportunities by attracting a customer flow that does not use traditional banking services.
“Most importantly, gaming operators should move forward to embrace crypto as a payment structure as future regulations evolve. Cryptocurrency payment adoption, along with effective KYC, geolocation, anti-fraud, and AML infrastructure could allow for a safer gaming payment environment for all forms of payments,” Dawson concluded.