Is it fair to say that cryptocurrency payments have failed to live up to its peer-to-peer potential since its inception in 2008? Possibly.
But whilst the market has moved on from most of the damage caused in 2022, it can be understood why gambling operators are apprehensive of adopting it as a payment method.
Discussing the benefits of crypto payments, as well as addressing the necessary boundaries, Fredric Hellsten – Manager of Strategic Payments Projects at LeoVegas – outlines some of the key talking points surrounding crypto in 2024 that will also be discussed at this year’s SBC Summit event in September.
Payment Expert: Firstly Fredric, what are your opinions at the moment of cryptocurrency as a payment method? Has it developed as a payment option enough for your liking?
Cryptocurrency as a payment method has made significant steps forward but still faces challenges and hasn’t reached its full potential as a mainstream payment option. There are both advantages and challenges with cryptocurrency payments.
This type of payment enables seamless crossborder transactions making it easier for businesses and individuals to conduct payments over borders without the needful currency conversations and high fees. Transactions can be processed much faster but it also depends on what network and type of cryptocurrency is used.
One of the most important advantages with cryptocurrency payments is security due to the blockchain technology. I will try to explain in a simple way why these payments are secure.
- The control is spread out: Instead of one central place controlling everything, lots of different computers (nodes) keep a copy of all transactions. This makes it hard for anyone to mess things up.
- Advanced maths: Cryptocurrencies use strong maths to keep transactions secure. Each transaction is signed with a private code that only the owner has which proves it’s legit.
- Group agreement: Transactions are checked and agreed upon by many computers. This teamwork ensures no single computer can change things without others noticing.
- Everyone can see: All transactions are recorded on a public list that anyone can see. This openness makes it easy to spot anything suspicious.
- Multiple copies: Many computers have a copy of the transaction list. If one gets hacked, the others can correct it.
Some of the most frequently mentioned challenges in cryptocurrency payments include volatility, adoption, regulatory uncertainty, and technological barriers. Volatility makes it difficult for businesses and individuals to use cryptocurrencies for everyday transactions.
Frequent price fluctuations can lead to financial losses, causing hesitation in spending or accepting cryptocurrencies. This instability hinders cryptocurrencies from becoming a reliable payment method. However, there are suppliers that have developed various tools to mitigate volatility in different ways.
Adoption is closely tied to regulatory uncertainty and technological barriers. Regulatory environments vary significantly by country, creating uncertainty and potential legal challenges for both users and businesses. The underlying technology of cryptocurrencies can be complex for the average user which adds additional barriers to understanding and effectively utilising these digital assets.
Despite growing acceptance, cryptocurrencies are not yet widely adopted by mainstream businesses which limit their usability as a payment method and making adoption one of the primary challenges.
It is true that companies like PayPal, Visa, and Mastercard are beginning to support cryptocurrency transactions, which is a positive sign but there is still a long way to go for widespread acceptance.
PE: If cryptocurrency is realised as a recognised payment method, what benefits can this bring for bettors?
If cryptocurrency payments were recognised as a legitimate payment method today, customers of online gambling operators could benefit in various ways.
Customers could benefit from lower transaction fees, as operators typically bear the cost of transaction fees. The cost savings from using cryptocurrencies can lead to better odds, lower minimum deposits, enhanced bonuses and improved services, thereby offering indirect benefits to customers.
For example, transaction fees with cryptocurrencies like Solana or XRP can be as low as EUR 0.0002, which is significantly lower compared to an Open Banking transaction fee of EUR 0.10-0.20.
The security of transactions is often enhanced due to blockchain technology, which provides robust security features. This results in a lower risk of fraud for customers.
Cryptocurrencies also offer global accessibility allowing customers from various regions to participate without the need for currency conversion or being subject to local banking restrictions. The use of blockchain technology increases transparency and fairness which enables customers to verify the integrity of games and transactions.
Currently, some online gambling companies accepting cryptocurrency payments may also offer special bonuses or incentives for using cryptocurrencies further enhancing the value for customers.
Additionally, cryptocurrency payments enable better financial management as all transactions are stored and can be traced on the blockchain. This can help operators track problematic gambling patterns more easily and ultimately benefiting the customer.
PE: Countering this, what potential risks and ethical concerns do cryptocurrency payments bring to bettors and operators like yourselves?
Cryptocurrency payments in online gambling present several risks and ethical concerns for both bettors and operators.
For bettors, the volatility of cryptocurrencies can lead to significant fluctuations in the value of winnings. Additionally, the lack of regulation and consumer protection can increase the risk of unfair play if there are no rules to follow for the operators.
For operators, navigating the complex and varying regulatory landscape is a significant challenge, especially when looking at anti-money laundering (AML) and know-your-customer (KYC) requirements. The regulatory guidance in this area is currently unclear, posing difficulties for responsible operators.
One major uncontrollable risk is the reputational risk associated with cryptocurrencies. Oftentimes, the positives of new technology are overshadowed by the focus on the negatives. People are naturally sceptical of change. To mitigate this, it is essential to keep external stakeholders informed and educated about the company’s actions. Technically implementing cryptocurrency payments requires a new approach, necessitating internal education and understanding across multiple departments.
Ethically, while cryptocurrencies offer global access, they can bypass local laws designed to protect consumers which raise questions about operators’ responsibilities. Ensuring fair play and promoting responsible gaming are crucial, as the anonymity and ease of access provided by cryptocurrencies can increase problem gambling. However, it is up to the operator to establish guidelines that protect both the business and its customers. It is important to note that blockchain technology can enhance both anonymity and transparency for customers. Despite benefits, such as lower transaction fees and enhanced security, these risks and ethical concerns must be carefully managed.
PE: Whilst all countries are at different stages of regulating cryptocurrencies, how crucial is it that cryptocurrencies get fully regulated in a market before it can be considered as a payment method?
The regulation of cryptocurrencies is crucial before it can be widely considered a reliable payment method. Its importance varies by country based on their respective stages of regulatory development.
Proper regulation ensures consumer protection by safeguarding against fraud and other malicious activities and by building trust and encouraging more people to use cryptocurrencies as payment. It also provides the tools to resolve disputes which is vital for consumers to feel safe using cryptocurrencies.
Regulation contributes to market stability by curbing speculative trading and reducing extreme price volatility, making crypto more suitable for everyday transactions. It also helps prevent market manipulation, ensuring fair trading practices and a more stable market.
AML and KYC regulations are essential to prevent crypto from being used for illegal activities, such as money laundering and terrorism financing, exactly like when we use fiat currency. Proper regulatory oversight ensures transparency and traceability in transactions and maintains the integrity of the financial system.
Businesses are more likely to adopt cryptocurrencies as a payment method if they are confident in their compliance with legal requirements because it reduces the risk of legal repercussions and financial penalties.
For cryptocurrencies to be effective in global transactions, consistent international regulations are needed to ensure smooth and legally compliant transactions across different jurisdictions. Regulatory harmonisation facilitates the seamless integration of cryptocurrencies into the global financial system and making them an attractive option for international payments.
In conclusion, while the crypto regulatory landscape varies globally, achieving full regulation in a market is crucial for their acceptance as a reliable payment method. Regulations ensure consumer protection, market stability, prevention of illegal activities and provide the necessary clarity for businesses to adopt and integrate cryptocurrencies.
Without proper regulation, the risks and uncertainties associated with cryptocurrencies can undermine their potential as a mainstream payment option. That is why developing clear and effective regulatory frameworks is essential for the broader adoption and acceptance of cryptocurrency payments.
PE: Will LeoVegas do anything differently in terms of security and compliance if it does introduce crypto as a payment option?
We believe the cryptocurrencies market requires further maturation and the establishment of appropriate regulations in the different markets. Should we decide to implement cryptocurrency payments in the future, we will utilise tools that enable us to maintain our compliance standards. LeoVegas Group will not compromise on our firm approach to compliance if we ever would offer cryptocurrency payments to our customers.
We have been closely monitoring the growth of the crypto sector for a long time and in particular the use of cryptocurrencies as payments. We have thoroughly evaluated the potential integration and setup of cryptocurrency payments into our business and assessed the potential impact on our customers and operations but at the moment LeoVegas will not implement cryptocurrency payments.
The Payment Expert Summit, part of the upcoming SBC Summit, will be held at the Feira Internacional de Lisboa from September 25-26. Secure your spot with the Early Bird ticket offer, which provides access to all three core days of the event, including the exhibition floor, conference sessions, and evening networking parties, all for the discounted price of just €400.
