Chief among the factors behind bitcoin’s surge over the past 12 months is its wider acceptance as a payment method by major companies and websites. One sector where bitcoin is on the rise is online gambling, with bettors, bookmakers and online casinos all embracing the digital currency. Faced with mores stringent regulations and higher taxes for operating in certain countries, gambling companies can offset these losses by offering bitcoin as a payment method while operating in an offshore gambling jurisdiction. As such, betting companies and offshore jurisdictions alike are reaping rewards from embracing bitcoin.
Bitcoin offers gambling operators the chance to cater to all markets without fear of having their business curbed by regulation. In countries such as the United States, for example, banks can block payments linked to an online gambling company, thereby preventing US-based customers from wagering through that particular operator. On the other hand, bitcoin payments are anonymous; they are stored on a blockchain, as opposed to running through a banking system. Bitcoin companies also respect customer anonymity by not requesting details such as their physical location. This helps them draw in a greater amount of customers from around the world, and curbs a government’s ability to punish companies that serve customers in countries with online gambling bans.
Another example of increasingly stringent regulations that gambling operators face is tax. Recently, the UK Gambling Commission implemented a gross tax on all profits made off bets by UK citizens, irrespective of the location of the gambling operator. This eats into an operators profits, particularly given the size of the UK market and the popularity of online gambling. Offshore operators can offset the impact of such regulations through bitcoin. This once again ties in with anonymity, as when a UK-based customer gambles with bitcoin the operator has no way of knowing that the customer is in fact from the UK. Continuing to offer customers anonymity will be vital for gambling operators that want to sidestep anti-gambling legislation.
Given the above, countries such as Malta and Antigua, both of which are welcoming of offshore gambling operators, are embracing bitcoin and reaping economic benefits from it. The Prime Minister of Malta, Joseph Muscat, has urged fellow European Union member states to embrace bitcoin and other crypto-currencies. In creating cryptocurrency-friendly business environments, Malta and Antigua are banking on gambling operators investing in their jurisdiction and helping them grow economically. In return, these operators are able to attract customers from countries with anti-gambling legislation without fear of prosecution. Additionally, these operators also sidestep increased taxes and other regulations that impact their bottom line.
Challenges Remain
While there is undoubted upside in cryptocurrency-friendly business environments, there remain serious challenges that impact the widespread adoption of bitcoin. Firstly, the world’s largest digital currency remains subject to wild fluctuations, and is capable of losing – or gaining – more than 20% of its value in a single day. This causes hesitation on the part of operators that are afraid of dramatic price drops.
Additionally, bitcoin can’t seem to shake the reputation that it is the currency of choice for criminals and mobsters, a stigma it has had since its infancy. Operators are eager to disassociate themselves with anything that could tarnish their reputation, and in light of bitcoin’s negative reputation hesitate to dive into the cryptocurrency market. However, offshore gambling jurisdictions have looked to counter claims that bitcoin is the domain of criminals, and have plenty of evidence to work with. The reality is that bitcoin is a poor choice for money laundering and other schemes on account of it acting as a database of transactions stored on a blockchain, which can’t be altered in anyway. Additionally, cryptocurrency wallets and exchanges have gone to great lengths to fend off hackers and keep their customers’ money safe.
While there are challenges to overcome before virtual currencies are widely embraced by offshore gambling jurisdictions and gambling operators alike, this is undoubtedly an exciting new era in online gambling. A number of sportsbooks have already invested in bitcoin, while others are mulling its adoption. If price stability can ensue, coupled with effective measures that deter criminals, bitcoin may well become the currency of choice for online gamblers.
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