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Regulators hoping to unlock the payment and responsible gambling benefits of blockchain technology should develop frameworks to accept digital currencies attached to digital identity, according to a panel of experts.
Panellists discussing blockchain at the Betting on Sports Europe conference yesterday argued attaching the two techs will remove any compliance concerns about the adoption of distributed ledger technologies (DLTs).
The Isle of Man’s Blockchain Office regulatory lead, Steve Billinghurst, said he gets very “uptight” hearing concerns about how the “cleanliness” of cryptocurrency funds can be assured from gambling operators and regulators.
“The banking system is the international money laundering system. They don't like the blockchain system because it can be run and traced on clean cash,” he said.
Billinghurst highlighted on-chain analysis, which examines transaction activity of a cryptocurrency and its blockchain data, as a means for the source of funds to easily be traced on DLT.
Blockchain tech is also touted as a means of improving responsible gambling safeguards, as it could capture data in a way that allows multiple parties to access a player’s history in real time.
“DLT gives a single source of truth and there is not a full understanding of that yet and which is why we have not seen adoption yet. DLT, smart contracts and algorithmic trading all scare regulators. I've seen regulators really struggle to understand DLT,” Billinghurst said.
The blockchain regulatory lead believes DLTs could therefore be used to help create a single-customer-view (SCV), the Gambling Commission’s current challenge to the industry in Great Britain.
Additionally, the same access by third parties and the decentralised nature of the tech could allow for the formation of national, industry-wide self-exclusion systems, he said.
Billinghurst believes consumers would be able to trust a self-exclusion system run on DLT as their data would not be handled by individual operators or be held on a data server that can be overridden.
Blockchain transaction processing company TAAL’s chief commercial officer, Kal Suurkask, said his firm is already educating operators how they can use data to solve problem gambling.
Stable coins are issued by banks, but AML and KYC laws are embedded within them, so the source of funds are “clean”. According to Suurkask, this is a good stepping stone for operators and regulators looking to explore DLTs.
However, there is also a clear commercial benefit for operators looking to adopt DLTs, such as enabling micropayments due to their incredibly low payment processing cost, he said.
“Transactions cost a fraction of a penny. In the gaming or remittance business, you can do that with a blockchain that has really low fees,” Suurkask said.
Brandt Page, business development VP at cryptocurrency platform HXRO, argued that once the adoption of DLTs is widespread, the use of digital currencies on scalable blockchains, such as Solana, will allow frictionless cheap gambling payments.
“I can see stablecoins being the first things regulators widely accept. We just saw the creation of the first Brazilian stablecoin. They are cheap, simple, and effective payment processes that make a lot of sense. Not a lot has happened to the fundamentals of money in 1,000 years — it still revolves around trust,” he said.
International gambling regulators remain broadly cautious of blockchain technology and suspicious of cryptocurrency gambling.
Although authorities in the Isle of Man, Malta and Wyoming have begun to experiment with sandboxes and licensing, for the time being, the vast majority of cryptocurrency gambling is happening in the black market.
