As we’ve seen with the maturation, and subsequent regulation, of the online gambling sector there is no area of the internet that gets to be the new ‘Wild West’ for too long.
The boom in value-driven interest in blockchain-based currencies and enterprises has forced many governments to step up their understanding of the benefits and challenges presented by globally accessible decentralised data.
The latest move by an authority to bring some semblance of control to the cryptocurrency landscape took place January 10th when the Financial Conduct Authority (FCA) was installed as the supervisory body of all UK cryptoasset businesses.
What Drove This Aggressive Decision?
The issue of Anti-Money Laundering practices is a major discussion point not only in the arena of online gambling but even more so in the world of cryptocurrencies given its inherent resistance to governmental controls.
The EU recently updated its Money Laundering Regulations, which has been adopted by the UK even with Brexit looming. This makes it the 5th edition of the Money Laundering Directive and this update specifically addressed the issue of risk mitigation in terms of new financial products.
Some of the salient points of the update require authorities to:
- Taking appropriate measures in preparation for, and during, the adoption of new products or business practices and to assess and mitigate any money laundering risks
- Taking appropriate measures to ensure that any agents that operators use for the purposes of their business are given appropriate training in anti-money laundering and counter terrorist financing
- Further requirements for enhanced customer due diligence measures for high-risk third countries, complex or unusually large transactions, and where there are unusual patterns of transactions, or the transactions have no apparent economic or legal purpose
With these specific requirements for ensuring protection against money laundering the UK felt that the FCA was best positioned to accept responsibility for their emerging cryptocurrency businesses.
What Are Cryptoasset Businesses?
The FCA has defines its area of authority as extending specifically to the control and oversight of Cryptoasset Exchange Providers and Custodian Wallet Providers.
They define Cryptoasset Exchange Providers as businesses or individuals who participate in the following activities:
- Exchanging, or arranging or making arrangements with a view to the exchange of, cryptoassets for money or money for cryptoassets,
- Exchanging, or arranging or making arrangements with a view to the exchange of, one cryptoasset for another, or
- Operating a machine which utilises automated processes to exchange cryptoassets for money or money for cryptoassets.
Further, they define Custodian Wallet Providers as those entities who safeguard, provide safeguarding services or administer for the following:
- Cryptoassets on behalf of its customers, or
- Private cryptographic keys on behalf of its customers in order to hold, store and transfer cryptoassets, when providing such services.
Specific businesses which fall into the categories are Cryptoasset Automated Teller Machines (ATM), Peer to Peer Providers and Initial Coin Offerings (ICO).
Does This Impact Online Gambling Sites?
The UK Gambling Commission has advised online casinos and betting sites which trade in cryptocurrencies or have their own crypto tokens which they process through their platforms to check if their business practices now fall under the supervision of the FCA.
While it is less prevalent for online casinos there are some sports betting sites who offer their own crypto coins. While these are only of use on the betting platform the fact that they control and offer a digital currency will see their business practices coming under scrutiny by the FCA.
In a perfect world, they will receive a positive endorsement from the FCA and this can only strengthen the value of their brand.