UKGC Approves Virtual Currency Usage for Online Gambling Licensees
The United Kingdom Gambling Commission [UKGC] has announced that it will allow licensed online-gambling companies to begin accepting virtual currencies as a payment medium, effective as of October 31, 2106. Digital currencies, by definition, include Bitcoin [BTC] and a myriad of other such virtual offerings.
The UKGC’s green-lighting of BTC came with very little fanfare. The change in conditions was quietly inserted as a modification in the UKGC’s License Conditions and Codes of Practice [LCCG], the latest edition of which was unveiled last week. The minor insertion which translates into the new acceptance of Bitcoin and other virtual currencies appears in the LCCG’s “cash and cash equivalents” section, as follows:
Licence condition 5.1.1
Cash and cash equivalents
All operating licences except gaming machine technical and gambling software licences
1 Licensees, as part of their internal controls and financial accounting systems, must implement appropriate policies and procedures concerning the usage of cash and cash equivalents (eg bankers drafts, cheques and debit cards and digital currencies) by customers, designed to minimise the risk of crimes such as money laundering, to avoid the giving of illicit credit to customers and to provide assurance that gambling activities are being conducted in a manner which promotes the licensing objectives.
2 Licensees must ensure that such policies and procedures are implemented effectively, kept under review, and revised appropriately to ensure that they remain effective, and take into account any applicable learning or guidelines published by the Gambling Commission from time to time.
The green-lighting of digital currencies was viewed as a mild surprise by some, given how lightly the topic was treated within the UKGC’s annual report, which was released earlier in July. Digital currencies received the barest mention, and that only as an area of increased interest. That slight and non-specific mention read as follows:
A further area for continuing future focus will be on emerging products and digital currencies. The growing market in esports and computer gaming has scope to present issues for regulation and player protection – issues which are being examined by gambling regulators in other international markets. These issues range from the emergence of real money esports betting markets, to trading in-game items which blur the lines between gambling and social gaming. Our focus will be to understand developments, including engaging with key stakeholders, and we will work wherever we can to ensure the risks associated with these, particularly to children and young people, are minimised.
The UKGC’s very light touch — a tip-toeing, perhaps, into the world of digital currencies — allows any licensed operator wide latitude regarding which digital currencies can be used, and how, all while retaining oversight through the LCCG’s much longer “best practices” framework. That framework also demands compliance from operators to prevent said digital currencies from being used as a money-laundering medium. The anonymity with which many modern virtual currencies can be used — in fact, the way many of them were designed to be used — means that the UKGC (and other responsible licensing jurisdictions that follow) will likely take steps to ensure strict KYC (Know Your Customer) controls remain in place as well.
The UKGC thus becomes the first significant regulatory authority to grant approval for digital currencies, not counting Curacao, a Caribbean licensing authority with a poor track record. However, others among the world’s more reputable regulators are also reported as considering similar approvals in the near future.