A lack of readiness among licensed operators to adopt cryptocurrency is significantly contributing to the growth of the black market, warned Andy Danson of the law firm Bird & Bird during the SBC Player Protection Digital Day conference.
He stressed that the UK Gambling Commission (UKGC) is becoming increasingly aware of the scale of the threat. However, he added, more needs to be done to reduce the appeal of alternative payment methods used by unlicensed operators.
Danson noted that the UKGC is closely monitoring the actions and strategy of the Financial Conduct Authority (FCA) and intends to take steps that will help shift the balance in favour of the regulated market.
He called for an evidence-based approach to ensure player protection amid growing ideological pressure that could push regulation in the wrong direction.
It appears that the UKGC fully recognises the danger associated with the growing number of players using cryptocurrency. Earlier, the organisation’s CEO Andrew Rhodes spoke of “pressure building within the system” due to the increasing number of users seeking to gamble with crypto assets.
Rhodes warned that the threat of crypto engagement is not something that regulators can afford to ignore. He did however underline that any changes must be led by government-level discussions, issuing the key warning that “once you open that door, you cannot close it”.
“The reality is, in some years to come, there will probably be a significant cohort of consumers who use cryptocurrencies because that is what they’re accustomed to. It is a demographic shift that will find they have no place in the legitimate industry because of the currency they use.
“The reality is, and this growth in those demographics means, I don’t think governments can ignore that pattern,” he added.
According to experts, the UK government is at odds with the gambling industry over cryptocurrency regulation. On one hand, it aims to foster the growth of the digital assets sector; on the other, it is moving toward stricter oversight.
The Bank of England, meanwhile, has warned of the potential risks associated with stablecoins. In a recent consultation paper, the Bank emphasised that balanced and effective regulation is key to the stability and reliability of stablecoins. It also proposed limiting the amount of stablecoins that can be held by a single individual.
Bank of England Governor Andrew Bailey has previously said that the UK economy should “reap the benefits” of the global growth of the stablecoin sector.
One of the main factors drawing younger players to illegal gambling sites is the more convenient and faster user experience, largely enabled by cryptocurrency transactions.
As the strategy to thwart the black market evolves, David Da Silva, Founder, So Good Partners, detailed that the regulated market mustn’t be forced to implement a user experience that is considerably more intrusive.
“The shortest and the most effective user journeys are the ones that convert the highest. Offshore with no regulation and no KYC have huge conversion rates. These operators are the least reputable, and they target the most vulnerable players.”
Da Silva added that in order to retain users within the legal market, there needs to be a balance between avoiding excessive KYC requirements and ensuring players engage with licensed operators.
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