After a relatively quiet summer dominated mostly by the coronavirus crisis, things are once again happening in the cryptocurrency space. Four particular developments just now making the news could have a significant impact on crypto, at least in the short term. Long-term impacts are not as clear.

All four developments involve direct government intervention. They are currently unfolding in the Bahamas, the US, India, and the EU. Those following cryptocurrency, online gambling, or both should pay close attention. Any decisions that flow from these developments will have an impact.

CBDC launch in the Bahamas

Many countries have been talking about launching central bank digital currencies (CBDC) for some time. For a while, it looked like China would be the first one to market. That is no longer the case. The Central Bank of the Bahamas recently indicated its intention to go ahead with the roll out of its CBDC, dubbed the Sand Dollar.¹

The Bahamian Sand Dollar is equivalent to the country's fiat (BSD) which, itself, is pegged to the US dollar. Officials say that the central bank is ready to begin the roll out in October 2020. The central bank will start issuing digital currency with a companion mobile app and wallet. Future minting of BSDs will be limited to immediate need only. Gradually, the central bank intends to start removing BSDs from circulation.

Should the Bahamian government succeed in its plans, they would be the first to roll out a viable CBDC with built-in value. Venezuela was technically the first country to launch its own crypto, but the Petro was separate from the bolivar and backed by the country's petroleum assets. Where the Petro has failed miserably, the Bahamian Sand Dollar has been built to succeed.

Are there any implications for online gambling here? Absolutely. The Bahamas are already known for a friendly gambling environment. Across the Bahamian islands, numerous gambling operations have thrived for years. Online gambling does very well, too.

Given that the Sand Dollar is the digital equivalent of BSD, it stands to reason that Bahamian casino operators will begin accepting it shortly after the launch. And if not, they will as soon as the infrastructure is in place. This suggests a larger acceptance of cryptocurrency deposits in general. Once the infrastructure is there, it is fairly simple to bring other cryptocurrencies online.

Punishing a gambling platform in the U.S.

Just to the west of the Bahamas, the U.S. has taken unprecedented action in punishing an online gambling platform for conducting an ICO back in 2017.² Unikrn, in order to settle with the U.S. Securities and Exchange Commission (SEC) will pay a fine of some $6.1 million. Company officials say the settlement represents a substantial portion of Unikrn's assets.

The SEC contended that the company's ICO was not registered and, therefore, illegal. Company officials contend that there were no hard and fast registration requirements in place when they offered the ICO. Nonetheless, the SEC ruled against Unikrn. If there is any bright side, it is the fact that one of the dissenting commissioners defended the company by reminding his peers that Unikrn was never accused of fraud.

The SEC's decision to go after Unikrn does not bode well for cryptocurrency and blockchain gambling operators in the U.S. Gambling in the States is already heavily restricted, and this decision only underscores the fact that the SEC is willing to do what it can to keep gambling in check.

Things are made more difficult in the U.S. due to how laws are implemented and enforced. Federal legislation covering digital assets, ICOs, etc. are few and far between. In the absence of legislative action, regulation is left to federal agencies like the SEC. Unfortunately, there are multiple agencies with overlapping jurisdictions and conflicting rules. This makes it difficult for companies like Unikrn to know what is legal and what is not.

At any rate, the SEC decision makes it more difficult for operators in the U.S. to move forward. It has been suggested that their action against Unikrn will have a chilling effect on further development in the online gambling space. In the meantime, Unikrn plans to continue operating. They have no plans to drop support for either cryptocurrencies or fiat.

Revisiting a ban in India

The Reserve Bank of India issued a rule back in 2018 designed to stop cryptocurrency trading in its tracks. The rule dictated that no organization regulated by the bank was allowed to deal in cryptocurrency transactions. That rule was overturned by India's supreme court in early 2020. However, the battle is not yet over.

Rumor has it that the federal cabinet is on the verge of taking up a new bill that essentially does what the old rule did.³ If the bill makes it through the cabinet, it could go on to Parliament in short order. However, it remains to be seen just how far the bill goes to ban cryptocurrencies.

The original bank rule essentially barred commercial banks from offering services to exchanges, investors, and crypto-based businesses. It did not prevent retailers from accepting crypto payments for day-to-day goods and services. Still, how many retailers would be willing to take BTC if the commercial banking sector would not cooperate?

It is interesting to note that cryptocurrency trading spiked considerably higher after the March 2020 court ruling. That is a clear demonstration that Indian investors and consumers are favorable to cryptocurrency. It may be the one thing that stops Parliament from outright banning it.

If a ban is enacted, it would not necessarily harm online gambling in India. While land-based gambling is heavily restricted in all but three states, offshore operators are allowed to offer online opportunities to Indian consumers as long as they accept rupees. The original Reserve Bank of India rule had no effect on that. It is possible that legislation coming out of parliament would likewise not harm online gambling. But in Indian politics, anything is possible.

New oversight in the EU

It is no secret that the EU's most powerful policymakers are wary of cryptocurrency. When Facebook first announced plans for Libra, representatives from France and Germany were quick to respond with vows to prevent it from launching in the EU. So it's no surprise that the European Commission is now considering new oversight of all things crypto.

Leaked documents from the Commission seem to indicate a willingness to begin regulating virtually all of fintech in the same way traditional financial markets are regulated. Proposed legislation would more closely align cryptocurrency and digital assets with traditional financial instruments.

Of particular interest to the Commission are stablecoins. Again, this is no surprise. Traditional cryptocurrencies, while still viewed as a threat, are considered more assets than anything else. European regulators see them as being very similar to stocks, bonds, etc. and primarily the domain of investors. They see stablecoins as something completely different.

Stablecoins, like Facebook's Libra, are backed by existing assets with a known value. Proposals for Libra had it backed by a basket of fiat currencies and securities. Why does this matter? Because the stablecoin model is more closely aligned with the CBDC concept, making it appealing to businesses and consumers.

EU Commissioners are fearful of stablecoins because these represent a threat to central bank control. They are bound and determined to prevent any competition.

Action taken by the Commission could impact online gambling within the EU by scaring operators away from cryptocurrencies. Even if new rules kept the door open to cryptos like BTC, BCH, and LTC, operators might prefer to avoid crossing the government altogether, leading them to drop support for crypto deposits.

It is a mixed bag

Of these four developments, the launch of the Bahamian Sand Dollar is the most encouraging. It shows some forward thinking in what is otherwise a mixed bag of government regulation. It would not be surprising to learn that the vast majority of casual cryptocurrency enthusiasts are quietly rooting for the Bahamas to succeed.

Then again, a successful CBDC throws another obstacle in the crypto community's way. By definition, CBDCs are not true cryptocurrencies at their core. The main problem is centralization. CBDCs are developed, released, and maintained by central banks. That makes them centralized monetary systems.

A hallmark of genuine cryptocurrency is decentralization. For example, Bitcoin was developed by a single computer programmer - or possibly a small group - as a private project. It exists outside of central bank control. Governance is maintained by asset holders and miners.

Digital currencies coming

Whether the Bahamas succeeds in the short term or not, it seems inevitable that the world is moving to digital currencies very quickly. China now plans to launch its CBDC at some point in 2022, after delaying what was expected to be a launch earlier in 2020.

In addition, a BIS survey from 2018 showed the majority of 63 participating central banks were already researching or in early-stage development of CBDCs.⁴ An OMFIF survey conducted in 2019 showed similar results. So it's clear that world governments are heading in the digital direction.

What can we learn from what we know about CBDCs and the four developments discussed in this post? While governments are interested in digital currencies, they might not necessarily be interested in allowing private projects to flourish. What they do in relation to private cryptos will impact the entire landscape, covering everything from fintech to online gambling.

1) Bloomberg. Bahamas Plans E-Currency to Connect Far-Flung Island Beaches

2) MSN eSports betting startup Unikrn to pay $6.1M in SEC settlement over unregistered initial coin offering source

3) Coindesk India Said to Be Preparing to Ban Cryptocurrency Trading: Bloomberg

4) Brookings The current landscape of central bank digital currencies source