Few could have imagined the influence bitcoin would have on world economies when it was first introduced back in 2007.
It may not be as strong as the major fiat currencies but it is more desired than many, and bitcoin is strong enough to have become a major disruptive force across multiple industries. That includes online gambling.
Bitcoin is definitely shaping the way online casino owners reach new customers by offering them yet another payment option. A question in the minds of many is how bitcoin will impact the future of online gambling.
Before we get into the future, a bit of introduction is necessary. Bitcoin is a cryptocurrency that does not exist as paper bills and metal coins. Rather, it is represented by digital tokens that exist in cyberspace. They have economic value based on two things:
- The agreement among bitcoin owners to accept the currency as valid for transactions among themselves; and
- The same supply and demand forces that govern everything from stocks and bonds to Forex market trades.
The primary difference that separates bitcoin from fiat currencies is its lack of centralized control. In other words, central banks the world over control fiat currencies by controlling monetary policy and the flow of cash. There is no central authority controlling or governing bitcoin. As far as currencies go, it is truly a currency of the people.
In order to transact with bitcoin, one must first acquire a digital wallet and then use fiat currency to purchase bitcoin. Once purchased, the bitcoin resides in the user's digital wallet. He or she can then transact business simply by transferring bitcoin from his or her own wallet into the wallet of the receiver.
With all of that out of the way, here are six ways bitcoin may impact the future of online gambling:
1. Bitcoin may erase international restrictions
Gambling has been subject to artificial, international restrictions to some degree. For example, online gambling is heavily regulated in the United States to the point that it is impossible to operate an online casino in the U.S., let alone sign up as a player. Bitcoin offers relief from those restrictions.
Bitcoin is not recognized as a currency by most national governments. Instead, it is recognized as a security and/or a commodity. In a lot of countries, that means online gambling site owners do not have to be licensed as long as they are only accepting cryptocurrency payments. As long as this reality does not change, online gambling could finally expand with limited government interference.
Remember the games themselves may be regulated - as they are in places the UK - but casino operators would not have to be government licensed. They would simply purchase a gaming license from one or more companies whose titles they wish to offer on their sites. It is actually already possible.
2. Bitcoin leading the way to crypto-only casinos
Erasing international restrictions is just the start of the possible licensing consequences of bitcoin in the online gambling environment. We have to assume that bitcoin and other cryptocurrencies will remain unregulated for the mere fact that no government entity has created them and, as such, no government can regulate them.
Unfortunately, governments can and do regulate gaming licenses. Yet a lack of regulatory control over bitcoin limits what governments can do with their licensing regulations. The end result is the possibility that future online casinos will accept a variety of cryptocurrencies in order to avoid as much regulation as possible.
Bitcoin as a payment method for online gambling may be just the start. Already there are online casinos accepting other cryptocurrencies including Bitcoin Cash, Litecoin, and Ethereum.
Would crypto-only casinos be a good thing? That depends on who you ask. Those who see the silver lining to crypto-only gambling see a world in which casino operators and the players are able to enjoy a private relationship not subject to government regulation. On the other hand, those against cryptocurrency in online gambling point to the potential of fraud and abuse as reasons to stop it.
3. Bitcoin could lead to higher casino profits
There is a lot to love about bitcoin as a currency for online gambling. Among its many advantages is the fact that transactions cost almost nothing. In some cases, there are zero fees attached to transactions. But even when there are fees attached, they are considerably lower than the fees attached to fiat currency transactions. This means more profit for casino owners and less expense for the player.
An online casino is, to some degree, subject to the restrictions of fiat currency. Between transaction fees and charge-backs, an online casino could end up spending an awful lot of money just to accept a fiat currency. Bitcoin eliminates the excessive fees. It also eliminates charge-backs.
Once a bitcoin transaction has been verified and added to the blockchain, it is considered permanent and irrevocable. Any casino customer wanting his or her money back would have to make a request to the casino in question. Should the operator agree to the request, money would be refunded via a direct transfer from the casino's wallet to the customer's wallet.
4. Bitcoin could hinder money laundering
Since the early days of the Las Vegas casinos in the 1950s, organized crime has used casinos to launder profits made via illegal business ventures. The ability to filter large amounts of cash through a casino is fairly easy to do. It is not so easy with bitcoin. That is one of the reasons the UK decided to approve bitcoin as an online casino payment method under its LCCP regulations back in 2016.
In theory, money laundering by way of online casinos could be significantly hindered if cryptocurrencies become the standard default. Cryptocurrency transactions are kept separate from fiat currency transactions out of necessity. If bitcoin ever became the dominant currency for casino gambling online, criminals would have a harder time using casino properties as money-laundering tools.
This is, of course, a long shot. Any criminal enterprise utilizing an online casino for money laundering purposes is likely to continue accepting payments in fiat currency. But the more the industry trends toward cryptocurrency and away from its fiat counterparts, the less hard cash will actually be flowing through gambling properties. That would mean less cash available for laundering purposes.
5. Bitcoin could introduce instability
Not everything about bitcoin is positive. One of its primary negatives is its volatility. Remember that bitcoin is viewed more as an investment than an actual currency. As such, its value can fluctuate quite a bit from day-to-day. In fact, 'fluctuate' is probably not a strong enough word to describe the volatility of cryptocurrencies.
Back in December of 2017, bitcoin entered the month valued at around US $11,000 per coin. It grew to $20,000 at one point before dropping back down to $13,000. These kinds of fluctuations are not abnormal for bitcoin. And unfortunately, large price swings can make bitcoin unstable as a primary currency. This is not to say that it couldn't stabilize in the future.
In short, online casinos relying too much on bitcoin in the future could be affected by its instability. A casino could have a very healthy bank balance one day and be in financial trouble the next - if that company relied on fiat currency to pay salaries, bills etc. So unless something is done to manage the volatility of bitcoin, online casinos that accept it will always have to take that risk.
6. Bitcoin could lead to higher taxes
Another negative aspect of bitcoin as a payment solution is the ongoing threat of taxation. Unfortunately, at least three European countries have decided to take action against bitcoin casinos one way or the other. Because they cannot regulate bitcoin, they have chosen to go after the casinos by way of taxation.
The Czech Republic instituted a 35% gross revenue tax on unregulated gambling operators. They have also imposed a 19% corporate tax on casinos located in that country. In Poland, there is a 12% revenue tax imposed on online gambling sites according to the Remote Gambling Association.1 Polish law even allows the government to have a say in a casino's hiring practices.
Higher taxation isn't likely to drive the largest online casinos out of the market. But it could spell the end for smaller operations as well as inhibiting new casino operators from getting up and running. But any problems related to taxation would also be limited to the taxing authority's jurisdiction. So on a worldwide scale, taxation is probably not going to be a major hindrance.
For every country like the Czech Republic that attempts to control bitcoin by imposing excessive taxes on gambling sites, there is another country that welcomes casino operators with open arms and very low taxes. Those countries will start seeing more and more online casino properties open within their jurisdictions. Players from around the world will still be able to play using bitcoin.
Bitcoin is proving a disruptive force in many industries, including online gambling. Moreover, it looks as though it is here to stay. That means bitcoin will almost certainly have an impact on the future of online gambling. The only question is how fast and great the impact will be.
1) Regulation of online betting market in Poland, RGA.