Antiuga and Malta embrace bitcoin for gambling
While many people including myself were somewhat skeptical about the real value of bitcoins, it must be acknowledged that the currency has exploded recently and has gained a lot of traction. When I first started writing about bitcoins the value was about $3 and now its value is at an all-time high, over USD $1,700. More importantly the virtual currency has received more acceptance from mainstream companies and websites who happily accept bitcoins as payment. There are more ways for individuals to buy bitcoins and bitcoin ATMs have made selling the crypto-currency for legal tender (fiat currency) much more convenient. Only a handful of countries have declared the trading of bitcoin illegal and to date only Japan and South Korea have adopted bitcoin as a legitimate form of payment. But there are other countries that are not only trying to determine whether to make bitcoins a legal form of payment but are discussing whether they should embrace the crypto currency as a preferred method. Two countries – Malta and Antigua have held meetings to that extent and are determining ways to use bitcoin to grow their economies.
According to the Antigua Observer "the Cabinet of Antigua & Barbuda has instructed the Attorney General, Steadroy "Cutie" Benjamin to draft laws for the implementation of Bitcoin". The article states that the cabinet acknowledges it will help the online gambling sector and they believe that there won't be any issues surrounding money laundering concerns since there is a measure of traceability of transactions with bitcoin which makes money laundering unfeasible.
What the article doesn't state, of course, is that the island likely views this as the only way to attract new gambling operators that have their eye on the U.S. market and possibly entice back companies that left Antigua to return. In fact, it's been widely reported that Calvin Ayre, the former CEO of Bodog, was instrumental in convincing Antigua to adopt the new bitcoin strategy. It's doubtful that U.S. facing companies that currently allow bitcoin and operate in other jurisdictions would move to Antigua just because they are embracing bitcoin, e.g. Heritage Sports, BetOnline or Switch Poker, but I've been told that there are numerous operators that are interested in getting into the industry provided they can cater to the U.S. market without fear of prosecution from American authorities and bitcoin provides that opportunity.
In fact, 2 individuals that have been connected to sportsbooks in the past, but left the industry, have told me that they are closely monitoring bitcoin as an opportunity to return. And knowing the jurisdiction you are setting up in has your back should be worth something. The United States doesn't officially recognize bitcoin as a real currency but rather a commodity, so even if it went to U.S. courts it's very doubtful anyone could be charged for violating the RICO act or the Wire Act if all transactions were in bitcoin since there is no real money changing hands and those laws only apply to currency.
And best of all, bitcoin avoids the use of the banking systems to process payments so the banks can't flag and block payments as they have been doing following the passage of the UIGEA. Right now, the biggest deterrence for gambling companies setting up in Antigua is that banks in the United States won't deal with Antiguan banks as they consider them rouge. But bitcoin payments are anonymous and are just a blockchain of numbers. So, if someone receives payment in bitcoin and goes to a bitcoin ATM to cash them in for fiat currency there is no possible way to know for what purpose those bitcoins were obtained. But maintaining anonymity is crucial. If no record is kept on individuals that identifies their physical location, bitcoin gambling companies can honestly tell anyone in the U.S. government that accuses them of catering to Americans, they have no way of knowing, since they don't ask for those details. Of course, if the gambling company keeps track of customers with traditional KYC requirements then the governments will have a way of identifying customers.
And it's not just Antigua that is intrigued by bitcoin. As mentioned Malta is as well. Countries and gambling commissions around the world have been putting in tough regulations that not only are hindering the potential profits of gambling companies due to stringent requirements to keep track of individual information, but have also mandated taxes that make profitability difficult. The UK Gaming Commission regulations passed recently are such a case.
The UKGC has mandated a gross tax on profits from any bets made by UK citizens regardless of where the gambling site is located and I have been told that companies in Malta, Gibraltar, Alderney and the Isle of Man are finding it difficult to make any money because of this requirement, not to mention separating accounts is a logistical nightmare. The UKGC put in a policy last year which accepted bitcoin, along with other crypto currencies as a legitimate form of payment under the section "cash and cash equivalents" but companies have apparently been asking if they could forego the UKGC license if they take payment in bitcoin. After all, the UK has not accepted bitcoin as a legitimate form of currency, so in their minds why should they pay tax on something that the country deems as illegitimate? It's thus not surprising that Malta and the Isle of Man have embraced bitcoin and the Malta Prime Minister has encouraged the rest of the EU to adapt it in the wake of Brexit to free its dependence from Britain's fiat economy
The Prime Minister of Malta is hailing this as a way of encouraging innovation and making Malta the place to operate from for companies that want to try out new initiatives, but people in the gambling industry also realize that Malta views this as a way of expanding their gambling industry without requiring operators to receive a UK Gaming Commission license. Naturally, this will cut down on costs and frustration for gambling operators and bettors.
I talked to an international lawyer and industry analyst, who didn't want to go on record, if the Prime Minister of Malta's vision is realistic and he said it was if it's done correctly.
"The way I see Malta, Antigua and other offshore gambling jurisdictions thriving in the wake of bitcoin is to put a policy in place that requires information on all gamblers that wager with credit cards, bank transfers and e-wallets, but lifts any requirements on bitcoin. So, if someone bets with bitcoin the only record that would be kept on file is the blockchain number. By doing so, companies can plead ignorance to the particulars of the gamblers and avoid any issues with paying tax to the UKGC or similar licensors since they will say they don't know if bitcoin gamblers live in the UK, the EU or Mars. It also opens a big opportunity to cater to bettors from China, Russia, the U.S. and other hostile nations just if the particulars of the bettors are never revealed. China has been brutal to online gamblers, but bitcoin allows Chinese residents to wager without the government finding out. To that extent, companies in these jurisdictions will have to make it clear that gamblers can not place any wagers with anything other than bitcoin if they live in the UK, the U.S. or another country that will hinder the new policy. Of course, doing that is easy as the only payment method available to them will be bitcoin. Companies that decide to accept real currency as payment also will still have to abide by the rules of the country in question and probably keep very detailed records on those individuals."
Not surprising there are others who vehemently disagree with both the Prime Minister of Malta and the lawyer. To many, bitcoin is still seen as the currency of mobsters and criminals and is a way to launder money without detection. And associating themselves with these types of individuals only harms the jurisdiction that embraces it. But bitcoin users point out precisely what the Antiguan Minister of Trade and Community Affairs iterated and claim this is nonsense because bitcoin is simply a ledger of transactions that have taken place since the inception of Bitcoin that cannot be altered. And if need be individuals can be linked to the transactions through back door measures which makes it a poor choice for money launderers.
The one issue for gambling operators who want to transact in bitcoin, however, is fluctuation. From the beginning bitcoin owners have contended that the value of a bitcoin is a bitcoin and can't be really measured by fiat currencies. But the exponential rise in value in terms of fiat currencies and the ability to easily sell bitcoins for fiat currencies proves that argument is invalid. So, if someone who say placed a 1 BTC wager on a future when the value of a bitcoin was $700 and now must be paid out when the value is $1,500 means that the gambling operator has effectively paid more than 2 times as much as the bet was originally worth. If the whole world was transacted in bitcoins that wouldn't be an issue, but most gambling sites still convert bitcoins to cash at some point to survive. The solution according to some people in the industry is for gambling sites to be all bitcoin. So, employees are paid in bitcoin, expenses are paid in bitcoin, etc. But that's not feasible. So, one gambling site operator I spoke to who accepts bitcoin as payment has put in a rule that all bets are converted to the fiat equivalent at the time and winnings will be paid at the fiat value at the time of the wager. So, in better words if a person wagered 1 BTC on Edmonton to make the NHL playoffs at 2/1 odds last September when a BTC was worth $600 then they would be paid out the value of $1800 today which would be about 1.125 BTC. The site operator says he does get some blowback from gamblers who would have expected to receive 3 BTC as a win but the rules are clear. He also says the gamblers have no reason to complain since the 1.125 BTC can still be sold for $1,800 as they expected to get back when they made the wager and it also protects them should the value of a BTC decline. The operator said this type of hedging is absolutely necessary until the value of a BTC doesn't fluctuate.
This is an exciting time for both gamblers and gambling operators. Bitcoin does appear to be the future and as some have contended, there is no industry that will thrive more because of the virtual currency than gambling.