Cryptocurrency in online gambling: a double-edged sword

Cryptocurrencies have undeniably revolutionised various sectors, and online gambling is no exception. While these digital currencies can offer increased security and ease of transactions, they also pose significant challenges, particularly in regulated markets.

How did we get here?

In a nutshell, cryptocurrencies are decentralised digital assets that leverage blockchain technology for security and to prevent double-spending. Blockchain, a decentralised digital record of transactions, ensures a secure, tamper-proof way of sharing valuable data. Given the nature of the technology, and its applications, it’s unsurprising that it has found a fertile ground in the $80bn+ online gambling industry.

The upside

The integration of blockchain technology in online gambling provides an added layer of protection for users. It records all transactions and stores the information in a decentralised ledger, preventing illegal trading of digital assets and reducing the risk of hacking and payment duplication.

Plus, cryptocurrencies offer anonymity and privacy, thereby addressing a major concern for many online gamblers. Traditional gambling websites often require users to disclose personal information, creating hesitation among individuals who worry about the storage and security of their data. Cryptocurrencies eliminate the need for such detailed information as transfers are immediately validated by the public blockchain. This not only protects user information but also streamlines the registration process, potentially attracting more players.

Additionally, the instantaneous and cost-effective transactions offered by cryptocurrencies are a boon for the industry. When online gamblers deposit cryptocurrency into a gambling platform, they don’t need to wait for a bank or third-party company to verify the transactions. The blockchain does this immediately, and the platform learns instantly whether it is valid.

The downside

However, the use of cryptocurrencies in online gambling is not without its challenges. The primary concern is the potential for increased and unseen harm due to people being pushed or enticed out of regulated markets. The anonymity provided by cryptocurrencies, while beneficial in many ways, can also facilitate problematic gambling behaviour without the usual checks and balances present in regulated markets.

The rise of crypto casinos has been a notable trend in the online gambling world. These platforms have surged in popularity due to the ease of use and minimal oversight they offer. This lack of oversight and regulation can lead to a host of issues. For one, the anonymity and ease of access provided by crypto casinos can exacerbate problem gambling. Unlike mainstream gambling services, which offer addiction-mitigation features like self-exclusion, crypto casinos often lack such mechanisms. Another potentially harmful pull factor to crypto casinos is player access to features that are banned or limited by the likes of the Gambling Commission, including bonus buys and auto-play spins features within video slots.

The use of cryptocurrencies in online gambling also raises serious concerns about money laundering. The anonymity provided by cryptocurrencies can make it difficult for authorities to trace transactions and identify illicit activities. This poses a significant challenge for regulators and law enforcement agencies, which must adapt to this new landscape and develop effective strategies to prevent and detect such activities.

The regulatory challenges extend beyond just law enforcement. The legal status of cryptocurrencies varies widely across jurisdictions and the lack of clear, consistent regulations can create uncertainty for both operators and users. This can deter potential users and may in fact limit the growth of the industry.

Collaboration is key to make crypto less cryptic

Despite these challenges, the use of cryptocurrencies in online gambling continues to grow. In 2021, the crypto casino industry pulled in $10bn, a 64% increase from the previous year. This growth underscores the potential of cryptocurrencies to transform the online gambling industry, but it also highlights the urgent need for effective regulation and oversight.

So, while cryptocurrencies offer numerous benefits to the online gambling industry – for both providers and players alike – including increased security, ease of transactions and user anonymity, they also present significant challenges. As the industry continues to evolve, it will be crucial to strike a balance between leveraging the advantages of these technologies and mitigating potential risks, and that’s something that can only be achieved through collaboration across the industry and geographically. 

Danny Kruse, content manager and spokesperson at CasinoReviews.com has five years of experience in the gambling industry and has worked on CasinoReviews since its launch, focused on championing the consumer and improving the industry.