The main reason for reviewing the Gambling Act 2005 is that the speed of technological change has rendered much of it unfit for purpose. So how is the UK government going to ensure the same doesn’t happen again?
The rise of blockchain and cryptocurrencies in the last decade has been stellar. Bitcoin launched in 2009 and today, one unit of the crypto asset is valued at £40,579.52 ($56,376.50). It is notoriously volatile – regularly soaring in value in response to a strategic tweet and just as likely to tumble in response to another.
However, over the last six months, Bitcoin has made serious moves into the mainstream. At the end of March, Paypal confirmed that customers in the U.S. can now check out with crypto for certain purchases, and similar facilities for European customers are unlikely to be far behind.
Meanwhile, on 24 March, electric-car trailblazer Tesla announced that its customers can now buy its vehicles with Bitcoin. This was shortly after the firm invested in $1.5bn worth of Bitcoin, almost instantly making far more from that one crypto investment than in a full year of car sales.
The point here is that cryptocurrencies are entering the mainstream. They are showing early signs of playing a greater role in our day-to-day lives, whether or not we are currently sceptical about the real-life use case, and risks.
Wealth managers at major private banks, such as JPMorgan and Morgan Stanley, are setting up programs to advise their clients on crypto investment. And in pockets of the online life, blockchain technology is beginning to revolutionise the way we understand ownership.
The mind-boggling rise of non-fungible tokens (NFTs) has led to a thriving market in digital sports collectibles, for example, while it has also opened a new door on the creation and distribution of artworks, with a digital artist known as Beeple selling an NFT artwork for $69m through a Christie’s auction on 11 March.
These markers of advancement in blockchain and crypto adoption still occupy the realms of the absurd in many minds today, but things change, quickly.
Smartphones were invented in 1992. As such, one might think there was plenty of time to forecast how the developing technology might evolve and impact society two decades later. But mobile gaming was barely a concern in 2005 when the UK’s gambling legislation was written and two years later, the launch of the first iPhone changed everything.
Could we be about to make the same mistake with blockchain and crypto? The Review of the Gambling Act 2005 Terms of Reference and Call for Evidence mentions crypto in one question: “Q9: What evidence, if any, is there to suggest that new and emerging technologies, delivery and payment methods such as blockchain and crypto currencies could pose a particular risk to gambling consumers?”
It feels a little thin for an ‘emerging’ technology that in some countries is already being developed with a view to digitising central-bank currencies. By the time changes to the UK’s gambling laws are passed, Macau is likely to be accepting China’s digital yuan as a matter of course.
The U.S. will be experimenting with a digital dollar. Will the UK simultaneously have passed a set of new gambling laws that barely address, or worse, take draconian measures against, cryptocurrencies in gambling, only to find shortly after that they are in fact the preferred method of payment across much of society?
The downsides to cryptocurrencies are clear. They are volatile and investment in them today is still akin to gambling in itself. As the Gambling Commission (GC) points out on its website, the UK Treasury Committee prefers the term “crypo-assets”, due to the fact that they do not always conform to the function of traditional currencies. It should be noted that the launch of stablecoins, which are pegged to the market value of currencies such as the dollar or a commodity’s price such as gold, present a lower risk profile.
Still, crypto can pose issues for AML and KYC procedures and the GC has also noted that many license applications from businesses claiming they will be funded through profits from investment in crypto-assets make it difficult to prove the source of funds.
Currently, the GC does not impose specific regulations on the use of crypto by gambling operators. However, it stipulates to operators that: “If you want to accept digital currency as a means of payment (either directly or through a payment processor which accepts digital currencies), you must satisfy yourself and us that you can meet your obligations in relation to anti-money laundering and that you are acting in a socially responsible way.”
One response to Gambling Review, from the Institute of Licensing, states that its members feel that “crypto currencies are already causing confusion and concern and should not be permitted as a form of payment for gambling”. However, it adds: “It may be that it is simply too early to make an informed judgement on such technologies.”
This latter point is most salient to this review. Can we afford for it to be too early to make an “informed” judgement on emerging technologies now that the pace of change is so rapid? For this review to fulfil its remit of protecting consumers and properly regulating the industry, it must thoroughly consider the role of any technology that already plays a part, or is likely to in the future.
