Crypto critics are quick to lambast crypto casinos as illegal and, therefore, unsafe. This couldn’t be further away from the truth. Online crypto casinos featured on Casinos Blockchain proudly hold licenses from reputable gambling jurisdictions, including C Curaçao e-gaming and MGA (Malta Gambling Authority), guaranteeing these platforms have been tested for fairness and security.
Nowadays, you probably won’t find a crypto casino that does not have a license to operate or a certification of sorts stating they abide by strict Anti-Money Laundering (AML) and Know Your Customer (KYC) policies.
In this article, we are going to present you with a detailed analysis of the legal aspect of crypto casinos and the financial regulations that apply and that may affect your experience.
Overview of Financial Regulations for Crypto Casinos
Gambling platforms are responsible for preventing financial crimes and ensuring players are at no risk of problem gambling. Local and international financial regulations mandate this responsibility.
For example, an international body of 39 member states, as well as the European Union and the Gulf Cooperation Council, created a special Financial Action Task Force (FATF) tasked with developing policies and procedures for combating money laundering and terrorism financing. There are also scores of other laws and operations on a local level that apply to crypto casinos, from the Financial Crimes Protection Network (FinCEN) and the Bank Privacy Act (BSA) in power in the US to Enhanced Due Diligence (EDD) in the EU.
Depending on their target markets, the compulsory compliance to these acts by crypto casinos changes. However, most jurisdictions worldwide have their own set of AML and KYC policies in place.
The AML policies include onboarding and compliance screenings of all of their customers and transaction action-based controls. These regulatory requirements serve to identify and report potentially suspicious activities from a customer that could lead to placing unlawful proceeds into traditional financial flows, specifically through deposits in the casinos.
To ensure compliance, crypto casinos apply appropriate due diligence and other ongoing measures, among which is the KYC policy. This policy implies collecting baseline information of the user, such as wallet address and email, monitoring the risk associated with the crypto wallet used for funding, maintaining records of all transactions, and verifying that the user is not on any list of suspected terrorists.
Until you meet the KYC requirements, you won’t be able to deposit and withdraw funds and enjoy all the benefits of the crypto platform. What’s more, crypto casinos may impose a 1x mandatory wager on all deposits in order to better align with the AML procedures before allowing you to make a withdrawal.
Impact of Financial Regulations on Crypto Casinos
The AML and KYC policies are a nuisance for crypto casinos and players alike. Crypto casinos must first confirm the user is permissible to join the platform. This procedure includes identity and age verification checks where players must provide copies of their government-issued ID cards or passports. Additional customer information is collected to verify the identity, such as a physical address, wallet address, and more.
During the verification pending procedure, players won’t be able to make withdrawal requests and further deposit funds, leading to that irksome feeling of waiting that no player likes.
As a result, crypto casinos stand to lose a lot of clients who are not willing to wait for the completion of the procedure.
Moreover, financial regulations warrant crypto casinos to impose geo-blocking systems for prohibited and sanctioned jurisdictions, which further plagues the users’ onboarding, even for those not in those territories. Such prohibitions significantly impact the overall user experience.
Compliance and Licensing Requirements for Crypto Casinos
To satiate the AML and KYC requirements, crypto casinos must complete a series of activities, especially if the ongoing monitoring of player activities raises some red flags. The fulfillment of these requirements implies the provision of the following:
- Full legal name
- Proof of permanent address
- Taxpayer identification number
- Copies of ID documents
- Source of Funds
- Source of Wealth
The last two documents are critical to both crypto casinos and players. Once players submit documents clearly stating their source of funds and wealth, the casinos may deem these players indeed have the funds to gamble, thus reducing the risk of problem gambling and that these funds originate from legitimate sources.
Even upon verifying their customers, online crypto casinos remain under obligation to perform transaction monitoring and additional screenings so as to detect any potentially suspicious activity.
Challenges for Crypto Casinos in Meeting Financial Regulations
Putting up procedures and launching systems designed to ensure crypto casinos meet the AML and KYC requirements demands a lot of resources and time. The worst part of it is that these systems are far from being infallible, which can easily turn into a breeding ground for potential mishaps that could lead to operators being punished by licensing authorities, Such as Daub Alderney, which had to pay £5.85 million ($7.25 million) to UKGC for social responsibility and anti-money laundering failures.
In case of no compliance with the rules, crypto casinos can easily see their licenses revoked by gambling regulators, which will, in turn, terminate their business. Players do not want to play in unlicensed and unregulated casinos.
The Future of Financial Regulations for Crypto Casinos
As blockchain becomes more important to the global financial system, it’s only natural that the use of cryptocurrencies will expand, propelling the rise of new crypto casinos. Regardless, the same issues related to financial regulations are bound to remain unless central banks and authorities decide to integrate cryptos into their systems and modify the regulations.
As things stand, crypto casinos will still have to verify their clients’ accounts, so there goes the anonymity. They could only hope that players will still be attracted to the prospect of making almost instant and entirely safe deposits and cashouts and continue to use cryptocurrencies.
In the unlikely event that cryptocurrencies ever attain the level of legal tender, we can expect crypto casinos to treat cryptos as they do fiat currencies, with the same or even stricter requirements. Players will undoubtedly have to provide evidence of their income in crypto to justify its origin and use.
Conclusion
Complying with financial regulations is the only way crypto casinos can retain their licenses and represent themselves as fair and safe. Future rules regarding cryptocurrencies in online casinos will certainly have to tackle problem gambling issues and implement additional tools and services to help problem gamblers.
Consequently, by making players provide sources of funds and wealth, crypto casinos have the necessary coverage for letting them gamble on the platform. At the same time, they can automatically set deposit limits for the players or at least a deposit threshold. Once players reach that limit, the casino can warn them, thus keeping their gambling habits in check, all the while demonstrating their dedication to providing a safe and fair gambling environment.
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