Bitcoin Gambling In the UK - Current State of Play

Bitcoin is a digital currency, or cryptocurrency, created by Satoshi Nakamoto, a mysterious figure. No one knows whether Satoshi Nakamoto is a person, or a moniker used by group of individuals.

Here is a very brief overview of Bitcoin:

Bitcoin operates using peer-to-peer environment and the currency itself is created using a process called mining. Mining is undertaken in the virtual world and is a complex process, involving a large amount of computing power. You can read more about the process of mining Bitcoin at BitcoinMining.

Few have the resources to mine Bitcoin, but anyone can purchase already mined Bitcoin through any one of the different online exchanges like Kraken or Coindesk. The total number of Bitcoin in circulation will roughly be called at 21 million, which is determined by the size of the blockchain (a term for how the transactions are conducted).

Bitcoin offers some great advantages to casino enthusiasts:

• It is decentralized currency and therefore not under the control of any single authority, which is why:
  • Transactions with Bitcoin have a minimal fee, depending on the platform you use.
  • Financial transactions undertaken by players are guaranteed complete anonymity.
  • Transactions are completely secure, provided the user takes all the necessary precautions to protect their Bitcoin transactions.
• Bitcoin transactions are fairly fast.
• A number of UK casinos offer special bonuses to players using Bitcoin for making payments.
• Some UK Bitcoin casinos also offer special games to players using Bitcoin, generally referred to as "provably fair games" These are games that do not use a Random number generator. Instead they use cryptography as a means of generating an outcome.

There are other aspects of Bitcoin gambling that make it a win-win for both players and operators. The speed of transactions involving Bitcoin raises the prospect of players playing and spending more at a Bitcoin casino, which is great for the casino operator. It also raises the possibility of existing operators including Bitcoin in their list of accepted payment currencies; at the time of the UKGC's 2016 amendment (see section: Bitcoin Gambling Legislation in the UK Today) it applied only to existing gaming operators servicing UK players.

When Bitcoin first came onto the online gambling scene, there was concern about its use as currency. The major concern was due to the anonymity that Bitcoin afforded users:

• It could be used for money laundering and other financial fraud.
• It could be the perfect tool for funding all forms of criminal and terrorist activity.

In July 2015, the UKGC had issued a stern warning to gaming operators supporting Bitcoin that they would need to operate with a UK license if they were offering their games and services to UK players. The UKGC stance was that though Bitcoin itself is unregulated currency, Bitcoin gambling came under the purview of gambling law, in particular the Gambling (Licensing and Advertising) Act of 2014. That meant the operators would have to comply with the UKGC rules and regulations.

The UKGC's reasoning was simple: all gaming operators offered prizes of 'money' or 'money's worth', and Bitcoin operators came under the purview of the latter clause. The UKGC's concerns were aired through a FAQ document that it published on its website titled 'Why has the Gambling Commission written to Bitcoin operators?' At that time, Jenny Williams, the CEO of the UKGC said:

"We wrote to these operators because they were either advertising gambling illegally or illegally offering gambling products to consumers, or both…The Commission neither prohibits nor encourages Bitcoin; we are interested only in ensuring the proper regulation of gambling products consumed in Britain."

The FAQ document further stated:

"An operator needs to be licensed by the Gambling Commission regardless of where they are located in the world, if they provide facilities for gambling to consumers in Great Britain…The currency is almost irrelevant as all operators need to satisfy themselves, and us, that they can fully meet all our requirements, particularly the requirements that ensure crime is kept out of gambling and consumers are protected."

This was contrary to an earlier stance that the British government had taken in 2013, when it proposed exemption from licensing and regulation for all Bitcoin-driven businesses because Bitcoin was not what could be considered legal tender. The proposal did not come through because of opposition from British tax authorities - Her Majesty's Revenue & Customs (HMRC) - their argument being that Bitcoin transactions would be 'single purpose vouchers' and therefore entail sales tax.

What this in fact means is that there would be a considerable amount of punters in the UK playing at unlicensed online casinos with Bitcoin - which is all the more reason for the UKGC to clarify regulations.

The threat by the UKGC with regard to the regulation of Bitcoin operators ended with its announcement of the intention to regulate them. After multiple consultations and discussions with the various stakeholders, the UKGC made amendments to its gambling regulations and guidelines to bring Bitcoin gaming operators servicing UK players to under its purview. Other licensing authorities looking to regulate Bitcoin usage include the Gambling Supervision Commission (GSC) and Treasury of the Isle of Man.

The amendments were made to the License Condition 5.1.1. of the UKGC's gambling law, the License Conditions and Codes of Practice. It now includes digital currencies in the list of cash equivalents, along with:

• Debit cards
• Credit cards
• Cheques
• Banker's drafts
• E-wallets

The amendments were made in August 2016, and came into force October 31, 2016. As per the amendments, players can now look for protection from the UKGC only if they play at sites that are listed and approved by it. The licensing requirements assume great significance from this perspective given that most Bitcoin gaming operators are currently licensed in the jurisdiction of Curacao in the Netherlands Antilles - a place considered a safe haven for internet laws. This means that online gambling sites licensed in the Netherlands Antilles who would like to serve UK customers must also apply for licensing within the UK.

There are still reservations that the UKGC has about the use of Bitcoin. One area where the UKGC has strong reservations is with regard to betting offered by eSports skin betting operators. With skins being traded and the eSports betting operators acting as enablers that facilitate betting between different betting and sports sites, the need for licensing becomes especially strong to ensure fair play and minimize instances of fixing.

There is also concern in the realm of social gaming. This is a domain where gaming is enabled with the use of virtual chips. That meant there was a risk of said virtual chips being traded for Bitcoin and other such virtual currencies - another way to launder money that has plagued physical casinos for many years.

These reservations were behind the UKGC taking the step of asking Bitcoin gaming operators to put in place stringent policies in the realm of anti-money laundering activities and also social responsibility with regard to Bitcoin. In a statement it released it said:

''Bitcoin-friendly operators "must satisfy themselves and the Commission that they can meet their obligations for anti-money laundering and for social responsibility''.

With the passing of the amendment to the UKGC's existing gambling laws, the stage was set for operators to offer Bitcoin as valid gambling currency. NetBet became the first operator licensed in the UK to accept Bitcoin. The offering was valid for its online casino as well as its sportsbook. NetBet was fully supported in its decision by BitPay, a global payment service provider for Bitcoin.

A number of major casino software providers are now looking to offer sites compatible with Bitcoin, including big names like NetEnt and Microgaming. Today there are a number of casino operators licensed in the UK accepting Bitcoin as currency. Some of the best UK-licensed Bitcoin casinos are listed below:

• NetBet
• BitCasino.io
• Casino Evolution
• PlayCoin Casino
• StockBet
• SatoshiBet
• Betcoin Palace

Most Bitcoin casinos, however, don't accept straight Bitcoin deposits and withdrawals, they go through a service called Neteller, which is similar to PayPal, but accepts Bitcoin, too. You can use this method if you already have Bitcoin and the online casino only accepts Neteller, by sending your Bitcoin to your Neteller account.

Never used Bitcoin before and want to use it in an online casino that accepts straight Bitcoin deposits? You'll need a Bitcoin wallet, since you can't purchase or cash out Bitcoin directly from your debit or credit card through the casino itself. You send and receive Bitcoin to and from this wallet, and a simple way to do this, especially with online casinos, is through a third party wallet, such as BitPanda or Coinbase.

So, from say your Coinbase account, you can instantly buy Bitcoin using your credit card, and then deposit to your online casino account, using an address that will look something like this: 3QJmV3qfvL9SuYo34YihAG3sRCW3qSinyC. It's that easy.

It is great to see more online casinos taking up the Bitcoin path, as it inevitably leads to more choice when playing games online. Allowing casinos to operate using Bitcoin in the UK was a huge step for the UKGC, and although licensing may require jumping through some hoops to achieve, we are set for this style of gaming to take off.

• https://www.netbet.co.uk/blog/2016/10/19/netbet-becomes-the-uks-first-online-gambling-site-to-accept-bitcoin/
• https://www.cardschat.com/news/uk-cracks-down-on-bitcoin-gaming-operators-13236
• https://www.bitcoingg.com/uk-reiterates-bitcoin-gambling-not-outside-the-law/
• https://calvinayre.com/2015/07/01/bitcoin/uk-gambling-commission-warns-bitcoin-gambling-websites/
• http://www.newsbtc.com/2016/08/19/ukgc-declares-bitcoin-as-cash-equivalent/
• https://www.gambling.com/bitcoin-gambling/top-sites
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• https://www.cryptocoinsnews.com/licensed-u-k-online-gambling-operator-accepts-bitcoin-payments/
• https://www.bestbitcoincasinos.co.uk
• https://www.bestbitcoincasinos.co.uk/provably-fair/