Getting the go-ahead for crypto

As president of a crypto-enabled platform provider, I can be sure of one thing from first-hand experience: the future of crypto remains a bright prospect for egaming.

In many ways, cryptocurrencies are perfect for the egaming environment. They are limitlessly divisible, transparent and liquid. One can easily use their ‘wallet’ to send and receive as much (or as little) as they like and expect it to arrive at its destination safely, quickly and inexpensively.

Despite this, only a handful of regulatory bodies have begun to take notice. Malta is already heavily involved in crypto-enabled egaming and has been the quickest off the mark in regulatory terms, establishing the small island nation as a soon-to-be blockchain powerhouse. However, it’s the major markets like the US, Canada and the UK that need to enact regulatory practices to enable crypto’s global adoption by the biggest players.

This lack of establishment of a legal framework has slowed down the rate of cryptocurrency adoption worldwide, especially within the gambling sector. For obvious reasons, gambling operators are required to comply with a raft of KYC and AML regulations, often in multiple jurisdictions at once. Regulatory governance is undoubtedly necessary before mainstream gambling operators begin to accept crypto, as there’s just no way the major operators will consider themselves ready to harness its benefits until there are laws in place to govern it.

Peaks and troughs 

I predict that the biggest driver for regulatory adoption will be user demand, but the trouble is I don’t believe that bitcoin can be the catalyst for that. It’s just too volatile. Double-digit price movements in a single day aren’t uncommon. While volatility may make bitcoin popular with traders, a currency that threatens to flash crash or decrease in value within minutes isn’t exactly appealing to casinos and sportsbooks operators. Without their demand for it, major regulatory bodies are unlikely to take notice.

I believe the solution to initiating regulatory governance via popular demand lies in creating bespoke cryptocurrencies tailored to the gambling industry’s requirements and that suit the major operators’ needs. Bitcoin lacks the easy-to-use smart contract capability inherited by bespoke gambling cryptocurrencies that are based on the Ethereum ERC-20 blockchain and similar protocol.

Ethereum was created as an alternative to bitcoin, with one of the main objectives being the ability to support smart contracts. It is the capability of smart contracts, used imaginatively, that will enable features to be built that can allow regulatory governance to be automatically enforced, as well as automating pay-outs and assisting in KYC and AML procedures. This will make it far friendlier for mainstream acceptance.

The biggest question at this point, however, is that assuming demand increases as bespoke cryptocurrencies become more popular, how soon will it be before regulatory bodies get into gear? Next year will likely see the first major global player to make the move. Once a major global regulatory body shows its willingness to embrace new technology and foster innovation, most other bodies will fall into line thereafter. At the very latest, we’ll likely see some form of regulation in all major global markets by 2021.

The crypto markets are taking a battering right now, and I don’t blame big gambling sites for not wanting to touch it, but I’m a true believer that brighter days are ahead and that this is just the beginning. Leveraging the full power of the Ethereum blockchain, bespoke cryptocurrencies will be able to do more than a traditional gambling chip ever can, and once demand begins to grow, mainstream regulation and adoption will undoubtedly follow.

Author: Ed Brennan is the president of CashBet. He has over 25 years combined experience spanning internet software, hardware, and financial services industries, supporting all operational functions at Fortune 500 companies including Merrill Lynch, Seagate and Adobe.