- 1 The State of Digital Currency Regulation
- 2 The Importance of Regulation
- 3 A Look at Current Laws
The introduction of Bitcoin in 2007 was the first glimpse into the world of blockchain transactions. A paper on the peer-to-peer cash system explained that Bitcoin was a new payment method that operated without interference from a central authority. In 2010, the first transaction using Bitcoin gave the virtual currency monetary value. Since then, thousands of altcoins – cryptocurrencies that are not Bitcoin – have been developed. At the turn of the decade, digital coins proved to be viable alternatives to fiat currency, with an increasing number of people trading and investing in them.
Online gambling has been particularly keen to adopt digital currencies as payment options. Blockchain transactions uniquely cater to casino gaming by filling the gaps traditional banking solutions left. The past few years saw the number of crypto casinos more than double due to increased demand. One concern many gamblers have when gaming with virtual currency is its regulation status. When cryptocurrency was considered obscure, governments didn’t care much about it, hence, didn’t bother regulating it. The last few years changed that. Calls for laws to govern the use of digital currency are more vocal than ever. However, cryptocurrency regulation remains a murky scene to navigate. Players unfamiliar with the crypto gaming scene might be confused about the legality of using virtual currency to gamble. This article expounds a bit on the subject.
The State of Digital Currency Regulation
Governments are reacting differently to the surging popularity of digital coins, which means legislation varies on a broad spectrum. Because cryptocurrency is decentralised, meaning it doesn’t answer to any specific government, it’s not subject to any global laws. Individual governments are responsible for setting up legislation to regulate blockchain transactions. For this reason, the legality of virtual coins goes from one extreme to the other. Some nations are embracing the alternative of blockchain payments as others tighten the grip. For example, in 2021, El Salvador established Bitcoin as legal tender, while other countries like China prohibited it.
However, most countries are yet to establish laws for the trading, investing and use of crypto coins. In some nations, digital currencies may not be explicitly illegal, but their usage might be restricted. If you plan to gamble with Bitcoin or altcoins, ensure you learn everything you can about crypto regulation in the region from where you are gaming. It’s not enough to pick the best gaming platform as described on Casino.Guide. You must also know if you are breaking any laws when playing at a crypto website. Therefore, stay up to date on local regulations because they are bound to change as virtual currencies gain a stronger footing in the payment ecosystem over time. If you access online casinos from different regions due to regular travel, then be particularly careful about the shift in crypto regulation.
The Importance of Regulation
Why should governments care what citizens do or don’t do with digital coins? When Bitcoin hit the market, it was associated with financing criminal activities. The use of distributed ledgers to record transactions made cryptocurrency appealing to bad actors. Although the connotation of crime with digital coins diminished over the years, a degree of caution remains. Blockchain transactions are hard to track, which still makes various coins appealing to criminals. Governments are wary about the proliferation of virtual currencies causing a rise in crime rates. Campaigns to be strict with the industry aim to protect users and businesses. The idea is that keeping a closer eye than before on crypto payments will deter currency holders with malicious intent.
Digital currency has also been a constant target for cybercriminals. Some of the biggest cyberattacks in the past several years have been on coin exchanges. Scams and hacks led to currency holders losing significant amounts of money. For this reason, various regions revised their laws regarding how crypto exchanges work. In most countries, the platforms require a license to conduct business. AML (Anti-Money Laundering) and KYC (Know Your Customer) policies are other ways regulators protect coin exchanges and their customers.
A Look at Current Laws
Exploring the approach that major regions take to cryptocurrency regulation gives gamblers an idea of what to expect. Below is a quick highlight of the legislation status in several countries.
In the UK, digital currency is not legal tender, although it is considered property. Therefore, taxation applies depending on the specific use of the asset. Capital gains tax applies to losses or gains from virtual coins. Crypto exchanges are legal in the UK and must have a licence from the FCA (Financial Conduct Authority).
Canada is in a similar situation – crypto is not legal tender, but exchanges are legal. The country allows the purchase of goods and services using digital currencies. Since 2013, blockchain transactions are subject to Canadian tax laws. Coin exchanges must register with FinTRAC from 1 June 2020. Canada has always been proactive with the regulation of digital currency and was the first country to register a crypto-only investment fund.
The US is becoming more accepting of cryptocurrency as its popularity grows. Various businesses in the country already accept virtual coins as payment, boosting their legitimacy. The IRS considers digital currency as property and applies capital gains tax. However, crypto is not legal tender. Coin exchanges are legal and operate under the provisions of the Bank Secrecy Act (BSA). So, the platforms need to register with FinCEN, keep relevant records, set up an AML/CFT program and submit reports to regulators. Each state is responsible for regulating its coin exchanges.
Australia, South Korea, Singapore and Japan have similar positions on crypto regulation. Although it’s not legal tender, virtual currency is legal property, and coin exchanges must be licensed to operate. A majority of the EU considers cryptocurrency legal, and member states handle the governance and taxation of coin exchanges. The region has strict KYC/CFT policies to protect consumers.
Online gambling is one sector that pushed and continues to push for the adoption of digital currency as a payment alternative. The industry caters to crypto users by providing gaming websites that accept virtual coins for deposits and withdrawals. Expectedly, as more players turn to the blockchain as a payment system, the stance towards cryptocurrency will be more positive. Reasonable regulation will legitimise digital coins, making it easier for users to access and transact with them.