Virtual currency operators must meet money laundering requirements

Virtual currency operators must meet money laundering requirements

Thursday, August 11, 2016 Posted by Andy McCarron
The Commission is looking for submissions about developing regulatory areas

The UK Gambling Commission took the chance offered by the release of a discussion paper on virtual currencies, eSports and social gaming to reiterate that contrary to recent reports it has not changed its view with regard to digital currencies and that “recent changes to our requirements” merely reinforced its previous position.

At the start of the month, the Commission made amendments to its Licensing Conditions and Codes of Practice (LCCP) where it added digital currencies to its list of cash equivalents. Now in the discussion paper ‘Virtual currencies, eSports and social gaming’ the Commission has moved to point out that “it is important to specify that any operator wishing to accept digital currency as a means of payment… must satisfy themselves and the Commission that they can meet their obligations for anti-money laundering and for social responsibility”.

The Commission paper added: “We have made clear in the recent changes that we require our licensees to conduct an effective assessment of the risk or their business being used for money laundering, including new methods of payments by customers (such as digital currencies).”

In the discussion paper the Commission also addressed the issue of skin betting, saying it was paying close attention to the growing popularity of other forms of virtual currencies and in-game items which can be won, traded, sold or used as virtual currency to gamble with and converted into money or money’s worth.

“Where ‘skins’ are traded or are tradeable and can therefore act as a de facto virtual currency and facilities for gambling with those items are being offered, we consider that a licence is required,” the report said.

In publishing the report, the Commission said it was hoping to explore some recent issues and developments where it saw as constituting real issues for the regulation of player protection and the protection of children and young people.

Neil McArthur, general counsel at the Gambling Commission, said: “We are concerned about virtual currencies and ‘in-game’ items, which can be used to gamble. We are also concerned that not everyone understands that players do not need to stake or risk anything before offering facilities for gaming will need to be licensed.”

He warned that any operator offering facilities for gambling to UK consumers, including using virtual currencies, must hold an operating licence. “Any operator who is offering unlicensed gambling must stop – or face the consequences,” he added.

Moving on to eSports, McArthur said the Commission expected operators to manage risk as with any other gambling market, particularly with regard to the significant risk of under-age gambling given the popularity of eSports with young people. The report said that with regard to eSports betting the Commission was of the opinion that it “presents risks that need to be managed in a similar way to other forms of betting and gaming, including the risk of cheating and match fixing and the risk that people will gamble excessively”.

On social gaming, the Commission reiterated its previous guidance from January 2015 which concluded there was “no compelling reason to impose additional gambling regulation on the social gaming sector given that it was and remains subject to extensive consumer protection legislation”.

This week’s paper added that the Commission remained of the view that winning additional spins, credits or tokens, even if they can be acquired via the payment of real money, “will not in and of itself make an activity licensable”.

However, operators offering games which use virtual items as a form of digital currencies in order to gamble will, in the Commission’s view, need a licence.

The discussion paper said the Commission had taken action against over 100 unlicensed gambling operations offering services to UK consumers, adding that a “significant number” were offering eSports and social gaming.

The Commission is asking for further submission to be sent in by 30 September, 2016.

Totally Gaming Says: The fact that 'in-game items' are being linked with virtual currencies makes the Gambling Commission's view on skin betting pretty clear. But it does ask the question why it has been left to esports platform operators such as Valve and Twitch to be the first to take a stand against unlicensed skin 'bookmakers'. 

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