A distinct lack of comfort around licensed operators utilising crypto is having a significant effect on driving players towards the black market, warned Bird and Bird’s Andy Danson during the SBC Player Protection Digital Day.
He emphasised that the UK Gambling Commission (UKGC) is becoming increasingly aware of the threat. However, more needs to be done to dilute the allure of alternative payment methods that the black market possesses.
Danson detailed that he believes the UKGC is monitoring the next steps and strategy of the Financial Conduct Authority, with it keen to take action to shift the scale in favour of the regulated market.
He urged the need for an evidence-based approach to ensure players are protected amidst what he believes is a significant amount of ideological pressure that is pushing regulation in the wrong direction.
It would appear that the commission is fully aware of the threat of the growing number of players engaging with crypto. Just this week, UKGC CEO Andrew Rhodes described the ‘pressure building within the system’ as a result of an increasing number of players looking to engage with crypto.
Rhodes warned that the threat of crypto engagement is not something that regulators can afford to ignore. He did however underline that any changes must be led by government-level discussions, issuing the key warning that “once you open that door, you cannot close it”.
“The reality is, in some years to come, there will probably be a significant cohort of consumers who use cryptocurrencies because that is what they’re accustomed to. It is a demographic shift that will find they have no place in the legitimate industry because of the currency they use.
“The reality is, and this growth in those demographics means, I don’t think governments can ignore that pattern,” he added.
The UK government is somewhat at odds with the gambling industry when it comes to crypto, seemingly shifting towards tighter regulation as it seeks to grow the digital currency sector in the UK.
However, the Bank of England has also warned about the implementation of stablecoins and the risk they could have on financial stability in the UK market.
A recent consultation from the Bank of England underlined that balanced and impactful regulation is essential to the effectiveness and stability of stablecoins in the UK. The Bank of England has also recommended limiting the level of stablecoins that are able to be owned by a single person.
Governor Andrew Bailey has also previously underpinned an appetite for the UK economy to ‘reap the benefits’ of the global growth of stablecoins.
A key pull-factor for younger players to the black market is a far more efficient user experience, which is in many parts fuelled by crypto.
As the strategy to thwart the black market evolves, David Da Silva, Founder, So Good Partners, detailed that the regulated market mustn’t be forced to implement a user experience that is considerably more intrusive.
“The shortest and the most effective user journeys are the ones that convert the highest. Offshore with no regulation and no KYC have huge conversion rates. These operators are the least reputable, and they target the most vulnerable players.”
He emphasised that to retain players within the regulated market, there must be a trade-off between not overly intrusive KYC processes and knowing players are engaging with licensed operators.
