Asia Racing Federation Attacks Illegal Crypto Gambling

One of the largest trade groups representing gambling operators in the Asian region has launched an attack on cryptocurrency gamblers. The report issued by the trade block attacks the use of cryptocurrencies in regulated sportsbooks on two grounds; first of all the lack of transparency around the Know Your Customer process, and secondly the vulnerability this transaction method grants to money-laundering operatives seeking ways to clean the cash of criminals.

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There are big decisions to be made in the regulatory space regarding cryptocurrency gambling. With the number of cryptocurrency gambling platforms increasing by 10 times since 2018, the situation calls for swift action. ©geralt/Pixabay

The trade group known as the Asia Racing Federation has been vocal critics of cryptocurrency gambling sites around the world. Particular currencies they are concerned about include BTC, ETH, and Tether – a stablecoin pegged to the US dollar. The Asia Racing Federation released a report last month detailing and outlining their case against the rising popularity of cryptocurrency usage within the betting ecosystem.

There is a lot of merit to these allegations as cryptocurrencies in the past have certainly revealed themselves to be the perfect facilitators of financial crime. Whilst gambling with digital currencies is certainly nothing new, the fact that it operates at the apex of financial technology and is still a relatively unexplored phenomenon are all contributing factors.

Bitcoin as a cryptocurrency often carries the illusion of being a completely untraceable digital asset, where transactions can be conducted anonymously. This is the exact opposite of the reality, the Bitcoin ledger is a publicly available database listing every single transaction ever conducted. By using on-chain analysis software tools, investigators have little trouble tracking and tracing funds from know criminals using Bitcoin.

However, for about 1% of Bitcoin users, they posses enough knowledge to circumvent the surveillance. Bitcoin tumblers are a common workaround for this and allow large transfers of Bitcoin to be broken down into thousands or even millions of small transactions, to avoid detection.

But the fact remains, withdrawing Bitcoin and transferring it into fiat currency is where the main detection vector for criminals is. Using an exchange is a guaranteed way to be caught as exchanges are all forced by the authorities to provide detailed reports on their high net worth customers. However, there are many other ways to sell and move Bitcoin, cold-wallets can be easily moved and transactions can be conducted off-chain in the physical domain.

Bitcoin Betting Sites Have Increased Seven-Fold

The report released by the Asia Racing Federation breaks down the numbers in cryptocurrency gambling, painting a picture of how active this sub-section truly is. According to their report over 700 gambling operators around the world are now accepting one of the five top cryptocurrencies as a payment method. Another surprising insight is that since 2018 the number of gambling operators accepting Bitcoin as a deposit method has increased by a whole order of magnitude, approximately 10 times.

There are two direct consequences of this enterprise, one that facilitates more customers funding their gambling activities with dirty money, and the other that allows more illegal offshore gambling operators to fund their operations using hard-to-trace financing methods. Both situations are terrible from a regulatory and licensing standpoint, and the risk that these trends keep growing is something the Asia Racing Federation clearly has concerns with.

In the report, the authors single out one of the biggest perpetrators of using cryptocurrencies to lure customers in jurisdictions where betting is illegal. The firm in question, Citibet, recently deployed a digital-currency-only sportsbook and casino, and they have been aggressively marketing their products across Australia, China, and the Asia-Pacific regions.

The Rise of Tether and Anonymous Gambling

In cryptocurrency gambling there has been an unlikely rising star, Tether – the stable coin pegged to the US dollar has become the most popular candidate for crypto betting this year. Tether accounted for about 1/3 of the gross cryptocurrency spend across sportsbooks and online casinos in 2019 and 2020. China’s Ministry for Public Security has already highlighted Tether as a risk, and the possible vehicle being exploited by criminals to operate illegal money transfer services.

Also included within the Asia Racing Federation report were details of another emerging threat in the form of the Tron blockchain, which is built and optimized to facilitate gambling platform’s payment processing needs. These services actively promote anonymity and operate as workaround solutions for KYC protocols that are essential regulatory requirements enforced by casino regulators.

In contrast, there is an alternative cryptocurrency known as the BSV enterprise blockchain which was developed in collaboration with regulators. This coin is packaged full of technical features that allow scalability but allows for audit trails of customer activity by design. It is a traceable digital money system that passes regulatory scrutiny, whilst incorporating on-chain analysis so that clients and players can see that games are delivered in a fairly.

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