There is no doubt that we are living in a digital world and that blockchain will be leading the future. All over the world businesses are offering blockchain solutions and also governments worldwide are embracing blockchain technology. It seems that blockchain is also becoming a real game-changer for the iGaming industry. More and more gaming companies are implementing blockchain-based solutions because of its key features such as decentralization, privacy, accessibility etc.
One of the biggest challenges for iGaming business today is trust. Results of online games might be manipulated, therefore a gaming platform built on blockchain would help providing trust and transparency. Since transactions are executed through a smart contract, there will be immutable records ensuring trustworthiness and safety for players. Moreover, through a blockchain system, the safety of players' funds does not belong anymore to the game owner as everything is recorded and regulated by the blockchain. Blockchain therefore provides peace of mind in relation to the safety of the funds. In addition, it provides security for game developers and gaming platforms. Blockchain gaming platforms are typically more resilient to hacking because hackers would need to hack a very significant number of nodes on the blockchain.
Nowadays, there are also a lot of gaming companies that are shifting their method of payment towards cryptocurrencies. This can increase the customer base considering that anyone who owns cryptocurrencies will have the possibility to be accepted. An additional advantage that gaming companies permitting the use of cryptocurrencies offer to the players is reduced fees and charges related with transactions. Gaming operators can eliminate the intervention of third parties such as banks, avoiding additional transaction fees. Also, winnings withdrawals can be done faster compared with more traditional gaming companies where the withdrawal process would usually take a few days. Blockchain therefore acts as an intermediary processor for transactions undertaken by users. Hence, since bets and winnings are instantly recorded, also the payments will be triggered straightaway. Smart contracts will execute payments when the preprogrammed condition is triggered by the outcome of an event.
Usage of blockchain in iGaming has raised several regulatory challenges. Most countries do not have regulations in place to regulate the use of blockchain and cryptocurrencies in iGaming. Governments worldwide are yet to implement new regulatory frameworks to regulate the use of blockchain in iGaming. Ideally, there should be clear legal obligations in order for players and operators to act in a secure environment which is not riddled with legal uncertainties.
Locally, the Maltese regulatory framework has undergone substantial and ambitious changes, making it one of the most competitive and innovative jurisdictions in this sector. The Malta Gaming Authority has launched its Sandbox Regulatory Framework for the acceptance of Virtual Financial Assets and the use of Distributed Ledger Technology within the iGaming Industry. Operators now have the possibility of applying for approval to start using cryptocurrencies as a means of payment. Recently, the MGA has launched the second phase of the Sandbox to allow operators to integrate Innovative Technology Arrangements. Operators can apply for permission to use ITAs, including DLT platforms and smart contracts. The duration of the framework will be valid till the 31st December 2021. The exciting developments which Malta is introducing is testament to its commitment to embrace innovation to harness the power of blockchain within the iGaming environment.
Sara Leka is a Legal Associate at E&S Group.
E&S Group is a boutique, multidisciplinary practice that provides a wide array of services to an international client base. As a multidisciplinary group our pro-active team of practitioners, financial advisors, accountants, partners and independent associates are available to assist, advise and deliver to any aspects of our clients' operations. Contact E&S Group on +356 20103020 or via email at [email protected].