There are now several hundred e-gaming sites which accept various cryptocurrencies as a deposit method. Calvin Ayre has closed his informative gambling news site to concentrate on cryptocurrencies, whilst Elon Musk’s Tesla has invested US$ 1.5 billion in Bitcoin.
Two questions. 1. Why the sudden uptake, and 2. Will it last?
Why the sudden uptake?
• Ease of use: signing into a gambling site that takes crypto is easy. The gambler gives his name, address, email address makes a deposit, and he has an account to use. KYC on withdrawal.
• The typical cryptocurrency gambler is an ordinary guy, not a millionaire/billionaire who invested in Bitcoin, but cannot spend it. But now he can gamble with it.
• The typical crypto gambler was an early investor sitting on a large capital gain, likes taking risks, dislikes fiat money and a has brought into various conspiracy theories to the extent it’s a new religion, and saw Bitcoin as the next big investment thing, they are IT savvy.
• Exceptional value, no betting taxes on some sites, no limit on stakes or deposits.
Will it last?
Let us deal with the negatives first. The biggest threat is government. they do not like it, and are beginning to act against it. Bitcoin reached a three-month low after China imposed a ban on banks, insurance companies and payments companies from processing transactions. China believes cryptocurrency is disrupting the normal economic and financial order.
Janet Yellen the US Treasury Secretary said at a Senate hearing, “At the same time, we know they [cryptocurrencies] can be used to finance terrorism, facilitate money laundering, and support malign activities that threaten U.S. national security interests and the integrity of the U.S. and international financial systems. I think we need to look closely at how to encourage their use for legitimate activities while curtailing their use for malign and illegal activities”.
Ambrose Evans-Pritchard writing in the Daily Telegraph says that Bitcoin is already “a barbarous relic in fintech time. It has failed to make the grade as a daily means of exchange after 12 years of agitation, bar money laundering, cyber extortion, and Iranian sanctions-busting.”
It has not progressed beyond the stage of a speculative asset. It is captivating but is not what the evangelists promised.
Now for the positives. While governments are concerned about cryptocurrencies and would probably wish they did not exist, and would no doubt like to curtail their use, they are also inadvertently causing their widespread adoption. Here is how:
• Proposals for a standard rate of corporation tax: paying tax is not a pleasure, its an obligation that few enjoy and will go to extraordinary lengths to avoid it. Cryptocurrency is a mechanism that assists that end.
• Countries are printing a lot of money which will create inflation. People feel unprotected, Bitcoin’s algorithm provides protection against inflation because only a finite number can be produced.
• Various gambling commissions in Europe have made life difficult for operators, and their VIPs. To the extent that the new holy grail is now recreational gamblers because they bet small and provide a consistent revenue stream which is code for, we are not going to get fined out of business by making those customers our bread and butter revenue stream. One problem, the VIPs who are having their stakes reduced, or accounts closed have not stopped gambling, they have moved to the crypto websites. Stakes are not capped, deposit as much as they like, they do not have to prove affordability, superb value because less administration and compliance on the part of the operator, and no betting tax to pay.
• With the entire finance industry against cryptocurrency, why does it still exist? It can be banned, but how do you enforce the ban? Will Bitcoin’s anonymity trading outside of regulation ensure its longevity? For the time being it is a yes from me.
By Warwick Bartlett