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Why Crypto’s Wild Swings Make It a Nightmare for Gambling Companies

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Why Crypto’s Wild Swings Make It a Nightmare for Gambling Companies

Over the past decade, cryptocurrency has slowly edged into the spotlight, staking a claim to be considered as a genuine alternative means of payment. Offering greater independence and anonymity, an increasing number of people around the world are turning to crypto.

Given this appetite, digital currencies are becoming more widely accepted for everyday transactions, including gambling. A number of casinos now accept crypto as a valid means of payment, allowing customers to use their Bitcoin to fund their betting.

Despite the demand, using crypto in gambling is fraught with difficulties. As a path that needs to be carefully navigated, here’s a closer look at where the challenges lie.

Extreme Volatility

If you are trading on the stock market, volatility is often viewed as a positive feature as it means there’s a greater likelihood of giant swings, which produce greater profits. However, greater volatility means that the value can also swing rapidly in the wrong direction, creating even more significant losses.

Therefore, it’s possible to conclude that the higher the volatility, the greater the degree of risk.

The foreign exchange currency market is highly volatile, but cryptocurrency is even more so. The relative newness of digital currencies and their lack of centralised regulation mean that crypto is the most volatile market of them all.

Although volatility is attractive to traders who can alter their investments to respond to the market, it’s a much less appealing feature for merchants, such as casinos.

Licensed online brands, especially the likes of Entain’s PartyCasino, who have a huge global audience, operate with a wafer-thin house edge, with probability and outcomes carefully balanced to ensure that overall the casino retains a profit. Some players may walk away having won more money than they spent, but if this were the case for everyone, casinos would be out of business very quickly. The difficulty with crypto is that sudden downward lurches in value could completely wreck the carefully calculated system, leaving casinos to swallow huge losses.

Challenges With Regulation

There are many reasons why the public is interested in digital currencies, but for many, the relative anonymity and lack of oversight from a centralised body are attractive features. This may make crypto appealing, but it creates difficulties from a regulatory perspective.

Globally recognised institutes such as the UK Gambling Commission (UKGC) are insisting on standards that are impossible for casinos to currently meet.

All UKGC-approved casinos carry out Know Your Customer checks, a type of anti-fraud measure that ensures gambling isn’t being funded with the proceeds of crime. The problem is that these checks can’t be carried out easily on crypto funds. This means that while the UKGC says that it’s willing to consider cryptocurrencies, in reality, it’s virtually impossible to meet the criteria.

Of course, crypto remains a very new currency, and there are many barriers to overcome if it’s to establish itself as a credible means of payment for daily expenditure. Although regulators are currently reluctant to back websites and casinos that accept crypto, as knowledge and experience grow, it’s hoped that this situation will change.

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