A new crypto asset regulation drafted and passed by the House of Representatives in Japan is expected to have a serious effect on the way custodians and exchanges do business in the country. The Financial Instruments and Exchange Act and the Payment Services Act is set to keep a keener eye on players in the crypto industry at a time when the crypto gambling industry in Japan is fighting through already restrictive gaming regulations.
Joseph D. Hugh is the CFO of Jukebucks, a platform that facilitates international cryptocurrency betting. Hugh says the strict regulations Japan has regarding gambling, in general, has been passed over to the crypto gambling industry. Hugh explains it is not an easy thing for the country to completely deny players access to the gambling industry, but Japan keeps tabs on players under the pretense of tax monitoring.
Despite the restrictions that exist in Japan, lawmakers in the country agreed a little more than a year ago to allow physical gambling locations in the country.
Hugh says Japan will begin allowing offline casino betting in the country following the 2020 Olympics. He says it is unclear at this time what business entities may be in line to receive casino licenses but these permits will be issued for casinos in Osaka, Tokyo, Hokkaido, and Okinawa. It is presumed by experts in the industry, Japan will lessen restrictions on online casino play in the country after the offline industry is established.
The “integrated resorts” stamp of approval was given by the Japanese government some time ago but the effects have yet to trickle down to the gambling industry.
Integrated resorts are entertainment complex that showcases a comprehensive set of entertainment venues. Casinos are often counted among the group of business establishments part of an integrated resort. Other attractions include shopping malls, movie theaters, theme parks, and hotels.
Japan and Prime Minister Shinzo Abe have appeared to be more willing to introduce legislation to benefit casinos in recent times. However, this enthusiasm does not seem to translate to crypto gambling possibilities.
Japanese Crypto Gambling
One would think that crypto gambling is much more prevalent in Japan than it is once taking a look at the abundance of regulations the country has put together on the matter. Much of the regulation is seen as a response to the 2014 collapse of the crypto-exchange Mt. Gox that was headquartered in the country.
Tron is a blockchain network that reports it is working on the infrastructure that will facilitate a completely decentralized internet. In 2019, Tron disallowed gambling apps in its app store after being pressured by the government of Japan to do so.
The Chief Technology Officer for Tron at the time of the decision to block the gambling apps, Lucien Chen, was so upset by the decision he left the company. Chen said there was a breakdown between the company’s claim to be a decentralized entity and the actions it was taken against the gambling apps.
How It Works?
There are two ways that blockchain gambling can take place. The first is off-chain gambling while the other is on-chain.
Off-chain gambling takes place whenever physical gambling locations like casinos agree to accept cryptocurrency as a form of gambling currency used to deposit into a casino account. A third-party custodian is then used by these establishments to convert cryptocurrencies into fiat money. However, casinos do exist that operate completely on Bitcoin and do not make use of fiat currency.
Smart contracts are utilized on a blockchain to facilitate on-chain gambling. A decentralized application is also needed that makes use of backend code that runs on a network for blockchain and not a traditional server.
Off-chain casinos are much easier targets for governments who wish to either regulate or eliminate crypto gambling. Websites that allow crypto gambling will often ban IP addresses that originate in certain countries. For example, users in America will find they are unable to access gaming sites that accept Bitcoin from their home location.
It is important to understand that on-chain gambling sites are not completely immune from government regulations. A good example of this is Tron’s refusal to share access to its gambling apps to users with Japanese addresses. However, the same users can access the apps if they use a VPN.
Global Crypto Gambling Regulations
The regulations most countries have in place to govern gambling that takes place online have been in place for quite a few years now. However, only a few countries have so far specifically addressed the issue of crypto gambling. Countries that have established crypto gambling regulations include the Netherlands, the United States, Poland, Greece, Belgium, and Italy.
In countries that do not consider Bitcoin a legal method of pay it is not acceptable to fund gambling efforts with the currency. However, lawmakers in these countries will need to make the regulations regarding this matter clearer for gamblers, casinos, and themselves.
Japan, a nation whose gambling revenue slightly outpaces the revenue produced by Nevada in the United States, is one of these countries in need of better clarity.
A number of online gambling platforms exist in the United Kingdom that will allow players to fund their accounts with Bitcoin. These providers of gambling services are subject to the same laws that govern the operations of other establishments in the gambling industry. Sportsbetting is popular in the United Kingdom and this is reflected by the number of sports betting websites available that allow users to place wagers using cryptocurrencies.
The U.K. Gambling Commission urges citizens to use caution when using Bitcoin to fund gambling accounts. The commission explains there are inherent risks with using Bitcoin that is not present with the use of fiat currencies.
Gamblers are quick to point out the benefits afforded to them by the use of bitcoin. The first is privacy. Users are not required to reveal personal information when they use Bitcoin to facilitate a transaction. Bitcoin does not allow for total anonymity, however. Most countries make it necessary for individuals to share their identity before converting their Bitcoin to the fiat currency of their choice.
Coins like Zcash and Monero are not as popular as Bitcoin but offer users more protection to their identity. These coins are known to thwart attempts by regulators to gain access to personal information regarding coin holders and many supporters of regulations believe tighter controls should be exercised on these coins.
It may not be obvious to some who abhor the many regulations in place but the global gambling industry is slowly becoming more accepting of cryptocurrency. The effect can even be seen in Las Vegas, a place many believe to be the gambling capital of the world, where Bitcoin is being accepted in a few major establishments. The trend of increased acceptance for cryptocurrencies is expected to increase with time.