Could Bitcoin Save Online Gambling in Russia?

Russia’s bid to curb online gambling is picking up pace thanks to a new law that blocks transactions between Russian banks and international bookmakers. Yet, in an ironic twist, the move to expel certain operators could open the door for others, spelling the start of a new era of Bitcoin wagering in the Eastern European nation.

Drafted by the Russian Ministry of Finance after receiving strong backing from president Vladimir Putin, the legislation compels banks and online payment processers to block transactions between Russian-based bettors and blacklisted bookmakers. International third party sites and all forms of online casino and poker games are banned under the new rules, as are unlicensed local operators. Only a limited number of local online sportsbooks are granted gaming licenses in Russia each year, and all must process transactions through centralised payment hubs that are closely monitored by the government.

The revamp of online gambling laws is designed to tackle illegal online betting in Russia, which has steadily increased and caught the attention of Putin and co in recent years. The government estimates that as much as $3 billion worth of illegal transactions take place annually between unlicensed bookmakers and Russian bettors, prompting the crackdown. Putin’s government has been trying to tackle the issue of illegal gambling for several years, with a similar proposal drafted by the Ministry of Finance in 2015, only to be rejected by Duma legislators. On that occasion, financial institutions flagged concerns over the costs of enforcing the legislation, leading to opposition to the laws.

But the amended legislation has already begun to impact the country’s online gambling market, claiming their first victim in the process. BetVictor, an independent online sports betting and casino operator based out of Gibraltar, suspended its operations in the country in February, instructing its Russian customers to withdraw all funds from their accounts. A host of other websites, including internationally renowned brands such as Bwin and Unibet, have also been IP blocked by Russian authorities. These measures are likely to become increasingly prominent, likely prompting a host of international operators to follow BetVictor’s out of the country.

A similar scenario unfolded in the United States in 2006, when strict anti-gambling laws were passed in Washington under the Unlawful Gambling Enforcement Act (UIGEA). Under these laws, banks in certain US states are prohibited from approving transactions between their customers and online bookmakers, mirroring Russia’s payment-blocking measures. While this made business operations impossible for some gambling operators stateside, it left the door ajar for bookmakers that deal in cryptocurrency such as Bitcoin.

The reason for this is that unlike traditional mediums of exchange, crypto currencies are not controlled by government. Instead, they operate as a peer-to-peer online payment network that allows the anonymous transfer of funds to take place. It is precisely this protection from regulatory hurdles that prompted the rise of gambling with bitcoin in the United States, where the likes of Nitrogen Sports, a bitcoin sportsbook, and bitcoin online casinos such as Fortune Jack are flourishing. Unsurprisingly, a growing amount of gaming operators are now including cryptocurrency in their business models.

Industry experts are predicting similar outcomes in Russia, even in the wake of more stringent legislation. In the case of the new anti-gambling laws, while the government will indeed be able to block transactions between banks and blacklisted bookmakers, it will not enjoy the same regulatory power over digital currency transactions. It cannot, for example, stop Russian bettors from funding bitcoin sportsbooks and online casino accounts with operators that welcome players from anywhere in the world.

This lack of government control over cryptocurrency has in the past generated strong opposition to digital currencies such as Bitcoin in Russia. The Ministry of Finance has previously drafted draconian laws threatening those caught trading and mining digital currencies with four-year prison terms and fines of up to $14,000. Thankfully for cryptocurrency advocates, the Russian government has since changed its stance dramatically. It completed an about-turn in December 2016, when it confirmed the legality of cryptocurrency and deemed it a foreign currency. That spells more good news for Bitcoin bookmakers, who are primed to sidestep anti-gambling legislation and make their presence felt in Russia.

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