Use of Bitcoins for Online Gambling Subject to U.S. Money-Laundering Regulations
Alarmed by the popularity of using bitcoins (BTC) for online gambling activities, the Financial Crimes Enforcement Network of the U.S. Treasury, recently published guidelines in regulating the use of virtual currencies. The sudden surge in its exchange rate during the past week indicated the increasing demand for bitcoins. This also sent alarm bells ringing because of its potential use for money-laundering and illegal activities. In fact, some U.S. players are actually asking about the legality of using BTCs for online gaming and betting.
In applying the money-laundering rules, bitcoin operators have to comply with the U.S. Treasury’s bookkeeping requirements, and mandatory reporting for BTC transactions involving transfers of $10,000 or more. Rules will apply to all online entities involved in the issuance and exchange of money whether real or virtual, particularly those that do not have links or accreditation with any government institutions.
BTCs are virtual money and have no physical existence. It requires the use of bitcom open-source software to interface with other BTC users and third-party websites; the latter acts as transaction verifier and provider of cloud-based bitcoin wallet accounts. If an online casino accepts BTCs, then an online player simply uses his BTC wallet to transfer money to the BTC account of the online casino. The payouts due from the online casino will likewise be by way of BTC transfers.
However, such BTC transfers still involve exchange of actual cash between online casinos and players, albeit indirectly. In light of the bookkeeping systems required from bitcoin and payment processor websites, such transactions are still traceable. Regardless of the amounts transferred, U.S. states that do not recognize online betting as lawful will likely deem such transfers as illegal.