Investors are hedging USD 27 billion (€27.3 billion) on the future success of Web3 and crypto. “The use of cryptocurrency in the gaming industry has made an impact on developing Web3 based games offering players decentralised finance without the involvement of a bank and more user-friendly engagement” says Fintech and gaming lawyer Dr Joseph Borg speaking with iGamingCapital.mt.
Dr Borg explains that “the blockchain based messaging service Web3 will eventually replace the use of Web2” and includes the email system. “Web3 gaming is possibly the most significant development in the gambling industry over the past 20 years since online gaming emerged” he adds. “With the evolution of the metaverse, gaming is evolving as well. It needs to keep newer generations interested.”
There has been a sharp rise in the use of cryptocurrency in the sector this year which is being marketed as the safest mode of payment in gaming. Valued in excess of €300 billion, the gaming sector is projected to grow exponentially over the next two years.
“Like everything else,” Dr Borg says, “using cryptocurrency has its advantages and disadvantages. It enables fast payments and remittances without involvement from a third-party.” He explains that blockchain technology is robust and effective and some operators are offering a “play and pay-as-you-go” option for crypto users. This makes it very attractive to players as they do not have to deposit large sums of money.
With cryptocurrency users on the rise, gaming operators are adding more sophisticated crypto-related functions to support gamers. Earlier this week casino platform Softswiss announced the implementation of multi currencies to enable players to convert ‘in-game’ crypto balances into their choice of currencies. Dr Borg explains that crypto payments do not allow for chargebacks, and this reduces the risk of fraud.
Education is key. He argues that “the lack of knowledge of the crypto market is the biggest challenge that the iGaming sector is encountering and that most regulatory frameworks are still uneasy with the use of cryptocurrencies” restricting both regulators and operators. Technologies are evolving at a very fast pace and authorities can regulate the industry more efficiently by gaining a better knowledge of the technology.
He adds that AML (Anti-Money Laundering) is still the most significant challenge that regulators face with the wider use of cryptocurrencies in the sector. “It is still a big concern as mitigating risks such as wallet verification and the imposition of ridiculously low limits impose barriers for both gaming companies and players.”
Dr Borg explains the Malta Gaming Authority (MGA) came up with a ‘sandbox framework’ in 2018 to accept DLT (Distributed Ledger Technology) assets as a method of payment. The framework is expected to be implemented at the beginning of 2023 and identifies the different criteria that operators need to satisfy before accepting cryptocurrencies as a form of payment from players. The framework includes regulations on wallet validation and verification and restrictions such as deposit limits.
Therefore the MGA’s new framework on the use of blockchain technology to accept cryptocurrency payments will attract more gaming operators and players Dr Borg says “The MGA is much more well versed with the risks” of the use of crypto in the sector. In 2024 the first law known as Markets in Crypto-Assets (MiCA) will come into force and will provide a comprehensive regulatory framework for digital assets. It will define more of a practical solution for regulators with a solution for gamers who wish to offer deposits in Crypto.
Dr Joseph Borg is a lawyer who specialises the Fintech and Gaming industry. He heads the sectors at WH Partners. He co-founded Bitmalta, an NGO that promotes discussion on the use of blockchain and cryptocurrencies in Malta. Prior to joining WH Partners he held the position of Chief Regulatory Officer of the Lotteries and Gaming Authority.
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