Cryptocurrency experiment moves to its next stage at MGA.
The Maltese gaming regulator, Malta Gaming Authority (MGA), is taking the next step in its Sandbox Framework project, which aims to investigate the use of cryptocurrencies in Bitcoin casinos by licensed gaming operators. This project focuses on blockchain technology, the backbone of digital currencies like Bitcoin. Many industry professionals view blockchain as a trailblazing technology for the future. Here's a summary of recent developments.
Promising Technology of the Future?
"Blockchain technology can be applied to online gambling and provides an innovative platform for a transparent gaming industry" stated MGA CEO Joseph Cuschieri back in August 2017. Since then, significant progress has been made in this area: Malta's parliament approved the MGA's plans in May 2018, and now the second test phase of the Sandbox Framework project is underway. The first trial phase occurred in January of this year.
As part of the experiment, Maltese licensees are invited to conduct various tests of blockchain systems in a secure environment. The MGA will select suitable technology platforms from various providers, which will be made available to the participants for trials.
The tests, known as Innovative Technology Arrangements (ITAs), are awarded through an application process. They provide temporary access to services and technological solutions such as smart contracts and distributed ledger technology (DLT) platforms, the foundation of blockchain technology.
To put it simply, blockchain technology is a digital database that can be used to handle transaction data without the need for a central authority or mutually trusted parties, but with complete transparency. Blockchains are often referred to as "virtual ledgers." Whenever a data, financial, or cryptocurrency transaction occurs between a sender and a recipient, it is recorded in the "ledger" and updated on all networked computers. In essence, it's a decentralized accounting system. Since each new entry must be recognized and verified by hundreds or even thousands of computers simultaneously, the system is considered tamper-proof. Transactions are made public but still allow for anonymity, unless desired. The platform does not need external financial administrators or controllers, like banks.
The largest public blockchain in existence today is the Bitcoin blockchain. With numerous experts viewing blockchains as the way forward, it's no surprise that the gaming industry is now attempting to embrace this technology. One of the first companies to initiate a blockchain-based gambling project was the Bulgarian online casino games developer SBTech, back in March 2018.
Strict Requirements for Participants
Despite the uncertainty in the technology's foundations within the gaming sector, licensed providers must meet numerous criteria to participate in one of the proposed ITAs. The MGA is mainly concerned with ensuring that operators adhere to all regulatory requirements throughout the trial period.
Initially, operators must undergo an audit conducted by a registered auditor with the Malta Digital Innovation Authority (MDIA). After agreeing to the established guidelines, the trial phase starts. Throughout the planned trials, which will run until the end of 2021, participants will receive further feedback and updates. MGA Managing Director Heathcliff Farrugia commented on the high-security conditions:
"The MGA's primary objective is to promote innovation, but also to maintain a leading role in gambling regulation. With the growing interest from gaming operators in incorporating blockchains and cryptocurrencies into their operations, we've taken a proactive approach to create a sandbox framework for the use of these technologies in a regulated environment."
The Demand is Getting Stronger
In addition, the MGA has updated its Licensee Relationship Management System (LRMS) to accommodate both existing and potential licensees interested in gaining approval to incorporate ITAs. Within this system, participants must report all player spending with any cryptocurrencies and flag failed transactions, promoting transparency.
Farrugia also emphasized the motivation behind the update given the significant media attention surrounding the potential of blockchains and digital transactions: "The media buzz surrounding the potential of blockchains and digital transactions is immense. We aim to be at the forefront of this trend." Whether and when the first online casinos will be established based on cryptocurrencies remains to be seen at this point.
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