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UK Licensed ‘NetBet’ Accepts Bitcoin; Security & Money Laundering

Reading Time: 2 minutes by on October 21, 2016 Bitcoin, Business, News
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BitPay announced on October 17 that UK-licensed gambling site NetBet has officially integrated bitcoin for instantaneous deposits, allowing users to place bets on a variety of sporting events.

BitPay development and compliance teams worked closely with NetBet in assisting its bitcoin integration, to ensure that the British gambling site stays completely compliant with both financial regulations on gambling and alternative policies on bitcoin usage.

The BitPay team wrote, “Since bitcoin is new to the regulated gambling industry in Europe, we’ve worked closely with NetBet to ensure that the addition of this new payment method meets their existing UK Gambling Commission regulatory requirements.”

However, users of NetBet are not allowed to withdraw their winnings using bitcoin just yet. Bitcoin deposits are enabled but withdrawals are still in progress. Upon the integration of a bitcoin payout system, NetBet will most likely experience a substantial increase in demand for bitcoin in its user base.

Similar to how BitPay invoices are settled, bitcoin payments and deposits to NetBet are instantaneous. That means, for more efficient user experience, NetBet has chosen a high-risk transaction speed setting on BitPay for the users.

According to BitPay, there exists three main settings for transaction speeds: high speed (high risk), medium speed (moderate risk), and low speed (low risk). The measurements of risk assessment in the speed setting differ primarily because zero-confirmation transactions are more insecure and vulnerable to double-spend attacks.

Because of this risk, BitPay co-founder and CEO Stephen Pair has been quite vocal and expressive on his support for Opt-in RBF, which essentially enables users to create a follow-up transaction with higher fees to make faster payments.

Thus, in a fee-based market and platform where BitPay merchants aren’t responsible for the risks, users can send RBF transactions to replace their previous low fee transactions to settle the payment faster and securely.

“While it might not have been communicated well (it even took us by surprise), we do support it. We support it because it adds a useful feature to the Bitcoin mesh network. In fact, more than a year ago we were trying to figure out how we ourselves would lobby for this capability as it is an enabler for an internal project we’ve been working on. We were thrilled when we saw that Opt-In RBF was merged,” explained Pair.

Another feature of bitcoin that could enhance user experience and efficiency for BitPay merchants is the Lightning network, that allows anyone in the network to work with a lower fee and instantaneous transactions based on the same security level of the main bitcoin network.

While it is still being actively tested, Lightning could replace BitPay’s zero-confirmation method and provide a higher security level for both merchants and consumers reducing the risks merchants are required to take when selecting high-risk payments.

According to various research institutions and government agencies like the International Compliance Association (ICA), online gaming and gambling are becoming the frontiers for money laundering and fraud.

As noted by the Wilmington Risk & Compliance firm, The Gambling Commission is particularly concerned with criminal spending of derived cash. The Commission believes cash and its complete anonymity is harmful to the industry and suggests that alternative currencies like bitcoin could be a better choice of payment.

“The combination of anonymity and extensive use of cash exposes the betting sector to particular money laundering risks. This can create a tension between commercial imperatives and the need to comply with controls which, if conducted properly, can be time-consuming and increase the attractiveness of using black-market operators,” stated the Commission.

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