A State-operated Blockchain-based System for the Transparent Processing of Online Gambling Payments in Germany
Steinmetz, F., & Fiedler, I. (2019). A State-Operated Blockchain-Based System for the Transparent Processing of Online Gambling Payments in Germany. Gaming Law Review, 23(10), 715-725.
Online gambling and its regulation is a sensitive topic, controversely discussed in politics and the public. On the one hand, unrestricted gambling is an indicator for people’s sovereignty and freedom to take risks and satisfy their desire to play. On the other hand, however, it entails risks for individuals and society as whole, which stem from its addictive potential and utilization for money laundering. Regulators face the challenge of composing and enforcing regulative measures which bear financial interests while also protecting youth and players from the threats it entails. This indicates the importance of an effective law enforcement of online gambling regulation, which oftentimes fails to prosecute gambling operations outside of the respective jurisdictions. The most promising way for protecting players from unregulated gambling operators is identified to be cutting their monetary accessibility through the traditional financial system.
At the example of the regulatory framework for online gambling in Germany, this paper conceptualises and discusses how a dedicated blockchain system can be employed to separate monetary streams from and to regulated and unregulated operators onto two different infrastructures and thus contribute to law enforcement against unregulated and unlicensed gambling operators. While the proposed blockchain system causes additional effort for its implementation and maintenance, it significantly increases the transparency of monetary streams between players and operators for supervisory authorities and creates a technical distinct separation of unregulated and regulated offerings for financial service providers, authorities and players.
The key parameters of the system include:
- Closed monetary system (private/permissioned blockchain)
- Hierarchical payment gateway implementation
- Technical licensing on the infrastructure level
The key benefits can be summarized as:
- Encrpyted transaction monitoring for supervisory authorities
- Technical differentiation and isolation of unregulated gambling operators
- High level verified player accounts across operators
- Easily enforceable limitation schemes for player protection
- Potentially extendable across jurisdictions