A glimpse into the future: can Cryptocurrency and blockchain technology become a part of gambling industry?
With the development of new technologies (that are characterized by versatility and adaptability) to perform an array of diverse functions and tasks, it is no surprise that these technologies have started to be integrated, but also to attract interest of business operators, within multiple industries.
Alina Tace
Geanina Oprita
A more than ever digitalized gambling industry, for which fast and secure transactions represent not only a key element, but also a necessity, is no exception to the rule. As a result, in recent years, questions have been raised by industry stakeholders with respect to the potential role of and possibility to use cryptocurrencies and blockchain within the Romanian gambling market.
A starting point to provide a response to said interests should be the analysis of the legislation in force and its regulations with respect to cryptocurrencies. From this perspective, Romania does not lay out a legal framework per se related to such technologies, but only contains isolated provisions in national legislation which touch upon fiscal aspects related to the taxation of income generated by individuals from crypto-related activities, security aspects regarding the prevention of money laundering implementing a series of rules and restrictions applicable to the providers of virtual currency exchange services and cryptocurrency storage service providers (wallets) and aspects in connection with the criminal law.
A comprehensive and consistent crypto-related legal framework, regulating aspects such as the use of cryptocurrency, the exchange services between virtual and fiduciary currencies and the provision of digital wallets is yet to be adopted by the Romanian legislator.
Simion & Baciu
Nevertheless, cryptocurrency or virtual currency was defined for the first time by Government Emergency Ordinance no. 111/2020 in view of completing and amending Law no. 129/2019 for preventing and combatting money laundering and terrorism financing as a “digital representation of value that is not issued or guaranteed by a central bank or public authority, is not necessarily linked to a legally established currency and does not have the legal status of currency or money, but is accepted by natural or legal persons as a way of exchange and may be transferred, stored and traded electronically”.
Bearing in mind the above definition, it should be noted that, from a gambling regulatory perspective, the entire legal framework is based on fiat money and payment instruments from the financial-banking system.
As such, article 5 para. 5 of Government Emergency Ordinance no. 77/2009 on the organization and operation of games of chance stipulates that the payment methods allowed for gambling activities are “payment instruments used in the financial-banking system”, provided they contain information about the natural person who operated with them. In addition, online gambling organizers licensed in Romania are allowed to deposit funds of the players only in bank accounts opened at banks on the Romanian territory. It may therefore be concluded that, at least at this stage in time, cryptocurrencies are not permitted as payment methods in relation to games of chance offered in Romania (neither as a form of deposit nor as a form of withdrawal in what concerns Romanian gambling operations).
Article 5 of Law 209/2019 on payment services provides that payment instruments may be used for initiating payments with the purpose of depositing, transferring or withdrawing funds, funds that may consist of banknotes and coins, scriptural money or electronic money, as defined by the legislation on electronic money activity. Virtual currencies are not listed among the type of funds that may be transferred through the payments methods allowed by the financial-banking system.
Furthermore, article 18 of Government Emergency Ordinance 99/2006 on credit institutions and capital adequacy does not include deposit or transfer of virtual currency as an activity allowed to be carry out by banks in Romania.
The possibility to use cryptocurrency is further limited by Romanian law, as payments of taxes and fees due to the Romanian authorities are only allowed in fiat money.
What is more, the view of Romanian authorities on cryptocurrencies remains cautious as the Romanian National Bank (i.e. the regulator of the financial system) has issued multiple official press releases over the past years underlining that cryptocurrency continues to be a speculative, highly volatile and extremely risky asset with a high potential to generate financial losses for investors, which cannot be considered fiat money.
As opposed to cryptocurrency, blockchain technology does not benefit from a definition in the Romanian legislation and the use of blockchain technology within the platforms of gambling operators is not specifically provided for in the Romanian gambling legislation.
From a practical point of view, blockchain is a decentralized and immutable ledger of all transactions across a peer-to-peer network. As each transaction occurs, it is recorded as a “block” of data and each block is connected to the ones before and after it, forming a chain of data as an asset moves from place to place or ownership changes hands.
While, to a certain extent one may argue whether games using cryptocurrency fall under the games of chance definition (considering that cryptocurrency is not considered fiat money in Romania), it must be noted, nevertheless, that the Romanian gambling legislation comprises in article 136 para. 2 of Government Decision 111/2016 for the approval of the Methodological Norms for the implementation of GEO 77/2009 the obligation, for online gambling activities, that the gaming server must be located on the territory of Romania or on the territory of a Member State of the European Union, on the territory of a Member State of the European Economic Area or in the Swiss Confederation.
blockchain technology
Considering that blockchain technology essentially uses “blocks” of data stored on separate, connected devices in a network to ensure data accuracy and security, devices that may be located on different territories, it may be argued that each device in the network must observe the territoriality requirement.
In conclusion, although the use of cryptocurrency and blockchain technology may appear limited at this date, mostly due to the lack of a legal framework, once the much-debated Markets in Crypto-Assets (“MiCA”) Regulation, which intends to shape the existing EU financial services legislation by establishing a harmonized set of rules for crypto-assets and related activities and services, will be enacted, new possibilities may become available in order to make use of these new technologies (which have the potential to revolutionize the way that businesses operate) and incorporate them in other industries as well, including gambling. Hence, we can fairly expect to see in the future further developments and legal advancements that will help to address the current regulatory challenges on this subject matter.
