The maturing regulatory framework for cryptoassets across the UK and Europe is reshaping the risk landscape – regulators and operators should be equipped to manage, not exclude, this growing consumer payment preference and avoid further displacement to the black market. The Government’s White Paper on the future of the UK gambling market contained relatively little in terms of a consideration of the use of cryptoassets in real money gambling with no hint at the need for the Gambling Commission to consider how it might consider embracing the opportunities which the growing popularity of cryptoassets might afford the sector.

For several years, the Commission, along with many other international regulators, has approached the use of cryptoassets in gambling with significant caution, if not outright resistance. Early discussions were dominated by the risks of price volatility, opacity in customer identity, vulnerability to financial crime, and uncertainty over safeguarding customer funds. The use of cryptoassets raised uncomfortable questions for operators and regulators alike, particularly regarding anti-money laundering (AML) obligations and player protection. While not the subject of an absolute legal prohibition, the Commission’s concerns were framed in a way which has had the same net effect.

Yet the regulatory and market landscape has developed meaningfully in recent years. The maturing of the cryptoasset ecosystem, combined with new legal frameworks in the UK and Europe, indicates that these risks are no longer insurmountable. Tellingly, the Gambling Commission’s recent Emerging AML Risks bulletin continues to describe crypto as high risk, but now acknowledges a likelihood that more payment providers will offer crypto payment solutions, and reiterates a need for operators to undertake proper risk assessments and implement closed-loop payments wherever possible. While cryptoassets still present unique challenges, the tools now available to manage them – both legal and technological – allow for a more sophisticated risk-based approach. Regulators and operators should be equipped to manage and not exclude this growing consumer payment preference and avoid further displacement to the black market.

Revisiting the Gambling Commission’s original concerns

Before exploring these developments, it’s useful to recap the Commission’s core concerns historically underpinning regulatory hesitation:

1. Price volatility
   Cryptoassets, especially unpegged tokens like Bitcoin and Ethereum, are known for dramatic price swings. This volatility can undermine the integrity of financial controls if the coin price spikes or plunges, complicating both operator oversight and customer self-regulation. The Commission’s guidance asks licensees to explain “how fluctuations compared to fiat currency will be dealt with” when notifying a Key Event.
2. Customer identification and source of funds
   Cryptoassets can be acquired and transferred pseudonymously, making it difficult to establish customer identity and the source of funds. Self-hosted wallets can be created in seconds with no KYC. While blockchain offers transaction transparency, wallet holder identities are not always apparent, creating AML challenges for operators.
3. Scalability and transaction costs
   Historically some blockchains (e.g. BTC, ETH L1) carried high and unpredictable transaction fees and slow confirmation times, raising operational concerns for gambling platforms reliant on transaction speed and fee predictability.
4. Protection of customer funds
   Where cryptoassets are held by operators on behalf of customers, regulators have highlighted the risk of customer loss in the event of operator insolvency due to historic uncertainty around the legal status of cryptoassets and the robustness of custody arrangements. If an operator (or its payment gateway) holds customer coins, are they held on trust? The Commission’s guidance requires the Key Event to set out “how the funds will be treated in the event of insolvency” and how this accords with the Commission’s customer funds ratings system.
5. Open loops
   Where a player can withdraw to any wallet or to a different account from the deposit account that has not been previously risk-assessed, the Commission has identified this as high risk. Moving winnings to a different wallet breaks the audit chain and also creates a “mixing” effect.

Regulatory maturity: The turning point

Since the Commission first articulated its concerns with cryptoassets, significant regulatory advances have emerged warranting at least some form of reappraisal.

The UK’s evolving framework

In the UK, the Financial Conduct Authority (FCA) has progressively clarified the rules applicable to cryptoassets and cryptoasset services. While cryptoassets (other than security tokens) for now remain outside of the financial services regulatory perimeter, key cryptoasset services activities such as the operation of cryptoasset exchanges (fiat-crypto and crypto-crypto), custodianship and custodial wallet services are subject to FCA AML registration requirements, and restrictions apply to the promotion of cryptoassets in the UK. These measures have significantly improved accountability, AML controls and consumer protection outcomes regarding cryptoasset services.

Additionally, the UK government has released draft legislation for a comprehensive crypto regulatory regime covering capital requirements, insider trading, market abuse, custody, liquidity, and risk management, expected to be implemented by Q2 2026 at the earliest. In short, the new regime replaces a lighter-touch AML registration and single-point financial promotions friction with the wholesale transplantation of securities law disciplines into the crypto domain. Crypto businesses in the UK will move from being AML-supervised service providers to becoming fully FCA authorised firms, subject to capital buffers, personal accountability for senior managers, consumer-outcomes testing and market-integrity obligations. Operators outsourcing custody/on-ramps to FCA-registered Virtual Asset Service Providers (VASPs) (e.g. Coinbase UK, Gemini, Bitstamp, Ramp, Transak, Zodia) will also avoid falling inside the coming ‘crypto-custody’ permission.

The EU’s MiCA Regulation

The EU’s Markets in Crypto-Assets (MiCA) Regulation passed in June 2023 has been progressively entering into force in EU Member States over the period until December 2024.

MiCA establishes a harmonised framework requiring crypto service providers to be authorised and supervised by EU financial regulators. Of particular relevance to the gambling sector:

• Stringent requirements: Besides stablecoin regulation, MiCA covers extensive requirements around governance, capital reserves for cryptasset service providers, market integrity, insider trading, and market manipulation – offering operators clearer procedures for verifying fund legitimacy and addressing source-of-funds issues.
• Custody safeguards: Crypto custodians authorised under MiCA must maintain robust internal governance, capital requirements and client asset segregation – providing stronger protections for customer funds held on account.

Technological advances: De-risking the practicalities

From a technology perspective, blockchain-related solutions have evolved considerably:

• Chain analytics and forensics: Blockchain analytics tools (e.g., Chainalysis, Elliptic) can allow operators to trace cryptoasset provenance with a level of granularity and reliability that rivals – and in some cases exceeds – traditional banking channels. These tools can often be configured to meet business risk tolerances and integrated directly into AML compliance workflows, allowing for automated monitoring of deposit addresses and flagging of high-risk deposits, significantly enhancing AML capabilities. Operators would still need to determine when it is appropriate to establish a fiat origin story to satisfy the Commission’s source-of-funds expectations – e.g. the player bought the BTC on Coinbase with their own debit card. That hop is invisible unless such evidence (e.g. PDF bank/ exchange statement or API call) is collected and included in the KYC file. “Travel Rule” messaging (mandatory for UK VASPs since Sept 2023) now passes originator / beneficiary data automatically whenever the deposit stems from a hosted wallet.
• Wallet identity verification: Many regulated exchanges now rigorously implement identity verification and “Travel Rule” compliance, which gives you payer/beneficiary details for transfers between UK-registered VASPs, making audit trails stronger than card top-ups and significantly reducing transaction anonymity.
• Layer 2 (L2) scaling: Technologies such as Bitcoin’s Lightning Network, Ethereum’s rollups, and other protocols with improved architecture, have significantly improved blockchain transaction speeds and efficiency, mitigating earlier scalability and cost unpredictability concerns. Today, L2 rails (e.g. Lightning, Arbitrum, Polygon) routinely clear at <£0.05 per transaction at sub-second finality.

While crypto must still be treated as a higher AML risk (consistent with Financial Action Task Force (FATF) and Gambling Commission risk ratings), the tools and analytics available can help to significantly mitigate compliance risks – an important factor given that much of AML compliance already operates by reference to a risk-based approach.

Increasing consumer adoption

Evidence suggests that there is a niche but scaling market segment of UK online gamblers wanting to deploy their crypto holdings for their wagers. A 2023 YouGov poll found that 15% of existing UK online gamblers (~1.2 m adults) were “interested” in placing crypto bets; that’s 7% of the whole UK adult population. For operators looking to service this audience, this cohort skews 18-34, male and London-based – a demographic with one of the highest gambling participation rates.

Reasons for players wanting to wager in crypto included:

• Fast withdrawals and instant 24/7 settlement – 33% of the crypto-interested cohort put fast withdrawal in their top features compared to 28% of all gamblers. Crypto settlement is not affected by weekend bank delays and funds can hit wallets (and return) in minutes or even seconds.
• Lower bank-decline frustration – crypto-interested players are twice as likely to have faced withdrawal or account-lock problems with fiat methods, such as card issuers flagging gambling merchant category codes. Blockchain rails rarely fail authorisation on the same grounds.
• Tech-savvy cohort already hold crypto – the target market are much more likely to hold crypto compared to the online gaming average, who see wagering as another spend use-case for assets already in their wallet.
• Improving cost / fee efficiency and L2 chains – lower fees on alternative protocols fuelling popularity as a payment method which can increasingly undercut card cash-out charges, especially at higher stakes.
• Novelty and brand alignment – for the Web3-native audience, a crypto-cashier is part of the UX they expect from a forward-looking operator.

Will failing to embrace crypto support the black market?

Over the past two years the black-market segment has become the growth engine of crypto gambling – and several datapoints appear to show that UK traffic is part of the surge.

• Traffic to unlicensed sites is increasing. An International Federation of Horseracing Authorities (IFHA) study tracked just 22 offshore racebooks and found that unique UK visitors jumped 522% between August 2021 and September 2024, while total monthly UK visits passed 1.3 million during 2024. The Gambling Commission’s recent Unlicensed gambling market paper reported that automated web-scraping now detects a rising volume of UK sessions on such sites, although spend is not yet quantified.
• Crypto-first casinos already dwarf many licensed brands. The regulated sector’s fiat-only stance is creating a two-tier market: ‘crypto-convenience’ offshore, ‘compliance friction’ onshore. Claims made in a recent Financial Times article suggest that the three biggest offshore crypto casinos – Stake, Rollbit and Roobet – generated US $81.4 billion in GGR during 2024, a five-fold increase since 2022. Though these figures have since been rebuffed as a significant overestimate, including by analysts Tanzanite who estimate the true size of the crypto gambling market as between $10-11 billion.

Rethinking the risk profile

Given these developments, outright rejection of crypto-based payment methods appears increasingly unsustainable. Instead, crypto can now realistically be viewed within the same risk-management continuum as other payment systems: requiring appropriate safeguards, tailored controls and regulatory oversight, but not outright prohibition.

The Commission could also consider a phased or pilot approach – such as a regulatory sandbox allowing limited licensed operator use of crypto payments under specified conditions, as trialled in other jurisdictions – providing empirical evidence for a broader regulated framework.

Operators in the UK who are thinking about adopting crypto payment methods for gambling should consider:

• Implementing valuation mechanisms instantly fix fiat-equivalent amounts (or to a pegged stablecoin) at the point of transaction for deposit limits and safer gambling and AML triggers. Real-time FX lock-in ensures that RG tools still trigger the appropriate level. This should be accompanied by clear messaging from operators to players regarding potential price swings.
• Enhancing AML controls to reflect crypto’s higher risk profile, necessitating enhanced scrutiny (e.g. scrutiny at lower deposit or spend thresholds compared to fiat deposits made via lower risk payment methods). This could involve implementing full source-of-funds / source-of-wealth tools to trail back to the fiat on-ramp (e.g. exchange statement or bank proof). On-chain analytics (e.g. from Elliptic, Chainalysis) can be applied on every inbound hash with sanctions and darknet scoring. High risk country filters can also be applied and aligned with FATF lists.
• Storing customer crypto on account in segregated custodial arrangements with FCA-authorised custodians, and ensure regular reconciliation is conducted. Operators should ensure that Ts&Cs clearly state who bears network fees or risks and how funds are protected in the event of insolvency.
• Ensuring that fiat and crypto balances remain separate and custody or exchange obligations remain with FCA-authorised providers to avoid operators inadvertently conducting regulated activities.
• Implementing a closed-loop model where player withdrawals must return to the verified deposit wallet or the same hosted exchange account.
• Submit key events to the Commission when introducing new crypto payment methods (see Licence condition 15.2.1(8)).

UK operators that work with FCA-registered on-ramp providers, adopt chain-analytics, closed-loop withdrawals and real-time fiat conversion have an opportunity to demonstrably satisfy the Commission’s high-risk criteria and keep the next wave of players – and revenue – inside the UK’s regulated perimeter.

Conclusion: Regulatory and market alignment

The Gambling Commission was justified to approach cryptoassets with initial caution. But the crypto ecosystem has matured, and so too have the tools for managing its risks. Regulatory and technological progress now supports regulated integration with crypto rather than continued prohibition: the convergence and maturation of UK and EU regulatory regimes, the growing adoption of compliance-grade custody and analytics solutions, and the increasing prevalence of stablecoins all point toward a landscape where crypto can be integrated into gambling operations without undermining the core licensing objectives.

The continued exclusion of crypto as a payment method risks becoming a self-defeating policy. It is no longer a question of whether the risks can be eliminated – they can’t, as with any payment method -but whether they can be managed to a tolerable level. Aligning regulatory practices with market realities can mitigate black-market displacement risks, enhance consumer protection, and better reflect current consumer preferences. In 2025, the answer increasingly appears to be that cryptoassets should be actively managed and integrated, rather than excluded, from the licensed gambling market.

Moreover, under section 22 of the Gambling Act 2005, the Gambling Commission has a statutory duty to permit gambling, not merely to prevent or restrict it, insofar as it is reasonably consistent with the pursuit of the licensing objectives. As regulatory safeguards for cryptoassets mature, and as consumer demand for alternative payment methods grows, it is incumbent on both regulators and operators to consider how crypto can be brought within the licensing regime in a safe and structured way. A continued de facto prohibition may soon be out of step not only with market developments, but with the Commission’s own statutory mandate. With the draft crypto regime expansion and MiCA both in play, 2025 may now present a window for UK operators to hardwire a crypto-ready cashier before the market does it for them.