Isle of Man regulator raises alarm over rising cryptocurrency risks in gambling sector

The Isle of Man Gambling Supervision Commission has issued a warning about the increasing risks associated with the use of cryptocurrencies in the gambling industry, pointing to growing concerns over financial crime, including money laundering and sanctions evasion.

The regulator also stressed the need for closer international cooperation and stronger enforcement measures to address these emerging threats.

The Commission highlighted the expanding role of virtual assets within gambling operations, noting that cryptocurrencies are becoming more widely used as payment options, particularly across online platforms where cross-border transactions are routine. According to the regulator, there is mounting evidence that these digital assets can be misused for criminal purposes, including money laundering, fraud, and the evasion of sanctions. It explained that the speed of crypto transfers, combined with their pseudonymous characteristics, makes effective monitoring and enforcement significantly more challenging for authorities tasked with ensuring regulatory compliance.

The warning comes in the wake of findings from a recent assessment conducted by MONEYVAL, which examined risks linked to virtual assets across regulated industries. The report found that cryptocurrencies are extensively used in online gambling, including on platforms operating outside official regulatory systems. In such cases, digital currencies may enable operators and users to circumvent traditional financial safeguards.

The Commission further cautioned that emerging risks are not limited to individual gambling operators but extend to broader criminal threats, including organised crime groups and actors connected to state-sponsored activities. It warned that these developments could undermine the overall integrity of the gambling sector.

A spokesperson for the Commission said, “VA use in gaming and other sectors presents unique risks. Some jurisdictions allow VA use in online gambling under strict conditions. Case studies show exposure to illicit activity, including links to child abuse material. Emerging typologies include sanctions evasion, fraud, and proliferation financing. New threats include state-sponsored actors using VAs for proliferation financing, money mule networks, and fraud schemes exploiting the anonymity and speed of VAs.”

In addition, the regulator pointed to shortcomings in how existing virtual asset regulations are enforced globally. While licensing requirements for crypto-related service providers exist in many jurisdictions, the Commission said enforcement efforts are uneven, creating opportunities for operators and intermediaries to take advantage of regulatory loopholes.

This fragmentation allows illicit financial activity to move between jurisdictions with limited detection or intervention. The regulator also noted that some authorities do not yet possess the necessary investigative capacity to effectively address crypto-related threats.

To counter these risks, the Isle of Man regulator called for stronger international collaboration among supervisory bodies. It emphasised the need for enhanced intelligence sharing and coordinated enforcement actions to tackle financial crime linked to virtual assets.

The Commission also recommended that risks associated with crypto gambling be formally incorporated into national financial crime risk assessments.

Strengthening oversight of virtual asset activity was identified as a critical priority, with the regulator warning that without a unified and coordinated global response, the risks associated with cryptocurrency use in gambling are likely to continue growing.

By fLEXI tEAM