The MGA announces a sandbox allowing Virtual Currencies and Blockchain in the Maltese gaming sector

The Malta Gaming Authority (MGA) has published the details of a sandbox which will allow the use of Virtual Currencies (VC) and the use of Distributed Ledger Technology (DLT) in the gaming sector. The sandbox will start in Q2 of 2018 and will last for 6 months. The MGA also encourages participation of the major stakeholders in the consultation period which will be open until the 30th April 2018.

The publication outlining the details of the sandbox (Sandbox Document) is divided into two; Virtual Currencies and DLT.

Virtual Currencies

The Sandbox Document starts by outlining the accepted characteristics and procedures which must be followed in order for a licensee to be allowed to accept the use of VCs during its operations. The Document also lays down the safeguards which must be adopted to mitigate risks and the minimum necessary reporting and ancillary obligations.

Distributed Ledger Technology

The MGA published the details of the procedures, requirements and safeguards which must be in place in order for a licensee to be allowed to host games on a DLT platform, to use DLT to ensure transparency and prove fairness, such as random number generators, and to make use of DLT to store players’ funds.

General Overview

All the details in the Sandbox Document revolve around the idea that the MGA must be satisfied that the licensee which intends to accept VCs as a means of payment or which intends to use DLT platforms during its operations fully understands the risks associated, takes all the necessary measures and is compliant with all AML/KYC requirements by associating and verifying each wallet address with a verified player’s account.

The MGA is prepared to allow cryptocurrencies which satisfy criteria relating to the:

  1. Financial Value;

  2. Technological Value;

  3. Scalability;

  4. Market Conditions; and

  5. Economics.

Deposits in cryptocurrencies or deposits/withdrawals on DLT are allowed when the wallet and the player’s identity are verified and when the two are linked. No withdrawal shall be allowed before such verification process is completed. Any pending transactions which do not match a player’s verified wallet address shall be reversed back to the originating wallet address.

The MGA prohibits any form of exchanging between one VC and another and sale of any token within the operator’s ecosystem, while allowing custom tokens to be sold within the system as long as in a closed-loop scenario. Therefore, deposits in fiat currency shall only serve for wagers made in fiat currency and withdrawals which must be effected in fiat currency.

The MGA also outlines procedures how maximum amounts and wagering limits must be controlled due to the high volatility of VCs, and how exchange rates shall be calculated.