The Isle of Man Gambling Supervision Commission (GSC) has issued a stark warning about the risks of virtual assets and cryptocurrencies in gambling, drawing on findings in a newly published MONEYVAL report on the supervision of virtual asset activity across its member jurisdictions. Regulators identified that the speed, pseudonymous nature and cross‑border reach of virtual asset transactions, including crypto used for wagering, create vulnerabilities to money laundering, fraud and sanctions evasion that require stronger oversight and global cooperation.
The GSC’s warning comes as the use of virtual assets in online gambling continues to grow internationally, both within regulated frameworks and, more significantly, beyond them, where enforcement and compliance controls can be weak or inconsistent.
MONEYVAL Report Signals Crypto‑Related Financial Crime Threats
The latest MONEYVAL report on virtual assets provides an updated review of how virtual assets and virtual asset service providers (VASPs) are used, and potentially abused, across 25 jurisdictions, including the Isle of Man. The report highlights that while many countries have strengthened licensing and supervisory regimes for VASPs, enforcement gaps persist, particularly in detecting and deterring unlicensed providers and crypto flows that may facilitate illicit activity.
According to the report, virtual assets continue to present a series of emerging threats:
- Money laundering through rapid, lightly documented crypto transfers.
- Sanctions evasion, where users migrate to unregulated or permissive environments.
- Fraud and illicit networks, including sophisticated schemes relying on pseudonymity and fast transaction speeds.
- Proliferation financing and other misuse typologies that extend beyond individual actors.
Spokespersons for the GSC noted that these vulnerabilities are particularly acute in the digital gambling space, where high‑velocity financial flows intersect with platforms that permit virtual asset payments. The regulator stressed that crypto’s anonymity features can make transaction monitoring challenging and that even legitimate, licensed operators must be vigilant in how they evaluate and control virtual asset activity.
Regulatory Risks Extend Beyond Licensing to Enforcement Gaps
While many jurisdictions now require VASPs to be licensed or registered, a significant improvement, the MONEYVAL report noted that enforcement against unlicensed providers remains weak in several cases. That means operators and financial intermediaries can exploit regulatory gaps, making it harder for authorities to supervise cross‑border financial flows effectively.
The GSC emphasised that effective enforcement against virtual asset‑related financial crime requires:
- Stronger intelligence‑sharing mechanisms between jurisdictions.
- Coordinated AML/CFT risk assessments that explicitly account for sanctions and fraud risks.
- Enhanced capacity building and analytical tools to track crypto‑asset flows in real time.
This warning also reflects the regulator’s view that existing AML/CFT frameworks must evolve alongside the technology itself, a process that requires both national action and international cooperation.
Crypto Gambling in Context: Regulatory Approach and Risks
In the Isle of Man, cryptocurrencies are legally permitted as payment methods for licensed operators under the Online Gambling Regulation Act (OGRA), provided operators meet existing AML/KYC obligations and monitor crypto flows as rigorously as traditional funds.
However, as the GSC’s warning highlights, the inherent characteristics of virtual assets, such as decentralised access, anonymity, and rapid value transfer, magnify the risk that legitimate gambling transactions may be used as fronts for money laundering and related financial crime. This aligns with broader compliance guidance from the GSC, which frames virtual currencies as requiring similar scrutiny to fiat money under AML/CFT codes.
The currency speed and cross‑border mechanics associated with crypto require sophisticated transaction monitoring and due diligence processes from operators, tools that are still developing in many jurisdictions.
Commission Calls for Stronger Global Enforcement and Cooperation
In response to the report’s findings, the GSC has reiterated the need for stronger international enforcement cooperation, including:
- Enhanced regulatory alignment on virtual asset licensing and supervision.
- Joint investigations and intelligence sharing between national regulators.
- Inclusion of crypto‑gambling risks in broader national financial crime assessments.
- Consistent enforcement against unlicensed platforms that exploit regulatory gaps.
The regulator also warned that organised criminal networks and state‑linked actors may exploit virtual asset channels for proliferation financing, expanding the risk beyond typical money laundering typologies.
Industry observers say that without such coordinated action, the growing integration of crypto into gambling could continue to outpace regulatory safeguards.
Industry Implications: Compliance and Risk Management
For gambling operators licensed in the Isle of Man and globally, the warning spotlights the importance of rigorous AML/CFT compliance, particularly with respect to virtual assets. Operators must incorporate virtual asset risk profiles into their know‑your‑customer (KYC) frameworks and transaction monitoring systems, ensuring they align with international financial crime standards.
The GSC’s emphasis on proactive risk mitigation also resonates with broader industry discussions about digital asset use. For example, senior figures in other major regulators have previously highlighted the challenge of integrating crypto into traditional gambling compliance frameworks, especially where fast, anonymous transfers complicate due diligence.
This suggests that regulators and operators alike must treat virtual assets with the same caution and oversight as other high‑risk financial vehicles.
Evolving Regulations and Financial Crime Strategy
The MONEYVAL report and the GSC’s consequent warning underline that virtual asset risk supervision is now a core component of financial crime prevention in gambling regulation. As virtual asset technology continues to evolve, regulators are likely to push for:
- Enhanced policy frameworks that integrate crypto‑specific AML/CFT requirements.
- More detailed guidance on monitoring and reporting virtual asset transactions.
- Expanded international cooperation mechanisms for sharing intelligence and coordinated enforcement.
- Increased capacity building for regulators and industry compliance teams.
With regulators across multiple jurisdictions calling for unified approaches to crypto risk, the landscape for virtual asset gambling compliance is poised for significant refinement in 2026 and beyond.