Regulating Cryptocurrency in the Gaming Industry in Global Perspectives
The ever-growing gaming industry is characterized by its ability to adopt new technologies that enhance gamer experience. As such, it is no surprise that cryptocurrency has been easily integrated into the industry and has started to revolutionize the way gaming transactions are conducted.
As gaming platforms increasingly explore the integration of cryptocurrency for in-game transactions and rewards, the need for regulations becomes more pressing. Although there has been recent progress made in digital asset regulation, differences in approach made by various countries can create challenges for global consistency and compliance. Below, let us explore the various regulations adopted on a global scale and the various challenges faced in implementing such regulations upon the convergence of cryptocurrency and the global gaming industry.
The Rise of Cryptocurrency in Gaming
The use of cryptocurrency has seen a meteoric rise in the gaming industry. Its decentralized nature and its ability to facilitate intermediary-free transactions have made it appealing for gamers especially when dealing with a lot of microtransactions.
One of the most notable applications of cryptocurrency in the gaming industry is the development of play-to-earn (P2E) games where gamers can earn cryptocurrency and NFTs as they play. These types of games leverage blockchain technology providing gamers an opportunity to earn in-game assets that can be traded or sold outside the game.
Another application is the development of interoperability between games and platforms where gamers get to earn and use assets and currencies across different games. This interoperability allows a more unified virtual world.
Crypto in Gaming: What are the Regulations?
As cryptocurrency continues to flourish in the gaming industry, countries such as the US, Canada, Australia, and others are becoming more committed to unveiling regulatory frameworks. Although progress has been made when it comes to regulating cryptocurrencies, the lack of coordination makes it challenging considering each jurisdiction needs to develop its set of regulations due to varying goals and objectives.
Despite varying goals and objectives, it is still imperative for global stakeholders and countries involved to collaborate and forge a secure and equitable regulatory environment in the gaming industry.
Consumer Protection
To help protect consumers, especially gamers, when it comes to risks associated in utilizing cryptocurrencies, various countries have set up regulatory guidelines implemented by their own agencies. In North America, including Canada, they have the SeC (Securities and Exchange Commision) and the CFTC (Commodity Future Trading Commission) that actively police digital asset markets, and enforce regulatory standards. When it comes to gaming, they require online casinos to enforce strict guidelines to ensure compliance and protect user’s data.
To assist consumers, gaming review sites frequently compile lists of the best crypto casinos that comply with local and state regulations and ensure compliance to protect user data. In doing so, they make it easy for gamers to enjoy secure, fast, and anonymous transactions on top of a thrilling gameplay. For the European Union, they have the Comprehensive Markets in Crypto-Assets regulation (MiCA) to provide legal clarity on privacy, security, and transparency for digital assets. Accordingly, this is upheld by the respective regulatory bodies of European countries to further provide clarity around managing and trading cryptocurrencies in gaming platforms.
Anti-Money Laundering and Combating Financing of Terorism
Aside from upholding consumer protection, regulatory bodies are also increasingly focused on combating money laundering schemes involving cryptocurrencies in online casinos.
In North and South Americas, Anti-Money Laundering (AML) regulations are enforced under the Bank Secrecy Act together with state-level regulations. Through these regulations, involved regulatory bodies require crypto casinos to maintain records of transactions and file suspicious activity reports to ensure all suspicious activities are detected. Additionally, they also require AML compliance from these gaming platforms as well as implementing thorough KYC (Know Your Customer) procedures to verify customer identities.
For the European Union, their MiCA regulations also provide the standards required to strengthen AML protections in crypto casinos. In 2021, they established the Anti-Money Laundering and Countering the Financing of Terrorism Authority to further strengthen and ensure the performance of these platforms in enhancing due diligence involving crypto-related transactions.
Additionally, they also have the 5AMLD (5th Anti-Money Laundering Directive) to further strengthen compliance of various sectors, including crypto casinos, to comply with anti-money laundering and Know Your Customer requirements.
Licensing
Lastly, putting up logos of local and international regulatory bodies has long been the norm for crypto casinos to assure gamers of their compliance with proper licensing requirements of regulatory bodies.
Whether a crypto casino is based in either America or Europe, the most common sign that an online casino adheres to regulations is that they display valid licenses from reputable gaming authorities in their platforms.
In the Americas, particularly in the US, these gaming platforms are primarily regulated at the state level which means that their state can set the rules for licensing and operation requirements. As such, if you are a US gamer, look for the logo of the state regulatory body in the platform just to make sure that platform you are playing in is in compliance with the local licensing and operation laws.
In Europe, crypto casinos must adhere to both EU-mandated regulatory framework and national-level regulations. Aside from adhering to 5AMLD, they should also comply with the UK Gambling commission, which was the rule pre-Brexit. As such, look for logos of national gaming authorities on the platform.
When in doubt of the platform’s compliance, make sure to reach out to their customer service team to gather the necessary information you need about their licensing.
Final Thoughts
As the gaming industry continues to broaden the applications of cryptocurrency, the regulatory landscape is likely to evolve alongside it. As such, we can expect that respective regulatory bodies of countries will have to develop more nuanced and adaptable frameworks that encourage innovation while still fully protecting gamers.
Additionally, regulatory bodies are also expected to collaborate with gaming companies to address concerns, establish best practices, and foster a regulatory environment that not only protects consumers but also nurtures growth.