GameFi Faces Regulatory Headwinds in Major Asian Markets

February 2, 2022 South Korea Crime & Legal

As cryptocurrency investors look to GameFi as the industry’s latest vertical, experts warn gaming and crypto’s most important markets will provide regulatory challenges for the industry.

In the first few weeks of the year, a considerable amount of capital was allocated to investment pools looking for the next big thing in GameFi – the collision of crypto and gaming. In January, FTX established a $2 billion fund to target gaming; shortly after, Singapore’s Crypto.com Ventures upped its $200 million fund to $500 million saying that gaming was one of the investment themes on which it planned to double down.

This enthusiasm crypto investors have for gaming is matched by executives at some of the gaming industry’s largest incumbents. Leadership at EA and Ubisoft have both said that blockchain technology, as well as non-fungible tokens (NFT), represent the future of gaming.

While mainstream crypto gaming has already had the challenge of lukewarm consumer interest, the industry faces an even greater challenge in some of the most important markets in Asia: a strict regulatory framework.

Laws already on the books
Usually, with crypto there’s an element of regulatory fog. However, with crypto gaming specifically, there are laws about monetizing game tokens already on the books in South Korea, Japan and China – and in some cases, they are nearly 20 years old.

Oleg Smagin, a senior crypto finance manager at Seoul-based Post Voyager, a GameFi service developer, points to Article 32 of Korea’s Gaming Industry Promotion Act as a potential problem. It specifically bans game currency from being converted into cash.