The United States Consumer Financial Protection Bureau (CFPB) has targeted crypto-centric gaming in a recent report, cautioning against scams and low consumer safeguards in video games and virtual realms.
In its “Banking in video games and virtual worlds” report released on Thursday, April 4, the consumer protection agency highlights the rising interest among gaming creators in bridging virtual items to reality.
Despite still trailing mainstream gaming platforms like Roblox or Fortnite, the agency highlighted the growth of crypto assets in virtual worlds. Third-party trading platforms enable users to convert digital assets into fiat currency. The report states:
“Notably, some of the largest virtual gaming world publishers have expressed growing interest in positioning their virtual items as crypto-assets that have the ability to be traded outside of the game’s economy.”
The report said that crypto assets in virtual environments like Decentraland and The Sandbox could be exchanged for fiat currency on other cryptocurrency platforms.
Alexander Grieve, government affairs lead at Paradigm, said that reports like the one published by the CFPB could signal upcoming regulatory actions. He suggested that the CFPB, like many federal agencies, is seeking its regulatory role in the cryptosphere, with this report potentially serving as one avenue.
The CFPB report states that online video games and virtual worlds are becoming akin to traditional banking but lack federal protections. The agency received complaints regarding hacking attempts, account theft and assets lost within games, with consumers expressing dissatisfaction over the lack of support from gaming companies.
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CFPB Director Rohit Chopra highlighted the increasing trend of Americans converting billions of dollars into digital currencies for gaming. With banking and payments shifting to virtual realms, the CFPB said it aims to safeguard consumers from fraud and scams.
The CFPB has shifted its focus toward cryptocurrencies, introducing a proposed rule titled “Defining Larger Participants of a Market for General-Use Digital Consumer Payment Applications.” This rule grants the agency oversight over “larger nonbank firms” providing digital wallet and payment app services.
It mandates nonbank financial entities processing over five million transactions annually to adhere to regulations akin to those imposed on major banks and credit unions. Although the 62-page rule references cryptocurrency sparingly, critics contend it “asserts authority over cryptocurrency” inappropriately.
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