The Consumer Financial Protection Bureau (CFPB) of the United States has recently released a report that focuses on crypto-centric gaming, warning about scams and inadequate consumer protection in video games and virtual worlds.
The report, titled “Banking in video games and virtual worlds,” was published on Thursday, April 4. It highlights the growing interest among gaming creators in connecting virtual items to the real world. Although crypto assets in virtual environments, such as Decentraland and The Sandbox, are still not as popular as mainstream gaming platforms like Roblox or Fortnite, the CFPB acknowledges their increasing presence. Third-party trading platforms allow users to convert digital assets into fiat currency, as mentioned in the report.
Alexander Grieve, government affairs lead at Paradigm, believes that reports like the one published by the CFPB may indicate upcoming regulatory actions. He suggests that the CFPB, like other federal agencies, is aiming to establish its regulatory role in the cryptocurrency sphere, and this report could be one way of doing so.
The CFPB report states that online video games and virtual worlds are becoming similar to traditional banking systems but lack the federal protections that come with it. The agency has received complaints from consumers regarding hacking attempts, account theft, and lost assets within games. These consumers express their dissatisfaction with the lack of support from gaming companies.
CFPB Director Rohit Chopra has emphasized the growing trend of Americans converting billions of dollars into digital currencies for gaming purposes. With banking and payments now shifting to virtual realms, the CFPB aims to protect consumers from fraud and scams.
In line with its focus on cryptocurrencies, the CFPB has introduced a proposed rule called “Defining Larger Participants of a Market for General-Use Digital Consumer Payment Applications.” This rule grants the agency oversight over nonbank firms that provide digital wallet and payment app services and process over five million transactions annually. These entities would be required to adhere to regulations similar to those imposed on major banks and credit unions. While the rule mentions cryptocurrency sparingly in its 62 pages, critics argue that it inappropriately asserts authority over cryptocurrency.
The proposed crypto regulations in the US are driven by lawmakers’ fear and doubt surrounding the industry.
Overall, the CFPB’s report sheds light on the need for better consumer protection in the crypto-centric gaming industry and indicates the regulatory efforts being made in this space.