The Consumer Financial Protection Bureau (CFPB) of the United States has recently released a report warning about scams and inadequate consumer protection in crypto-centric gaming. The report, titled “Banking in video games and virtual worlds,” highlights the growing interest among game creators in connecting virtual items to the real world. While not as popular as mainstream gaming platforms like Roblox or Fortnite, the report acknowledges the increasing presence of crypto assets in virtual environments. Users can convert these digital assets into fiat currency through third-party trading platforms. The report specifically mentions Decentraland and The Sandbox as examples of virtual realms where crypto assets can be exchanged for fiat currency on other cryptocurrency platforms.
Alexander Grieve, government affairs lead at Paradigm, believes that reports like this one from the CFPB could indicate upcoming regulatory actions. He suggests that the CFPB, like other federal agencies, is exploring its regulatory role in the crypto sphere, and this report could be a step in that direction.
The CFPB report emphasizes that online video games and virtual worlds are becoming similar to traditional banking systems but lack the same level of federal protections. The agency has received complaints about hacking attempts, account theft, and lost assets within games, with consumers expressing dissatisfaction over the lack of support from gaming companies.
CFPB Director Rohit Chopra has highlighted the growing trend of Americans converting billions of dollars into digital currencies for gaming purposes. With banking and payments moving into virtual realms, the CFPB aims to protect consumers from fraud and scams.
The CFPB has also shifted its focus towards cryptocurrencies and introduced a proposed rule called “Defining Larger Participants of a Market for General-Use Digital Consumer Payment Applications.” This rule gives the agency oversight over larger nonbank firms that provide digital wallet and payment app services. Nonbank financial entities processing over five million transactions annually would be required to comply with regulations similar to those imposed on major banks and credit unions. While the 62-page rule mentions cryptocurrency sparingly, critics argue that it inappropriately asserts authority over the crypto industry.
In the US, proposed crypto regulations are being driven by lawmakers’ fears and doubts about the industry.