The Consumer Financial Protection Bureau (CFPB) has released a report highlighting concerns about financial transactions on online gaming platforms. As part of its mandate to protect consumers in the financial markets, the CFPB keeps a close eye on these transactions and their potential impact on players.
Banking in video games and virtual worlds
The report outlines how players in popular video games can earn or buy in-game currency with fiat currency. This digital currency is then used for various in-game transactions, such as purchasing virtual items or upgrades. The CFPB likens these transactions to “banking in video games and virtual worlds,” highlighting the increasing role of financial activities within the gaming industry.
An important distinction made in the report is between virtual gaming worlds and cryptocurrency virtual worlds. While both involve the use of digital currencies, the latter has a direct connection to third-party crypto asset trading platforms that allow conversion to fiat currency. This adds an extra layer of complexity and potential risk for players.
Concerns about fraud and exploitation
One of the CFPB’s main concerns is the potential for scams, theft and other criminal activities within gaming platforms. Because millions of players are involved in these virtual economies, there is a real risk of exploitation.
The CFPB also highlights the potential for exploitation within DeFi lending platforms, such as MetaLend. These platforms allow players to take out loans against their in-game non-fungible tokens (NFTs). While this may seem like a convenient option for players, it also opens up opportunities for fraudulent activity and manipulation.
The report documents cases of exploitation in blockchain-based games, such as Axie Infinity. The game’s structure has created hierarchies between users, with expensive NFT requirements for top players. There have also been security breaches, such as the one in Ronin, Axie Infinity’s Ethereum sidechain, where more than $622 million worth of digital assets were stolen.
Continuous monitoring and collaboration
While the CFPB has not imposed a specific action plan, it plans to continue monitoring the online gaming industry in coordination with other agencies. It will focus on collecting and selling sensitive consumer data without user consent, which is a major problem in this area.
In conclusion, the CFPB’s report highlights the growing intersection between financial activities and online gaming platforms. With millions of players and billions of dollars at stake, it is critical to address the potential risks and protect consumers in this rapidly evolving landscape.