The Chinese authorities have propose a ban on converting virtual gaming tokens into fiat currency as a preventative measure to regulate the booming Web3 gaming sector.
The proposed rules have been introduced as part of a wider plan for new regulations for the gaming industry. They aim to exert tighter control over the digital economy, particularly in the rapidly evolving area of games based on the blockchain.
Ban on conversion into legal tender
The draft regulation, published by the General Administration of Press and Publications (GAPP) on December 22, outlines comprehensive measures governing the issuance and management of virtual tokens in online games. A key aspect of this regulation is the ban on converting virtual in-game tokens, often used in Web3 and blockchain-based games, into legal tender.
The move is seen as a direct response to the growing integration of blockchain technology into gaming, where digital currencies and assets are commonly traded and potentially exchanged for real money.
The proposed rules are primarily aimed at mitigating financial risks, illegal fundraising and money laundering, problems often associated with the unregulated use of virtual currencies.
According to the new guidelines, online gaming platforms must ensure that virtual tokens used in games cannot be exchanged for fiat currency or other real-world assets. The regulation also requires these platforms to keep detailed records of users’ purchases of virtual tokens for a minimum period of two years.
In addition to banning currency conversion, the project imposes strict standards on the issuance of virtual tokens. It emphasizes transparency and reasonableness in the distribution and purchase standards of these tokens, highlighting the government’s approach to protecting consumer rights and maintaining financial stability.
The proposed regulations also stipulate that entities offering virtual token trading services must adhere to real-name registration systems and are prohibited from providing anonymous trading services. This is part of China’s broader push for a more regulated and monitored digital economy.
Rules could stifle blockchain games
These regulations are expected to have significant impacts, particularly on Web3 game developers and operators in the video game industry. The inability to convert in-game tokens into legal tender could change the business model of many blockchain-based games, potentially affecting their popularity and profitability.
Experts say that while these regulations could curb speculative trading and ensure better oversight, they could also stifle innovation in the gaming industry, which has been a significant driver of blockchain technology adoption.
Chinese authorities have not yet announced when these regulations will come into effect, but the gaming and blockchain communities are closely monitoring further developments.