May 29, 2024
Web3 Gaming Faces Regulatory Storm as China Proposes Token Restrictions
Policy & Regulation

Web3 Gaming Faces Regulatory Storm as China Proposes Token Restrictions

To tighten control over the rapidly evolving online games industry, the General Administration of Press and Publication of China (GAPP) has unveiled a draft of guidelines that could reshape the landscape of in-game token activities. The guidelines, published on December 22, propose stringent restrictions, including a ban on the purchase of physical goods using game tokens and the exchange of these tokens for legal tender.

The comprehensive guidelines, comprising 62 articles, cover various facets of the online games sector. Among the proposed regulations, companies operating in China would be required to obtain a license, store customer data for up to two years, ensure content compliance with a set of national and socialist values, and eliminate opportunities for anonymous user registration.

Article 23 specifically addresses the use of game tokens, seeking to prohibit their utilization for purchasing physical goods or exchanging them for “products and services of other units” or “legal tender.” While the guidelines do not explicitly mention cryptocurrencies, the term “legal tender” raises questions about the potential impact on crypto transactions, especially considering China’s strict stance on digital currencies.

The GAPP aims to create a separation between online game economies and the broader real economy by restricting the interchangeability of game tokens with legal tender or tangible goods.

The guidelines impose additional constraints on game providers, prohibiting induced rewards like registration or daily login bonuses. Companies must also set user recharge limits and implement pop-up window warnings to deter “irrational consumption behaviour” by users.

It’s crucial to note that these guidelines are currently in the public consultation phase and do not carry legal force. Stakeholders and the public have until January 22, 2024, to provide feedback on the proposed regulations.

Recent data from DappRadar indicates that approximately one million unique active wallets have engaged in Web3 games daily over the past three months. Yat Siu, co-founder of gaming and venture firm Animoca Brands, anticipates a potential surge, with up to 100 million active wallets in Web3 games next year.

As the gaming industry continues to undergo rapid transformation and innovation, China’s proposed regulations signal a concerted effort to assert control over in-game economies and align them with the country’s broader regulatory framework. The outcome of the public consultation will likely shape the future landscape of the online games sector in China.

Image: Wallpapers.com

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