A CFPB investigation exposes cryptocurrency frauds in the gaming industry and cautions against combining bitcoin transactions with virtual worlds.
Source: coingape
STORY HIGHLIGHTS
The Consumer Financial Protection Bureau emphasizes the emergence of cryptocurrencies on gaming platforms in a recent study.
A paper titled "Banking in Video Games and Virtual Worlds" was released, with an emphasis on fusing virtual and physical money.
Roblox and Fortnite are the most popular virtual worlds, but lesser-known cryptocurrency worlds are also popular because of their financial interfaces.
The Consumer Financial Protection Bureau (CFPB) has recently focused attention on the incorporation of cryptocurrency into gaming platforms. Its most recent paper, "Banking in Video Games and Virtual Worlds," sheds light on the growing desire for fusing virtual gaming environments with actual financial transactions. The research, which was released on Thursday, highlights the change in how game developers are utilizing cryptocurrencies to incorporate virtual goods with the actual world.
Fortnite, Second Life, and Roblox are the three most popular virtual worlds. Conversely, less well-known virtual worlds featuring cryptoassets get attention due to their ability to interface with external trading platforms. This interface adds another layer of intricacy and risk to the same gaming economy by allowing players to convert virtual crypto-assets into fiat money.
CFPB Alerts Players to Growing Crypto-Gaming Scams
According to the CFPB's analysis, there are insufficient consumer safeguards in virtual settings, and cryptocurrency frauds are on the rise. Crucially, it is clear that the biggest game producers are thinking about classifying virtual goods as cryptocurrency assets. The likelihood of fraud and frauds grows when such assets are traded on marketplaces outside of the internal economy of the game.
Furthermore, in virtual worlds such as Decentraland and The Sandbox, cryptocurrency tokens may be exchanged for fiat money on various cryptocurrency platforms. The CFPB's worries about consumer safety and the potential for frauds in such digital environments are only reinforced by the liquidity and sensitivity of changing virtual assets into real money.
Regulation of Cryptocurrency Transactions
In response to the shifting landscape, the CFPB has put out a new rule that would penalize "larger nonbank companies" that offer services that are similar to those of payment apps and digital wallets. "Defining Larger Participants of a Market for General-Use Digital Consumer Payment Applications," a proposed rule, aims to increase the level of supervision over companies that handle more than five million transactions a year. Additionally, the move would unify these organizations with the regulatory framework that applies to credit unions and large banks.
Critics of the rule argue that it goes too far in granting authority over cryptocurrency transactions. Nonetheless, the plan backs the CFPB's goal to use digital finance to close regulatory gaps, especially in the area of cryptocurrencies. Publications like this one highlight the potential for rulemaking in the future as the agency works to safeguard consumers from fraud and scams in the increasingly digital financial sector.
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