The next time someone remarks casually that cryptocurrencies are not “real money” because nobody would use real money to buy digital goods, ask them if they’ve ever played the highly addictive mobile game Clash of Clans or any one of the other hugely popular mobile gaming titles available. In Clash of Clans, prices start as low as US$2.60 for 500 gemsbut can go much crazier from there. Yet not only are players happy to fork out real cash for virtual goods, at least in the case of Clash of Clans, they’re forking it out to the tune of a cool US$1.5 million a day, making the Helsinki-based company enormously rich. What are the developers going to spend all that real gold on anyway? A better ice house? Nowhere is the addictive nature of gaming more apparent than in China — the world’s largest biggest video game market. But just as the Chinese have been plonking down some hard-earned yuan for some virtual armor, the Chinese government has been coming down hard to limit what it has determined to be a highly malicious influence on Chinese society.
Earlier this year, Chinese authorities restricted the approval of new games (that’s right games actually need to be “approved” in China) and in October, new games were completely halted. Naturally, stock of Tencent, whose revenues depend heavily on games, fell by 28% since the start of the year. But it’s not just China which has its panties in a bunch when it comes to gaming, even liberal democracies such as Japan and South Korea have passed laws designed to regulate what authorities see as a video gaming industry whose products are addictive and harmful. Maybe it’s an East Asian thing, but these are countries which also have the highest numbers of smokers per capita. And while the governments in these countries are more than content to allow smoking to continue, they seem intent on limiting the effect of video games on their population.
One reason is no doubt economic. There is little debate now that players are willing to pay real money for virtual goods. And from a developer’s perspective, nothing could be better given that there is zero marginal cost of producing additional virtual goods or indeed of artificially restricting their supply. But the clamp down by regulators in China, Japan and South Korea, which coincidentally are also three of the world’s most major markets for cryptocurrencies will only drive game developers and gamers into a form of value transfer which would bypass a government sanctioned payment gateway anyway — cryptocurrencies.
Already, there are numerous forums where digital goods can be swapped for digital currencies, sanctioned by game developers or not. The regulatory push by governments to limit or restrict gaming titles due to their addictive nature is the same sort of push which made marijuana illegal — a move which has since been rolled back by several states in the United States. Coming down on games is not the solution — education is. Because driving the gaming world underground will only make it that much more difficult to regulate — similar to cryptocurrencies. As witnessed by the Chinese example, where China’s ban on cryptocurrency exchanges and ICOs (initial coin offerings) did little more than to push them offshore and underground, this push against games (which are far more addictive than cryptocurrencies) will do the same.
So it should come as no surprise that many of the early adopters of cryptocurrencies were gamers as well. Because the concept of paying fiat currency for virtual goods is not a leap of the imagination, many, had already been doing so for some time now. But with cryptocurrencies, the prospect of using digital currency to buy goods in the real world — many lost their minds and that was what contributed towards the mismatch between cryptocurrency utility and expectations towards the latter half of last year and the early part of this year. To me at least, the argument for using cryptocurrencies in video games is obvious. At least for now, cryptocurrencies can still be exchanged for fiat currency (if so needed) and at least that would give game companies the option to locate in more favorable jurisdictions, while maintaining a steady revenue stream, crypto or otherwise.
From a player’s perspective, it also affords a degree of anonymity in leisure activity, because whose business is it anyway if someone wants to spend money playing video games? It also provides for a far more vibrant secondary market for virtual goods, whether earned or created by enterprising gamers or service providers alike and the opportunity to trade for their own profit in these markets — so that the line between pleasure and business becomes less clear — and why shouldn’t gamers be financially remunerated for their hours spent gaming? And while for now at least, game developers may be content to work within the status quo, a hard line from regulators will only drive the developers into the shadows and bring cryptocurrencies along with them — making them even more difficult to regulate than ever.
Patrick is an innovative entrepreneur and a lawyer passionate about cryptocurrencies and the business world. He is the CEO of Novum Global Technologies, a cryptocurrency quantitative trading firm. He understands the business concerns of founders and business people helping them to utilise the legal framework to structure their companies to take advantage of emerging technologies such as the blockchain in order to reach greater heights. His passion for travel, marketing and brand building has led him across careers and continents. He read law at the National University of Singapore and graduated with Honors in the Upper Division and joined one of Singapore’s top law firms, Allen & Gledhill where he was called to the Singapore Bar as an Advocate & Solicitor in 2005. He created Purer Skin, a skincare and inner beauty company which melds the traditional wisdom of ancient Asian ingredients such as Bird's Nest with modern technology. In 2010, his partner and himself successfully raised $589,000 from the National Research Foundation of Singapore under the Prime Minister’s Office. He has played a key role in the growth of Purer Skin from 11 retail points in Singapore to over 755 retail points in Singapore and 2 overseas in less than a year. He taught himself graphic design, coding, website design and video editing to create the Purer Skin brand and finished his training at a leading Digital Media Company.