This post first appeared as Blog post at FIN LAW.
Video games have long since become an alternative way to spend leisure time in society. So-called massive multiplayer online games (MMO), in which players from all over the world can play together or against each other, are particularly popular. In many of these MMOs there are so-called in-game currencies. These are digital payment units that can only be purchased and used within the relevant gaming environment and can be used, for example, to purchase digital items within the respective computer game.
Providers of such MMOs are increasingly thinking about the possibility of tokenizing their in-game currencies. Tokenized game money could also be stored and transferred outside the relevant gaming environment in crypto wallets by the respective holders, without any involvement from the MMO operator. However, it must be clarified in individual cases, especially against the background of increasing crypto regulation, whether the tokenization of a game currency is possible from a regulatory perspective. If the tokenized in-game tokens ultimately qualify as regulated instruments, commercial use of them may, in individual cases, require the prior obtaining of a BaFin license or the publication of regulatory documentation.
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Does issuing in-game tokens require a BaFin license?
Whether an MMO operator must first obtain a BaFin license in order to issue a tokenized game currency depends on the regulatory classification of both the tokenized in-game currency and what specific activities the MMO operator would like to offer in this context. A door opener for regulated activities and thus for the requirement of a BaFin license is usually given if the crypto tokens in question are classified as financial instruments within the meaning of the Banking Act (KWG) or the Securities Institutions Act (WpIG).
In particular, classification as a unit of account or as a crypto value comes into consideration. However, according to its established administrative practice, BaFin only sees units of account in instruments that are used as substitute or complementary currencies. In this respect, the classification of an in-game token created through tokenization as an accounting unit always depends on whether it can at least also be used as a means of payment. If this property is missing, the units of the tokenized computer game currency cannot be classified as a unit of account. To qualify as a crypto asset, an in-game token must either be used as a means of exchange or payment or serve investment purposes.
However, the latter do not already exist when a player purchases in-game tokens in the expectation of an increase in value. Rather, it is necessary that the provider or third parties associated with him promise suitability for investment purposes through advertising statements. With regard to regulated activities, it must be examined which specific services the provider plans to provide in relation to the tokenized computer game currency. If, for example, a marketplace is to be operated on which in-game tokens can be purchased, a BaFin license may be required, depending on the design, for example for investment brokerage, proprietary trading, financial commission business or the operation of a multilateral trading system. If the provider wants to offer players a storage option via crypto wallets, crypto custody may be subject to authorization.
What obligations arise from MiCAR for the tokenization of a game currency?
The question of the necessity of a BaFin license must also be considered from the point of view of the fact that it will be binding from summer 2024 Markets in Crypto Assets Regulation (MiCAR) being checked. The new MiCAR supervisory regime also imposes an obligation on issuers of crypto assets in many constellations to create and publish a crypto white paper. This must contain the essential information that may be relevant for buyers of the crypto assets to be offered within the meaning of MiCAR. In particular, this concerns information about the issuer itself as well as the technical and legal design of the crypto asset in question.
The crypto white paper must also comment on the risks associated with the acquisition. The creation and publication of a corresponding crypto white paper may also be required for the issuance of in-game tokens created through tokenization. A relevant exception in the case of in-game tokens exists in cases in which the units of the tokenized game currency qualify as utility tokens within the meaning of MiCAR, which grant access to an already existing good or service that is already offered.
For example, in addition to the possibility of storage and transfer inherent in all tokens, the in-game token in question can only be used to be transferred back into the MMO in order to be used there as an untokenized in-game currency to purchase digital items in the game environment , the exceptional circumstances could exist in individual cases.
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