Blockchain games – commonly referred to as NFT or crypto games – are video games that incorporate cryptography-based blockchain technology.
Blockchain games typically use cryptocurrencies or NFTs that players can buy, sell, earn and trade with other players. These cryptocurrencies and NFTs can then be used to make in-game purchases. Blockchain gaming platforms monetize the process by taking a cut on each transaction and/or by selling in-game features and products.
Blockchain games that allow players to earn native NFTs or cryptocurrencies by playing the game are known as play-to-earn or P2E. These platforms are revolutionizing gaming as they allow players to potentially earn an income by playing a game. Over the last year, blockchain-based games have skyrocketed in popularity, becoming established as an entirely novel and value-generating subset of the crypto industry.
Some gaming platforms are also venturing into the ICO and launchpad space, offering native tokens as a means to fund development. These platforms offer investors the chance to make an early stake in a game’s native cryptocurrency, with the opportunity to make a profit should the game grow in popularity and the tokens increase in value.
What this all means is that blockchain games are blurring the line between gaming and finance. Using a P2E platform, users can now effectively earn or buy in-game tokens, cash them out for more liquid ERC20 tokens, which can then be sold for fiat.
This system is creating a whole new host of opportunities for gamers to earn incomes from gaming – but is also creating new possibilities for criminals to launder illicit proceeds through P2E platforms.
Indeed, blockchain analytics firm Elliptic has recently released a report delving into the various new ways financial criminals may be exploiting P2E games as a means for money laundering.
While video game providers previously did not have to consider aspects like Anti-Money Laundering (AML) and Know Your Customer (KYC) responsibilities as they did not offer any virtual assets, games that offer the chance to buy, earn, trade and sell in-game tokens need to comply with global AML regulations and reporting standards.
A KYC onboarding process for a blockchain game would progress through a series of checks that establish a user’s identity and risk profile. These can include:
- ID document verification (IDV)
- Liveness checks to detect if the user is a real person and not a bot
- Biometric selfie confirmation
- Crypto wallet screening
- AML screening against global sanctions, PEP and adverse media lists
Reasons for blockchain games to use KYC
Blockchain gaming platforms that implement efficient and automated KYC processes can realize numerous objectives, including:
- Regulatory compliance – Global financial regulators are constantly refining and expanding regulations governing cryptocurrencies and virtual assets (VAs), as well as the companies and platforms that facilitate their trade and exchange, such as blockchain games that offer token sales and P2E functions.
- Track record – By implementing effective KYC on their users, blockchain games can stay ahead of the regulatory curve and ensure they have a verifiable track record of their users, investors and compliance measures taken during their onboarding. This is especially important should any irregularities in crypto trades ever emerge, or if a regulatory audit demands a verified history of transactions and financial activity.
- Access to financial markets – Banks are increasingly demanding that any platform or individual engaged in crypto trading has demonstrated that their counter-parties have been adequately vetted, including through the use of crypto wallet screening. By carrying out crypto wallet screening, blockchain gaming platforms can gain better access to the global financial system in order to convert their proceeds into fiat, for example.
- Trust – While there is a preconception that KYC discourages investors who value anonymity, in reality most crypto investors appreciate the security and accountability that KYC processes provide.
- Expand investor pools – In addition to providing early-stage investors and users with the added assurance of KYC, automated KYC tech can ensure that blockchain gaming platforms can onboard users from diverse international jurisdictions without the risk of violating national and international financial regulations or global sanctions regimes.
Case study: Forgotten Chain
KYC-Chain has recently partnered with Forgotten Chain, an innovative, blockchain-based gaming platform that is also offering its users the chance to earn and trade its native tokens and NFTs.
Forgotten Chain presents an impressive break from what most blockchain-based games have so far offered.
The gameplay is as complex and multilayered as is to be expected from a massively-multiplayer online role playing game (MMORPG) in 2022, but has the added power of allowing its users to earn “Forgotten Coin” tokens through their performance in the game.
These can then be used to buy Forgotten Chain NFTs, which can be traded both within the game and out on the external NFT market.
Forgotten Chain is also issuing limited numbers of tokens for sale in private and public ICOs. In order to ensure compliance and to properly vet their prospective investors, they have opted to use KYC-Chain’s onboarding platform.
This allows Forgotten Chain to quickly and securely ascertain the identity and understand the risk profile of individuals who want to gain access to its NFTs, either through in-game earning or through its public and private ICOs. In addition to allowing Forgotten Chain to remain compliant with constantly-evolving global financial regulations, it also secures the platform against being defrauded by sham investors or malicious actors.
To find out more about the Forgotten Chain project and its ICO, check out their whitepaper here.
And if you want to find out more about how KYC-Chain can allow your blockchain gaming platform to onboard users, players and investors securely and efficiently, get in touch and we’ll be happy to start a conversation.