BSP warns vs play-to-earn games after major cryptocurrency heist

BSP warns vs play-to-earn games after major cryptocurrency heist

Bitcoin cryptocurrency representation is pictured on a keyboard in front of a binary code in this illustration taken on Sept. 24, 2021. — REUTERS

PHILIPPINE CENTRAL BANK officials warned the public to remain cautious when dealing with play-to-earn games involving digital tokens, following the hack of a blockchain project linked to the popular cryptocurrency game Axie Infinity.

“We wish to emphasize that there are risks associated with non-fungible tokens (NFTs) such as price volatility, which may resort to significant financial losses and also other types of risk relating to cyber fraud and scams,” Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said at a virtual briefing on Thursday.

Reuters reported hackers have stolen cryptocurrency worth almost $615 million from Ronin, a blockchain network that lets Axie Infinity users transfer crypto in and out of the game.

According to Axie Infinity, it has 2.8 million daily active players, with some $3.6 billion previously traded on its marketplace. Players can collect, trade and play with virtual creatures called Axies, which are traded in the form of NFTs and sell for hundreds of thousands of dollars.

Vietnamese startup Sky Mavis, which created the game, has previously said that about 35% of the game’s traffic comes from the Philippines.

Bridget Rose M. Mesina-Romero, deputy director at the BSP’s Payment System Oversight Department, said people should be aware of the risks involved in these play-to-earn games.

“They should only place funds that they are willing to lose because of the risk. Since this is a digital field, it creates borderless area where fraudsters can really enter and perform illicit activity so the public should practice cyber hygiene in order to protect your personal data,” she said.

Mr. Diokno said the central bank is continuously monitoring NFT activities that are used in online games, adding they are still discussing with other regulators the appropriate approach for Axie Infinity and other gaming platforms.

He said that under BSP Circular 1108, the “smooth love potion” tokens which can be earned through the Axie Infinity game could not be considered as a digital unit of exchange.

Meanwhile, Ms. Romero said those who wish to exchange their virtual assets into fiat currency or money should only do so with entities that are registered with the BSP to ensure their safety.

While cognizant of the risks, the BSP earlier also acknowledged that innovations like play-to-earn games can have the potential to boost financial inclusion and payments digitalization when harnessed in a responsible manner.

At the same briefing, Mr. Diokno said the social media platform LYKA/Things I Like Co. Ltd. (TIL) has yet to receive a license from the BSP.

Lyka uses Giftcards in Electronic Mode (GEMS) on its platform, which can be used to purchase, exchange, and pay for goods and services with selected merchants. This makes it function like an operator of payment system (OPS), which are entities that are monitored by the central bank.

Last year, the BSP reiterated that TIL itself should be the one to apply for an OPS license instead of its marketing arm.

As of March 25, Mr. Diokno said there are 200 OPS registered with the BSP — where 39 are banks, 24 are nonbank electronic money issuers (EMIs), while 137 nonbank non-EMI institutions. — Luz Wendy T. Noble