The anti-money laundering watchdog in the Philippines has issued a warning to financial institutions in the Southeast Asian country as they deal with play-to-earn gaming transactions. The regulator believes that the banks must be vigilant with their customer due diligence at a time when the $625 million Axie Infinity hack has forced global watchdogs to focus on the rapidly-growing blockchain gaming industry.
The Anti-Money Laundering Council (AMLC) reminded financial institutions in the Philippines that while play-to-earn (P2E) games are not under its purview or that of the country’s central bank, banks have to abide by the strict regulations they have been subject to for years when dealing with such entities.
In his message, AMLC Executive Director Mel Georgie B. Racela pointed out that banks are an important part of the wheel of the blockchain gaming ecosystem. In most play-to-earn games, the players earn digital currencies or native tokens, which they then sell for fiat currencies. This requires the services of a regulated financial entity such as a bank, and according to Racela, this presents a prime opportunity to monitor the industry.
“The payment channels used for the SLP tokens used in the game may include banks and electronic money issuers (EMIs). It must be remembered that banks and EMIs are covered persons and are, thus, required to conduct customer due diligence, keep records, and file covered and suspicious transaction reports (STRs),” the AML boss commented.
Racela believes that all financial institutions, “as payment and settlement facilitators, should closely monitor funds that pass through them (through the purchase or sale of such tokens) for possible links to dirty money and promptly file the corresponding STRs when appropriate,” reports local business newspaper Business World.
The warning comes at a time when P2E gaming has grabbed headlines following the $625 million heist of Axie Infinity, a game built on Ethereum whose Ronin Bridge sidechain was attacked recently. Axie had to use the sidechain as transacting on Ethereum is both expensive and slow, a fatal combination for a gaming ecosystem. However, in choosing scale and lower fees, the developers of the game sacrificed decentralization and, consequently, the security of their platform. Bitcoin SV scales unbounded, and as such, games built on BSV such as CryptoFights don’t suffer from such vulnerabilities.
“The small number of validator nodes for the Ethereum sidechain, Ronin, and the even smaller number needed to approve a transaction, shows how such platforms fail to deliver the levels of decentralization that are necessary to ensure sufficient levels of cybersecurity,” Swarup Gupta, an industry manager at the Economist Intelligence Unit summed it up, telling Business World.
Axie Infinity was most popular in the Philippines, with the Southeast Asian country making up about 35% of the game’s total payers. This has made Filipino regulators more concerned than their peers globally.
As CoinGeek reported recently, the Bangko Sentral ng Pilipinas issued a similar warning against P2E games. A senior official at the bank reminded gamers in the country that they “should only place funds that they are willing to lose because of the risk.” P2E platforms are borderless and create an opportunity for fraudsters to defraud and steal from unsuspecting gamers, the official added.
While regulators have continued to shoot such warnings about P2E games, most gamers have continued to play these games undeterred. As local Filipino outlets have reported, thousands of players even look at such games as a primary way to feed their families, devoting several hours each day to the games.
In the Philippines, most players cannot afford the high fees required to join a game like Axie Infinity, which ranges at around $1,000 for a team of three. This has led to the growth of guilds that buy into the game and then loan out digital creatures used in the game to retail players. Guilds have become such a hit that one startup offering such services raised $3.5 million in December.
“Authorities should reach out to gaming guilds in the country and coordinate with them to provide education about the risks inherent with play-to-earn gaming activity,” Gupta commented.
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