CFPB report calls out crypto, warns of financial risks in video games and virtual worlds

The Consumer Financial Protection Bureau has set its sights on crypto-focused gaming in its report warning of scams and reduced consumer protections in video games and virtual worlds. 

Crypto may have a smaller sliver in the realm of virtual gaming worlds, but interest is growing among gaming creators for taking virtual items into the real world, the CFPB said in a report titled "Banking in Video Games and Virtual Worlds," released on Thursday. The report mainly was focused on virtual games in general. 

"While these crypto-asset virtual worlds are significantly less popular than virtual gaming worlds like Roblox, Second Life, or Fortnite, they are important to note because of the prevalence of third-party crypto-asset trading platforms, users can convert a virtual world’s native crypto-asset to fiat currency, making them even more porous than typical gaming markets," the agency said. "Notably, some of the largest virtual gaming world publishers have expressed growing interest in positioning their virtual items as crypto-assets that have the ability to be traded outside of the game’s economy."

Crypto assets within worlds such as Decentraland and The Sandbox can be traded on other crypto platforms for the dollar, the agency added. 

Crypto and the CFPB

The CFPB has honed in a bit on crypto and recently proposed a rule called the "Defining Larger Participants of a Market for General-Use Digital Consumer Payment Applications," that would give the agency the ability to supervise "larger nonbank companies" that offer services like digital wallets and payment apps and would require nonbank financial companies handling more than five million transactions a year to follow the same rules as large banks and credit unions. 

The 62-page rule mentions crypto a handful of times. Some critics have argued that the rule "inappropriately claims jurisdiction over crypto." 

Reports like the one posted on Thursday by the CFPB can be a "precursor to rulemakings," said Alexander Grieve, government affairs lead at Paradigm, in a post on X. "The @CFPB, like seemingly every federal agency, is trying to find their regulatory nexus to crypto. This could be one—especially if/when their Larger Participants wallet rule gets cut back."

Gaming risks 

The CFPB said online video games and virtual worlds are increasingly resembling more traditional banking without the protections consumers might expect under federal law.

The agency said it has received consumer complaints about hacking attempts, stealing accounts, and losing access to assets within the games. According to the report, consumers say they don't receive much support from gaming companies in those situations.

“Americans of all ages are converting billions of dollars into currencies used on virtual reality and gaming platforms,” said CFPB Director Rohit Chopra in a statement. “As more banking and payments activity takes place in video games and virtual worlds, the CFPB is looking at ways to protect consumers from fraud and scams.”