1. Context
In September 2024, the European Consumer Organisation (BEUC) took the lead in filing a complaint with the European Commission and the Consumer Protection Cooperation Network (CPC-Network) regarding in-game purchase practices of leading video game companies. On that same date, the BEUC also published a report with recommendations on regulating in-game currencies and enforcing existing EU legislation in this field.
According to the BEUC, in-game purchases are harming consumers in the following ways:
- The price of digital items is often not displayed in fiat money. In addition, customers are often incentivised to purchase ‘premium’ in-game currencies in bundles, leading to overspending;
- Consumers are often subjected to unfair terms and conditions favouring game developers, whereby they are often denied their rights after purchasing premium in-game currencies;
- Children, who are an important part of the gaming demographic, are especially at risk of being swayed by the marketing of in-game currencies, as they do not have the same financial literacy as adults.
Next to various provisions of general consumer protection regulation, we were intrigued by the parallel that the BEUC draws in its report between in-game currencies and (regulated) electronic money, urging the European regulators to draw inspiration from the Electronic Money Directive (2009/110/EC) (the ‘EMD’) for the regulation of premium currencies.
We decided to dig a little deeper into this argument and assess to what extent qualifying in-game currencies as e-money would make sense, and what the consequences would be for the video games industry?
2. Qualification of in-game currencies
In-game currencies as such are not specifically regulated as an asset or product class. Their qualification and regulated status will largely depend on their purpose, use cases and manner in which they are acquired or disposed of.
Although the notion of in-game currencies is not legally defined, these currencies are in essence a type of virtual currency (i.e. not “real world or fiat money”). Under the Belgian AML Law, ‘virtual currencies’ are defined as “a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically”. Asides from limited AML implications, virtual currencies (not be confused with ‘cryptocurrency’ or ‘crypto-assets’) are as of yet largely unregulated.
Within the category of virtual currencies, there are roughly three types that can be distinguished:
- Closed virtual currencies: currencies which cannot be obtained with fiat money and which do not interact with the “real world.” As an example, we can think of most online role-playing games’ “Gold”, which is acquired exclusively through solving quests or by eliminating enemies in the game, and which cannot be obtained in exchange of fiat money;
- Unidirectional virtual currencies: currencies which can be acquired with fiat money, but once obtained cannot be refunded or exchanged back into fiat money. This is the case for well-known in-game currencies such as V-Bucks (Fortnite) or Gems (Clash of Clans); and
- Bidirectional virtual currencies: those currencies can both be acquired and exchanged back into fiat money.
Unidirectional virtual currencies can be further categorised in (i) currencies that (asides from being purchased) can also be earned through gameplay and (ii) the above-mentioned ‘premium’ currencies that can exclusively be acquired through purchases with fiat money. This last category of premium in-game currencies are the main type of currencies addressed by the BEUC, and the ones which are economically the most relevant in today’s video games industry.
In contrast, with some minor exceptions, we do not really observe any bidirectional virtual currencies in the current market. This can be explained due to the fact that being able to both purchase and sell a currency from-to real money, raises a lot of regulatory questions and thus is not an evident and commercially attractive feature to implement into a video game. In addition, if bidirectional currencies are issued or tradeable on the blockchain (think of popular games such as Axie Infinity), then game developers might soon also need to comply with the recent Markets in Crypto-assets Regulation (MiCAR), which will start applying on this topic as of 1 January 2025.
3. Electronic money
Electronic money (e-money) on the other hand is a specific type of regulated asset, which the EMD defines as an “electronically, including magnetically, stored monetary value as represented by a claim on the issuer which is issued on receipt of funds for the purpose of making payment transactions […], and which is accepted by a natural or legal person other than the electronic money issuer”. Common examples of e-money are preloaded payment cards or digital wallets in certain jurisdictions.
When the above definition is applied to virtual (in-game) currencies, there are indeed at first sight several similarities. Virtual currency does represent an electronically stored monetary value with a certain claim on the issuer and is also ‘issued’ on receipt of funds by the issuer. However, virtual currencies are typically not accepted by persons other than the issuer (i.e. the video game company) itself, at least in the case of closed or unidirectional virtual currencies. Furthermore, the “claim” on the issuer is not a claim for a redemption of the currency’s counter-value in fiat money, but rather a potential claim on other in-game items that can be purchased with the in-game currency.
4. Treating in-game currency as e-money
In the BEUC’s report, a parallel is drawn between in-game currencies and e-money, stating that “Article 11 of the [Electronic Money] Directive could provide a valuable template for consumer rights when using virtual currencies in-game and in-app” (P. 34-35 of the BCEU report).
A key characteristic of e-money (stemming from Article 11 of the EMD) is that holders have a right to redeem their e-money at nominal value for fiat money. If such a characteristic would more widely be introduced to in-game currencies, they would lose their closed / unidirectional nature and become bidirectional by nature, thus risking a qualification as actual e-money (provided they are also accepted by persons other than the issuing video game company).
A re-qualification of in-game currency as e-money would have far-reaching consequences for the sector, as this would bring these currencies in scope of financial regulations. Issuers of such currencies would then be required to acquire a licence as a regulated e-money institution or a bank (which is not quite realistic) or to cooperate with licenced companies for the issuance and redemption of these currencies.
5. Conclusion
The BEUC’s report raises several concerns and recommendations about the current state of in-game purchases, advocating for better price transparency and more consumer-favoured terms and conditions.
While the analogy to the protection system of e-money is definitely an interesting one, it is currently unlikely that this solution would be realistic for the video games sector. Bringing this mostly unregulated in-game market into the sphere of financial regulation would have large implications for the business practice of in-game purchases itself.
In practice, this would entail that video game companies who wish to continue offering such in-game purchases would need to seek the assistance of financial institutions offering e-money and/or payment services. It would also bring along various rules of conduct that the market participants will have to comply with, placing an extra burden on the video game sector.
On a last note, if we see an introduction of cryptocurrency in video games (which as of yet has not really gained any real traction), the developers of such video games will likely need to comply with MiCAR as of next year, which in itself contains quite stringent consumer protection rules.
If you have any questions on this topic or wish to discuss the potential impact of financial regulation on the video games sector, get in touch with us at digitalfinance@simontbraun.eu.
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This newsletter is not a legal advice or a legal opinion. You should seek advice from a legal counsel of your choice before acting upon any of the information in this newsletter.
