In the world of digital entertainment, systems like PlayStation Points serve as a clear, compliant example of a closed-loop system, where value is earned and spent strictly within a single platform ecosystem.
Does an in-game currency remain legally contained within the game, or does real-world exposure mean it requires a financial license?
The answer is not as straightforward as we think. Digital asset games may require a license the moment they turn from a mere-closed loop consumer entertainment feature to a regulated financial instrument. But what does closed-loop mean and how can game operators preserve that in order to not need licenses and incur more cost?
Closed-loop virtual currencies are assets that function only within their specific digital ecosystem. An example that has existed for more than 25 years, which is the Linden Dollars in Second Life, a free 3D virtual world. Such forms of in-game currency cannot be exchanged for fiat money, rather, can be used to redeem for goods and services in the respective platforms (this includes properties and clothing items in Second Life).
On the contrary, open-loop virtual currencies refer to any video game coin that can be exchanged for actual real life items and may flow through different payment channels. Many operators may assume that whether a game operates with a closed-loop or open-loop virtual currency depends on the mechanism and design of the game, namely whether the game designers have allowed real-world convertibility for cash. However, it may not be as simple as that.
To truly determine whether a game has been legally transformed into an open-looped system, we have to identify the features which break the safe harbor which include the following:
Hence, it is important for you, as a studio that develops the game or maybe publishing rights, to determine players’ intent when playing your game. Are players playing for fun or to obtain a profit?
To help you understand how the reality of players actually using your economy (which in turn, means that you may be running an unregulated financial market) impacts your operations, we will consider different license operators in different jurisdictions.
In the US, FINCEN defines a Convertible Virtual Currency (CVC) as a medium of exchange that can operate like currency but does not have the attributes of ‘real’ currency, including a legal tender status.
In order to determine whether your game currency does not have attributes of a ‘real’ currency, there are several factors in place:
Thus, what are scenarios that trigger MSB registration? FINCEN currently relies on the four-factor wallet test to see whether a CVC acts as a money transmitter where flow of funds may occur outside of the loop.
These factors include:
If you have answered yes to the final question, it is most likely that the intermediary (being you as a game or platform operator) is a hosted wallet provider, which means a MSB license is required.
Related: MTL vs. MSB License: What Business Activity Triggers Which License?
In Europe, the categorization of Asset-Referenced Tokens (ARTs), E-Money Tokens (EMTs), and utility tokens is the very first element you must tackle when operating tokens for your game.
Despite the above, the token type itself does not automatically force you to get a CASP license. Instead, the type of service your business provides (and perhaps the mechanisms operating behind it) dictates whether you need it.
Here are some features that you need to be mindful of:
We are all aware that NFTs, being “unique and non-fungible”, are exempted by MiCAR. On the surface, this appears to exempt the entire NFT space but it doesn’t.
ESMA, in its guidance in 2025, provides an “interdependent value test” where competent authorities must consider whether the value of a crypto-asset stems primarily from its unique characteristics and utility or it derives from its interconnection with a larger pool (such as other tokens).
This is where “fractionalized” comes in and how it collapses the NFT exclusion. In simple terms, fractionalization is the splitting of ownership of an NFT into smaller fractions, which allows several people to own a single NFT. This means it loses its special criteria of being “fungible”, and therefore falls under the purview of MiCAR.
In the United Kingdom, studios must be able to balance between the Financial Conduct Authority’s upcoming cryptoasset regime (which is triggered by providing crypto-asset services) and the UK Gambling Commission (which is triggered by providing gambling facilities, services or advertisements to consumers).
Logically, whilst these are two separate regulators with separate triggers, your game may fall under both categories.
In terms of “money’s worth”, the Gambling Act 2005 has defined it as a marketable value of a prize. In practice, this includes goodie bags, physical items (e.g. watch, tv, electronics), gift cards, travel and experience (e.g. hotel stay, spa, tournament, flight tickets).
A case worth noting is the FutGalaxy prosecution. In 2017, FutGalaxy.com, which has no official association with the FIFA series of games or EA Sports, allowed customers to buy virtual currency called FUT coins. Customers could then use those FUT coins to gamble. Ultimately, FIFA coins were exchanged for real cash, creating “money’s worth”, constituting as gambling.
Thus, as illustrated above, studios must consider whether your platform creates “money’s worth” for the users. If it does, you must navigate both financial services law and gambling regulations or risk criminal prosecution.
In Japan, the Payment Services Act (PSA) outlines how an in-game currency may be a Prepaid Payment Instrument. This includes:
Should your (Japanese) platform hit ¥10 million in your players’ account, your studio is legally forced to deposit 50% of that total unused balance in cash with the Legal Affairs Bureau as a security deposit to protect consumers if the game shuts down and you would have two months to provide an audit.
Interestingly, there exists a legal loophole under Article 4 of the PSA, whereby any Prepaid Payment Instrument that is legally bound to expire within 6 months from its date of issuance is exempt from the PPI regulatory regime.
Thus, most games provide a notification to players that their video game coin will expire within 180 days. With this, studios are able to completely bypass any financial or administrative burdens imposed by the Financial Services Agency.
Thus, most games provide a notification to players that their tokens will expire within 180 days. With this, studios are able to completely bypass any financial or administrative burdens imposed by the Financial Services Agency.
For closed-loops, studios may be limited by design constraints while studios may be bogged down by compliance cost via license if opting for open-loop.
If you do choose to opt for an “unregulated” closed-loop, then you must be aware of not being able to provide fiat-cash outs, third-party exchange integration or cross-game portability. This means that your game usability is limited for the players. What you must also consider is actively monitoring and shutting down grey third-party markets to ensure that your safe harbor is secured.
If you do opt for a “regulated” open-loop, then you can consider having a separate licensed entity for the payment or currency functions to ensure a legal separation from the game studio itself. You may also want to find banking partners who are willing to service such crypto-adjacent gaming businesses and ensure that you comply with AML/CFT requirements.
Your decision depends on what type of players you want to cater to (such as profit earning) and to what extent you are willing to meet those expectations (through obtaining licenses and incurring costs).
What is a game currency?
A medium of exchange that only works inside a specific game or platform e.g. Robux in the video game ‘Roblox’.
Is in game currency real money?
Not legally, unless your game allows you to cash out.
What is a synonym for in game currency?
Virtual currency, in-game tokens or game credits.
Is game coin a good investment?
It depends on whether the game survives in the long run. If it doesn’t, then you might not have any legal recourse for your loss (unlike stocks).
