{"id":14952,"date":"2026-06-25T08:51:52","date_gmt":"2026-06-25T08:51:52","guid":{"rendered":"https:\/\/legalbison.com\/blog\/game-currency-regulation-compliance-virtual-money-license-trigger\/"},"modified":"2026-07-10T06:47:44","modified_gmt":"2026-07-10T06:47:44","slug":"game-currency-regulation-compliance-virtual-money-license-trigger","status":"publish","type":"post","link":"https:\/\/legalbison.com\/en-id\/blog\/game-currency-regulation-compliance-virtual-money-license-trigger\/","title":{"rendered":"Regulated In-Game Currency Compliance: When Does an In-Game Virtual Money Trigger a License?"},"content":{"rendered":"

Does an in-game currency remain legally contained within the game, or does real-world exposure mean it requires a financial license?<\/span><\/p>\n

The answer is not as straightforward as we think. Digital asset games<\/a><\/span> 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?\u00a0<\/span><\/p>\n

Getting to Know Types of Virtual & In-game Currency: Closed-loop vs. Open-loop<\/h2>\n

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).\u00a0<\/span><\/p>\n

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The video game “Second Life” utilizes virtual currency. Image: secondlife.com<\/figcaption><\/figure>\n

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<\/a><\/span>. 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.\u00a0<\/span><\/p>\n

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:<\/span><\/p>\n

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  1. Whether the game enables users to conduct fiat cash-out, namely whether the game has a built-in option to convert in-game currency to real money? If your in-game money is converted in fiat currency<\/a><\/span> (USD, EUR, GBP) and sent to your bank account, then this means the safe harbor has been broken and your game might require a license.\u00a0<\/span><\/li>\n
  2. Does a third-party marketplace exist for your game? If users in your game have a way of converting in-game currency to fiat currency, then this may be an issue for your operations. However, this remains a legal gray area, as famous online games maintain their closed-loop by having no official cash-out buttons in-game and arguing that such digital commodities actually have no real-life value.\u00a0<\/span><\/li>\n
  3. Whether the virtual currency can be used outside of the original game and inside cross-games? If players can earn reward in your game and use or trade in another, this may also raise an issue for your operations.\u00a0<\/span><\/li>\n<\/ol>\n

    Hence, it is important for you, as a studio that develops the game or maybe publishing rights, to determine players\u2019 intent when playing your game. Are players playing for fun or to obtain a profit?\u00a0<\/span><\/p>\n

    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.\u00a0<\/span><\/p>\n