GameStop Terminates Crypto Wallet Service Due to US Regulatory Uncertainty

Updated: 02 August 2023

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Video game retailer GameStop said it will terminate support for crypto wallets from November as a result of regulatory uncertainty in the US.

The move comes just a year after the company, whose stock rose to dizzying heights during the meme-stock craze of the pandemic, launched the service.

GameStop said it advised customers now to ensure they have access to their seed phrase by October 1. A seed phrase is a random string of words that is used to unlock cryptocurrency wallets.

Looks like @GameStop is shutting down their GameStop Wallet program.

Included is a brief explanation someone had for the possible explanation or this decision.

You can still use your seed phrase to access your tokens in other wallets. pic.twitter.com/o8QJjJG0KV

— 🟣 Pulse Digital 🟦 (@CryptoPulse9) August 1, 2023

GameStop Pulls the Plug on Crypto

Gamestop’s crypto wallet support was launched in May last year ahead of its launch of an NFT marketplace. The service was aimed at allowing customers to hold and trade crypto and the NFT they bought from the platform.

The wallet utilized the Ethereum layer-2 scaling protocol ZK-rollup technology, which when compared to the Ethereum Layer 1 mainnet, processed transactions more quickly and at a lower cost. Through the wallets, users could also access decentralized apps (DApps) on the Ethereum blockchain.

The move showed GameStop’s interest in embracing crypto and what it has to offer in the gaming industry. During the launch, the retail platform partnered with Immutable X games to offer assets for games including Gods Unchained, Guild of Guardians, and Illuvium.

GameStop taps Immutable X for NFT marketplace https://t.co/xPR1UilwM3

— CNBC (@CNBC) February 3, 2022

Before turning to crypto, the retailer had been struggling due to a decline in the video games business. By adopting crypto, the company was hoping to increase business and consequently its revenue. Seemingly, this has not been the case as the company laid off a significant number of employees, some of who were engineers working on GameStop’s crypto wallet.

Moreover, NFT prices and demand have continued to drop and competition among NFT marketplaces has increased. Compared to the hundreds of millions and billions of dollars Blur and OpenSea, the two biggest NFT marketplaces, see each month, GameStop has only seen millions of dollars in trade activity in the year since its beta launch in July.

In addition, GameStop lost its blockchain department’s director who resigned in September 2022. This raised concerns regarding the company’s blockchain and crypto future since its venture into the space was still relatively new.

The withdrawal of the service indicates that the company is taking a step back from its crypto strategy which, according to Bloomberg, was a part of Chairman Ryan Cohen’s larger push into digital services in a bid to turn around the struggling video-game shop.

Crypto Regulatory Headwinds

While GameStop has not offered specifics into the uncertainties it has cited as the reason for the halting of the wallet’s support, it is probably due to the ongoing scrutiny in the US crypto industry.

Crypto companies have been facing a new round of regulatory issues as the two largest crypto exchanges face lawsuits filed by the Securities and Exchanges Commission(SEC). Other regulatory authorities such as the Commodity Futures Trading Commission and the Justice Department have also been doubling their crypto enforcement efforts.

So far, several cryptocurrencies have been declared securities resulting in some exchanges delisting them, and Ethereum’s ETH is rumored to be next.

With the New York Attorney General’s office having already declared ETH to be an unregistered security, it seems only a matter of time before the SEC follows suit (in writing). https://t.co/pjiTp1EJ4T

— Aileen May Davis (@AILEENMAYDAVIS1) August 1, 2023