Is GameFi The New Hack for Committing Financial Crimes?

Updated: 20 July 2022

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The introduction of Meta by Facebook CEO Mark Zuckerberg in 2021 created a frenzy; the effects of which were clearly visible in the cryptocurrency market at the time. Hundreds of projects had popped up claiming to be the future of technology and to be a part of the promised metaverse.

While a huge number of investors parked their funds in such projects, there was a whole different part of the community that wasn’t a fan of this new concept. Meta had been welcomed with mixed reactions all across the globe since its inception. There was a huge divide between people in several sectors, be it technology or cryptocurrency.

A high possibility of health problems, social issues and environmental concerns had already clouded investors and the general public. However, the top government authorities and organizations had their focus on another matter- The future rise in financial crimes.

P2E (Play to Earn) games had made a huge impact on the blockchain sector from the moment it was introduced. With games like Axie Infinity which brought along huge amounts of money as rewards or worth in NFTs, the game category had grown immensely.

But with its growth, grew opportunities for criminals to launder money in a much easier and anonymous way.

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What are P2E games?

Crypto games or play-to-earn games are games with cryptocurrency and NFTs as integral parts of the gameplay. Usually, instead of buying games, players buy items within them, such as characters, weapons, and so forth.

It’s not an uncommon model as many games, especially free-to-play (F2P) games, use it. Despite allowing free play, one still has to pay to unlock the good features and objects-or undergo a very tedious grind.

The main difference between free-to-play and play-to-earn is the ability to trade assets. The reason for this is that many of these assets can be converted to NFTs or are themselves NFTs. P2E games are simple to make and are usually played by millions of people, for rewards or simply for fun. Some of the most popular games within the space currently include Axie Infinity, Sandbox, Sorare etc.

Exploiting GameFi to Commit Financial Crimes

P2E games themselves aren’t created in a format that can support money laundering. However, criminals create loopholes and the absence of strict regulations or laws gives them a chance to launder money or commit such acts without much consequence.

Games like Axie Infinity have a financial model within the game that allows people to win money through challenges and events or sell the NFTs they acquired throughout the game for their desired price.

However, it gets complex with features like renting a team. Here, players can use teams or characters owned by others and win battles, post which the winnings can be split between the two parties. The game has no KYC policy, which means that the party who rents the team can introduce crypto without a source and get the dirty funds off their hands in turn for legal winnings.

While such features do embody the future of gaming to a certain point, it also provides fraudsters to legalize dirty money.

Government Authorities Expose Several Scams

The US government had recently cracked down on a hacker group that had allegedly stolen assets worth more than $540 million in March.

The culprits turned out to be North Korea’s cyber unit- The Lazarus Group, who had sought the funds to convert illicit money. The hack was carried out after a senior developer at Axie Infinity clicked unknowingly on a phishing link that has been presented as a job offer.

Selling virtual items for fiat; which was a much great task previously has now been simplified thanks to the advancement in the blockchain industry. This too, however, can be leveraged by criminal organizations to create illegal means of income going forward.

Institutions claim that such links or scams will only rise as time passes and culprits will keep finding newer ways to defraud the system and citizens unless strict regulations and policies aren’t put in place.

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With more than 1,000 P2E games already available, anti-money laundering units will need to work on a plan of action to catch culprits from draining funds illegally or inducing black money into such projects.