O ver the years, the vast scope and potential of blockchain technology has attracted the gaming industry. We explain the concept of blockchain games and the legal validity of providing such games in India.
"Games based on blockchain technology, such as the ciphertext of diaper labs, where each cryptocurrency is an irreplaceable token ("NFT"), provide only this facility." Launched as a blockchain game for the first time in 2017, cryptocurrencies now have more than 128,000 current users worldwide.
Over the years, the vast scope and potential of blockchain technology has attracted the gaming industry. With the success that cryptocurrencies have achieved, more blockchain games, such as Axis Infinity, have been introduced.
According to Business Insider, the popularity and success of the blockchain game is such that it has inspired nearly 60% of American and UK-based online game developers to start using blockchain technology. Large companies such as Ubisoft and Electronic Arts have also expressed interest in introducing elements of blockchain technology in their games in the near future.
Close to home, many Indian companies have also started their entry into the development of blockchain games. Prominent among them are Avisa Ventures and Nodwin Gaming.
To understand this dynamic environment, We have published this primer, Where we figure out the concept of blockchain games, Legal validity of such games in India, Various intellectual property protection that game developers and players can get under Indian law, And is the current regulatory framework in India enough to protect the interests of game developers and players?
What are blockchain games?
NFT-
NFTs represent in-game virtual assets, which can be owned by players, such as maps, armour or land. These NFTs act as asset tags, identify ownership of in-game assets, and store on blockchain. Being on the blockchain allows the player to keep a safe record of ownership of in-game assets and also the ability to get the property out of the game.
Depending on the way the games are designed, it also allows in-game assets to be transferred from one game to another. It also creates transparency, as the ownership record can also be independently verified by a third party. In doing so, it makes in-game assets marketable and creates a decentralized marketplace, where they can be bought and sold by people.
Cryptocurrency-
Cryptocurrency, such as tokens based on Atherium blockchain, can be used to purchase in-game assets. These in-game purchases typically enable gamers to buy things directly from the game, such as extra life, coins, etc.
Coins of gaming-
Gaming coins, such as Axie Infinity (ACS) and Engine Coin (ENJ), are in-game cryptocurrencies that can be acquired and then used to purchase in-game assets. "These gaming coins can be bought from crypto exchanges (and eventually traded on these crypto exchanges) or, in some cases, won in games that have adopted the "play-to-earn" model." In such games, gamers are rewarded for devoting their time and skills to playing games with gaming coins and in-game assets (and, in some cases, even with cryptocurrency).
Are blockchain games legal in India?
To revisit our definition of blockchain games: They are online video games that have been developed by integrating blockchain technology. Since blockchain is only an underlying technology, there is no clear regulation in India. It presents any question on its validity. However, it would be appropriate to ascertain the validity of the games through the lens of the existing Indian Gaming Regulation.
skill game, Assuming that the results of these games can be manipulated by manipulating machines used to play and therefore,, The skill factor of the players cannot be a major factor in the game.
In addition, by making in-game assets available for purchase, developers and publishers stand to earn revenue from the sale of such assets. When applying the code for in-game assets, they can also embed certain rules, such as paying a fee each time a certain action is taken, in which an item is transferred from one player to another.
A district court in Delhi has held in the past that a gaming portal will be covered under the definition of common gaming house if it is to earn commission/revenue from a given game. This is because such portals only try to replace common gaming houses with bricks and mortars which Indian law currently envisions and is illegal.
Since developers and publishers of blockchain games are likely to earn revenue/fees for offering such games, It raises the question whether he can be seen to play the same role as the role played by the common gaming house under Indian law.
The validity of a blockchain game that relies on cryptocurrencies-
The Finance Ministry of the Government of India had announced in late 2021 that the cryptocurrencies and regulation of the Official Digital Currency Bill, 2021 will soon be introduced in Parliament and will try to ban all private cryptocurrencies. If the legislature actually successfully bans private cryptocurrencies, the extent to which existing blockchain games are dependent on cryptocurrencies will be considered illegal in India.
"Furthermore, the Finance Minister, in his Budget Speech for 2022-2023, announced that income arising from the transfer of any "virtual digital asset" (including cryptocurrency and irrecoverable tokens) would be subject to income tax."। At the rate of 30%. Interestingly, people who have received any such virtual digital property as a gift will be taxed at the rate of 30%. Such policy announcements will require careful consideration by the publishers of the blockchain game while designing their pricing model
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Cryptocurrency