Video games have long since become a mainstream alternative for leisure activities. Massive multiplayer online games (MMOs), in which players from all over the world can play together or against each other, are particularly popular. In many of these MMOs, so-called in-game currencies exist. These are digital payment units that can be purchased and used exclusively within the relevant game environment and can be used, for example, to purchase digital items within the respective computer game. Providers of such MMOs are increasingly considering the possibility of the tokenization of their in-game currencies. Tokenized in-game money could also be stored and transferred outside the relevant game environment in cryptowallets by the respective holders, entirely without contribution of the MMO operator. However, it must be clarified on a case-by-case basis, especially against the background of increasing crypto-regulation, whether the tokenization of an in-game currency is possible under regulatory law. Should the tokenized in-game tokens ultimately qualify as regulated instruments, the commercial handling of them may in individual cases require the prior obtaining of a BaFin license or the publication of documentation required by regulatory law.

Does the Issuance of In-Game Tokens Require a BaFin License?

Whether an MMO operator must obtain a BaFin license prior to issuing a tokenized in-game currency created through tokenization depends on the regulatory classification of both the tokenized in-game currency and the specific activities the MMO operator intends to offer in this context. A door opener for regulated activities and thus for the requirement of a BaFin license is regularly given if the crypto tokens in question are to be classified as financial instruments within the meaning of the German Banking Act (KWG) or the German Investment Firms Act (WpIG). In this respect, a classification as a unit of account or as a crypto asset can be considered in particular. However, according to its established administrative practice, BaFin only considers units of account to be instruments that are used as substitute or complementary currencies. In this respect, the classification of an in-game token as a unit of account always depends on whether it is at least also intended to be used as a means of payment. Should this characteristic be missing, the units of the tokenized computer game currency cannot be classified as a unit of account. To qualify as a crypto asset, an in-game token must either be used as a means of exchange or payment or serve investment purposes. However, the latter is not already the case if a player acquires in-game tokens in the expectation of an increase in value. Rather, it is necessary that the provider or third parties associated with it raise the possibility of suitability for investment purposes by means of advertising statements. With respect to regulated activities, it is necessary to examine which specific services the provider plans to provide with respect to the tokenized computer game currency. If, for example, a marketplace is to be operated on which in-game tokens can be purchased, a BaFin license may be required, depending on the design, e.g. for investment brokerage, proprietary trading, financial commission business or the operation of a multilateral trading system. Should the provider wish to offer a custody option for players via cryptowallets, he may operate the crypto custody business by doing so and therefore he may require a corresponding BaFin license.

What are the Obligations for Tokenizing a Computer Game Currency under MiCAR?

The question of the necessity of a BaFin license must also be examined from the perspective of the Markets in Crypto Assets Regulation (MiCAR), which will be applicable as of summer 2024. The new MiCAR supervisory regime also results in an obligation for issuers of crypto assets to prepare and publish a crypto whitepaper in many constellations. This must contain the essential information that may be relevant for acquirers of the crypto assets to be offered within the meaning of MiCAR. In particular, this concerns information on the issuer itself as well as on the technical and legal design of the crypto asset in question. The crypto whitepaper must also comment on the risks associated with the acquisition. For the issuance of in-game tokens created through tokenization, the preparation and publication of a corresponding crypto whitepaper may also be required. An exception relevant in the case of in-game tokens applies to cases where the units of tokenized in-game currency qualify as utility tokens within the meaning of MiCAR, granting access to an already existing good or already offered service. For example, if the in-game token in question, in addition to the possibility of safekeeping and transfer inherent in all tokens, can be used solely to be transferred back to the MMO to be then used as an untokenized in-game currency for the acquisition of digital items in the game environment, the exception could apply in the individual case.

Attorney Lutz Auffenberg, LL.M. (London)



The competent lawyer for questions regarding tokenization and applying for a BaFin license under MiCAR in our law firm is Attorney Lutz Auffenberg, LL.M. (London).