The Anti-Money Laundering Council (AMLC) stated that financial institutions must ensure customer due diligence when dealing and transacting with entities involving crypto. The AMLC mentioned that the reminder must be noted especially by banks and platforms that serve as payment channels for play-to-earn games such as Axie Infinity.
AMLC Executive Director Mel Georgie B. Racela stressed that financial institutions are involved when players convert in-game tokens into fiat currency.
“The payment channels used for the SLP tokens used in the game may include banks and electronic money issuers (EMIs). It must be remembered that banks and EMIs are covered persons and are, thus, required to conduct customer due diligence, keep records, and file covered and suspicious transaction reports (STRs).” –Mel Georgie Racela, AMLC Exec. Director
He added that institutions that are involved in converting in-game tokens include persons, which acts as payment and settlement facilitators “should closely monitor funds that pass through them (through the purchase or sale of such tokens) for possible links to dirty money and promptly file the corresponding STRs when appropriate.”
Play-to-earn games, such as Axie Infinity, are not under the supervision of the Bangko Sentral ng Pilipinas (BSP) and not covered by the “dirty money” watchdog. In exchange for playing the games, its players receive cryptocurrencies known as Smooth Love Potion (SLP) and Axie Infinity Shards (AXS); these tokens are convertible to real money.
The financial regulators were especially alarmed when the hacking incident in Axie Infinity’s Ronin network of over $600 million happened last month. It is said to be one of the largest cryptocurrency heists on record.
According to the investigation results of the US Federal Bureau of Investigation last week, Lazarus Group and APT38, both associated with North Korea, were behind the cybercrime. (Read more: Axie Infinity Ronin Network Hack | North Korea is Behind the Crypto Heist)
Following this, the BSP has warned the public again about risks of non-fungible tokens (NFTs) and reminded them to remain cautious when dealing with GameFi (gaming-finance) projects involving digital tokens. (Read more: BSP Warns Public on GameFi Platform Risks After $600M Axie Ronin Hack)
Axie Infinity was resolving the issue by raising $150 million (₱7.6 billion as of writing) to fund the reimbursement for players and users affected by the Ronin Hack. As well as by adding five new validators to further strengthen their network’s security system. (Read more: Who are the 5 New Axie Infinity Ronin Validators?)
On the other hand, Swarup Gupta, an industry manager at the Economist Intelligence Unit (EIU) said the cyberattack showed how there are still gaps in ensuring decentralization for such platforms.
“The small number of validator nodes for the Ethereum sidechain, Ronin, and the even smaller number needed to approve a transaction, shows how such platforms fail to deliver the levels of decentralization that are necessary to ensure sufficient levels of cybersecurity,” –Swarup Gupta, EIU
Despite regulators issuing warnings on risks related to cryptocurrency, Gupta said gamers have remained “largely undeterred.” He noted that Filipno’s interest for play-to-earn games rose when the pandemic struck and the people sought new sources of income.
“Authorities should reach out to gaming guilds in the country and coordinate with them to provide education about the risks inherent with play-to-earn gaming activity… They should also consider imposing restrictions on the transactions of gamers at the point of conversion to fiat currency since this is an area that is within the government’s jurisdiction,” he added.
According to BSP’s last update about Axie Infinity in November 2021, they stated that its operator of payment systems (OPS) status is still under review. (Read more: BSP: Axie Infinity’s OPS Status Still Under Review)
This article is published on BitPinas: Anti-Money Laundering Council Warns Banks to Closely Watch Play-to-Earn Transactions
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