China’s National Press and Publication Administration (NPPA) released the “Regulations on the Administration of Online Games (Draft for Public Comment)” on the 22nd, causing a shock in the industry. It proposes changes to the operating models of game companies and may hinder the development of blockchain games in China.
Restrictions on excessive gaming and reward mechanisms
Game currency and game items can only be used within the game
KYC and the use of real-name wallets are required
On the 22nd, the NPPA released the “Regulations on the Administration of Online Games (Draft for Public Comment)” and opened it for public input. Although it is currently in the draft stage, the announcement has already had a significant impact on the gaming industry. The stock prices of Chinese gaming giants Tencent and NetEase fell by over 12.3% and 24.6% respectively.
Behind this decline is the fact that the draft includes several provisions that require changes to the operating models of game companies, including business models, monetization strategies, reward mechanisms, and even data management and restrictions on games for minors.
For example, the draft proposes measures to restrict excessive gaming and high-value consumption. Article 18 of the “Regulations” explicitly states that online games cannot have inducement rewards, such as daily login rewards, first-time recharge rewards, and additional rewards for consecutive recharges. At the same time, game publishers cannot promote high-priced transactions of virtual items through speculation or auctions.
In addition, all online games must set user recharge limits and clearly disclose them in their terms of service. Games should provide pop-up warnings for irrational consumption behavior.
For a long time, game companies have relied on daily login rewards, first-time recharge incentives, and cumulative recharge incentives to maintain user activity and promote consumption. Therefore, these new regulations may have a significant impact on the profitability of game companies.
Regarding the issuance of game currency, Article 23 of the “Regulations” states that games cannot allow users to exchange game currency for legal tender, unless game companies refund unused game currency when they terminate operations (Article 36 provides detailed regulations).
At the same time, the use of game currency should be limited to the exchange for products and services within the game, and cannot be used for payment or purchase of physical items, or for the exchange of products and services from other entities.
Furthermore, Article 26 clearly states that game publishers cannot allow the exchange of virtual items for legal tender. If users are allowed to exchange virtual items for physical goods, the content and value of these goods must comply with national laws and regulations.
In addition, Article 22 of the “Regulations” requires online games to require users to provide true identity information when signing agreements or providing services, strictly implement real-name registration and login requirements, and ensure the authenticity and validity of user identity information.
Similarly, in the use of digital RMB wallets, Article 24 stipulates that transactions must be conducted through real-name wallets, and anonymous digital RMB wallet transaction services are strictly prohibited.
These regulations in the “Regulations” will have a significant impact on the development of blockchain games in China. Although the Chinese Ministry of Industry and Information Technology expressed a high level of attention to the development of the Web3.0 industry on the 19th and encouraged the exploration of new business models such as NFTs, DApps, and DID, these new rules may limit the business models of the traditional gaming industry and further hinder the development of blockchain games in China.