[Free Speech] What’s Wrong with the Game Regulation Law Holding Back K-Games?

An increasing number of game companies are setting up corporations overseas to avoid domestic game-related regulations. Compared with the game industry, which fluctuates sharply, Korea’s game-related regulatory laws are rigid and strict. Critics point out that these regulations not only fail to properly regulate game companies, but also produce the side effect of driving them abroad.

At present, the type of game the government has blocked from distribution in Korea is the P2E game. P2E (Play to Earn) games are a new type of game that combines blockchain technology with gaming and is based on cryptocurrency. In this model, in-game goods or items are recognized as NFTs (non-fungible tokens) and can be owned by individuals, while dedicated coins are issued on proprietary blockchain platforms.

The Game Rating and Administration Committee has banned domestic services for P2E games on the grounds that they have a pronounced speculative nature. Skypeople filed a lawsuit against the committee’s refusal to classify its P2E game Five Stars, but the judiciary dismissed the case. The reason given was that NFTs obtained through gameplay become privately owned assets, which fall under the category of “prizes” under the Game Industry Promotion Act and may encourage the purchase of loot box-type items.

The game industry counters that P2E features are merely supplementary elements that stimulate users’ interest and immersion. Its position is that refusing to classify only blockchain games, when items are already being traded on external intermediary exchanges, constitutes excessive regulation and violates fairness. Major game companies such as Netmarble, Neowiz, Wemade, and Skypeople entered the domestic P2E game development market, but their launches fell through for this reason.

Game companies whose domestic distribution has been blocked are turning overseas. A growing number are establishing overseas corporations to avoid regulation. This is because most countries—including the United States, Europe, and South America, excluding Korea and China—do not regulate P2E games. Middle Eastern countries in particular have recently been investing aggressively in virtual asset services, opening a path into global markets. Wemade, for example, officially launched the global version of its blockchain game MIR M last January in more than 170 countries and in 12 languages. In other words, games developed by Korean companies are being launched on the global market, yet only users in Korea cannot access them.

The problem is that if P2E games are distributed only in overseas markets, national wealth and human resources will flow abroad. The employment effects and economic growth generated by industrial expansion will also be lost to other countries. This is a side effect caused by completely blocking domestic distribution.

There is also a strong possibility that overseas versions of P2E games will be distributed illegally through underground channels. If Korean consumers access these games through abnormal routes, the risks associated with NFT assets will be magnified. It also becomes harder to identify Korean consumers’ game consumption patterns, purchase histories, and demand, creating difficulties in analyzing the game industry.

If P2E game services are gradually allowed in Korea, the outflow of companies overseas and the impediment to industrial development could be mitigated. Applying existing game regulations unchanged to new paradigms such as blockchain and P2E only widens the gap between the government’s objectives and the industry’s direction, creating a vicious cycle. Rather than highlighting only concerns and side effects, the government should also consider a regulatory sandbox approach—allowing services first and then supplementing and regulating them afterward—as well as a flexible system of self-regulation. Instead of closed, restrictive regulation, it should preserve and expand market autonomy by providing opportunities and strengthen business competitiveness.

Seungyun Kim, Intern Researcher, Center for Free Enterprise (CFE)

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Original title: [자유발언대] K-게임 발목 잡는 게임규제법, 무엇이 문제일까

Author: Seung-yoon Kim

Date: 2023-04-07

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=free_opinion&pn=6&idx=25525