The Securities and Exchange Commission (SEC) warned investors interested in GameFi and play-to-earn (P2E) games to be cautious as they make digital wallets more vulnerable to hacking and expose traders to risks from high price volatility.
The SEC has described GameFi as a decentralised financial service using gaming and blockchain technology. The P2E games or blockchain games allow players to earn cryptocurrencies or tokens as rewards and trade them on secondary markets.
There are various types of coins that can be earned through P2E games, such as non-fungible tokens, reward tokens and governance tokens.
The SEC views GameFi as closely associated with digital assets and recommends players and traders of coins from these games to carefully study the products and their conditions as they are likely to be volatile, just like any other digital coin.
Gamers are urged to be careful and assess their readiness in terms of money, time, and gaming skills, and think carefully before investing.
The SEC said participants should consider the credibility of a particular game and its developer, and study both the game and its coin to understand the specifics and risks.
Participants must also ensure their coins and digital wallets are fully protected, and study in advance how to transfer digital assets to a more secure repository to avoid theft or hacks, said the regulator.
Digital exchanges are responsible for carefully screening the quality of a token and ensuring it passes the listing rules and requirements for digital assets.
The exchange must ensure the coin is legal, not a scam, and has a high potential for success. The monitoring process should be continual because these P2E games always evolve, the SEC stated.
An example of the coins' volatility is ETERNAL, the coins earned by playing the game CryptoMines. They dropped sharply from US$801 on Nov 25 to around $5 two days ago, before slowly recovering to their current level of $95.
Even though the company announced it would launch a new game on a new platform, existing players were spooked by the price drop and withdrew all the rewards, leaving accumulated coins virtually worthless.
Cryptomind Group Holdings, Thailand's leading digital asset advisory and investment business, announced on its website it was not involved with the gaming company, saying the similar names are a coincidence.