One of the biggest events that marked penetration of blockchain into the game industry was developing a virtual kitten breeding game CryptoKitties. The company behind the game, Dapper Labs, has not stopped and decided to go further, adding new functions to CryptoKitties. With a view to attract more users to the game, the company is currently building out a U.S. office in Los Angeles. Moreover, it is establishing partnerships with household brands and figures.
At the moment, the cryptocurrency market sees its mundane sideways price action. However, CryptoKitties continues to enjoy growing interest from external investors. On Thursday, Dapper Labs raised about $15 million in funding in a round led by venture capital firm Venrock. Samsung Next and Google Ventures, the venture arm of Alphabet, participated as well and brought its total funding up to $27.9 million since launching November 2017.
The raised funds will be used to expand both locally and globally, and help the game reach billions of users. According to David Pakman, a partner at Venrock, blockchain technology is a natural evolution of the collecting industry. Pakman sees CryptoKitties as a specific case wherein blockchain allows people to collect rare or scarce things, which earlier was possible only offline. He said:
“Collecting is an incredibly large hobby from baseball cards, to art, to wine, to trinkets, to stamps. It’s widespread, and it’s something the species does. This is the thesis that they can effectively be a platform company for the launch of many, many different kinds of digital collectables.”
Dapper Labs CEO Roham Gharegozolou is enthusiastic about blockchain as well:
“Everyone thought CryptoKitties was about buying cats… But it’s only the first step in a bigger vision. We believe that blockchain is going to change the everyday life for everyday people. We see it as a new platform the way social networks were, or the way mobile was a few years ago.”
Speaking of further development of the game, Gharegozlou said:
“Games are the way you understand how to use new tools. Solitaire taught drag-and-click. Minesweeper taught right click on a mouse. The original version of Hearts taught networking.”
Gharegozlou believes that the game can bring a billion people on the blockchain. He stated:
“I think this is a very big idea. I don’t know if this company is going to succeed at it. It’s very hard odds—the first movers aren’t always the ones to reap all the benefits. But I think this team has a chance of that.”
About CryptoKitties
Ethereum-based is a virtual kitten breeding game which allows users to collect and breed digital cats. A cat owner can breed the cat by changing its features, adding colors and make their cats distinguish from other users present in the marketplace. All the collected “cats” with their breeds belong to the individual owners and can’t be cloned by other users.
Dieter Shirley, Dapper’s chief technology officer and the author of the non-fungible token stardand on Ethereum, said:
“We launched CryptoKitties as an innovative and play-driven introduction to what blockchain can do and mean for consumers. By engaging the community with fun and games, we reached much broader audiences. That taught us where the obstacles and opportunities are for blockchain and mainstream adoption, and we can’t wait to share what we’ve learned with the rest of the world.”
Soon after its launch, CryptoKitties became so popular that it clogged a considerable 15% of the Ethereum network. Popularity of CryptoKitties creating similar concept games with digital or crypto collectibles. In July of this year, CryptoKitties it would launch a brand new version of its app exclusively for HTC mobile devices.
Hong Kong’s security watchdog – The Securities and Futures Commission (SFC) – has announced new regulatory rules and guidelines for the country’s local cryptocurrency market. However, the highlight of this announcement is that the regulator wants to have a watchful eye on the operations of cryptocurrency exchange and cryptocurrency funds.
In its , the SFC notes under the existing rules, virtual assets do not fall under the definition of “securities” or “futures contracts”. Hence they do not come directly under the regulatory oversight of the SFC. As a result, investors who are dealing with virtual assets through unregulated platforms do not get the protection under the Securities and Futures Ordinance (SFO). Thus the SFC has decided that to protect the investors’ interest, it will bring crypto exchange operators under its regulatory purview.
“…It is proposed that the standards of conduct regulation for virtual asset trading platform operators should be comparable to those applicable to existing licensed providers of automated trading services,” the SFC adds.
The definition of “virtual assets” provided by the SFC includes all blockchain-based tokens like the utility tokens, digital currencies, and the asset-backed tokens.
Licenses for Cryptocurrency Fund Distributors and Portfolio Managers
Under the new regulatory guidelines, cryptocurrency fund distributors and portfolio managers will require to get an official license from the SFC. Fund managers with more than 10 percent exposure into virtual assets will have to mandatorily get their licenses. Also, “firms managing funds which solely invest in virtual assets that do not constitute securities or future contracts” will require a license for the distribution of their funds. The statement reads:
“In order to afford better protection to investors, the SFC considers that all licensed portfolio managers intending to invest in virtual assets should observe essentially the same regulatory requirements even if the portfolios (or portions of portfolios) under their management invest solely or partially in virtual assets, irrespective of whether these virtual assets amount to ‘securities’ or ‘futures contracts.’”
Ashley Alder, the chief executive of the SFC praised the agency for its new approach towards investors protection.
“The measures announced today allow us to regulate the management or distribution of virtual asset funds in one way or another so that investors’ interests would be protected either at the fund management level, at the distribution level, or both. We hope to encourage the responsible use of new technologies and also provide investors with more choices and better outcomes,” added Alder.
The Growing Regulatory Demand Due to Increasing Risks
The SFC cites several risks associated while dealing with virtual assets. The regulator says that the inherent nature and characteristics of the virtual assets are some of the reasons behind it. As crypto assets lack any intrinsic value, they are subject to high volatility and price fluctuations.
Furthermore, the anonymous nature of virtual assets makes them vulnerable to all sorts of illicit activities like terror financing, fraud, and money laundering. Additionally, the cryptocurrency market is facing huge challenges in terms of cyber-security risks and thefts. Most of the centralized exchanges across the globe have faced huge losses this year due to external attacks. On top of it, the lack of secure storage solutions is another reason preventing investor participation.
The regulator thus mandates proper regulatory rules to have a cleaner and safer environment for investors. It notes:
“While virtual assets have not posed a material risk to financial stability2, there is a broad consensus among securities regulators that they pose significant investor protection risks. The regulatory response to these risks varies in different jurisdictions, depending on the regulatory remit, the scale of the activities and their impact on investor interests and whether virtual assets are deemed financial products suitable for regulation.”
