South Korean regulatory agency delays rating review of NFT games, possibly due to upcoming new legislation planned for next year.

After the decentralized finance (DeFi) concept sector entered a correction phase, the exclusive track of non-fungible tokens (NFTs) seems to have been activated. However, recent decisions by South Korean regulatory authorities regarding NFT games appear to have raised concerns for the development of blockchain games.

NFT Track Launch

After the end of August, the cryptocurrency market gradually cooled down, with the profits from major liquidity mining activities significantly reduced. The decentralized finance (DeFi) sector has officially entered a correction period. However, the market always finds new opportunities. The concept of Non-Fungible Tokens (NFTs) is quietly rising, with projects like Rarible RARI and MEME showing a trend contrary to the market, experiencing impressive independent market movements. Recently, the public chain project Flow, which is currently undergoing public funding, claims to be specifically designed for NFTs and blockchain games, indicating that the attention of investors and developer communities seems to have shifted from DeFi to the NFT sector.

However, despite the positive outlook from investors and developers, there seem to be regulatory concerns regarding NFT applications. According to a recent report from South Korean media iNews24, the South Korean Game Rating and Administration Committee (GRAC) postponed the approval of the NFT game "Five Stars" developed by the SkyPeople team based on the Klaytn blockchain on September 22.

Postponement Possibly Related to New Legislation

The South Korean Game Rating and Administration Committee (GRAC) is the South Korean authority responsible for game review and licensing. Therefore, games released in the South Korean region must obtain a rating certificate from GRAC first; otherwise, platforms like Google Play may determine that the game cannot be released in South Korea or may be directly removed. As GRAC oversees the entire South Korean gaming industry, South Korean blockchain game developers are concerned that the postponement by GRAC may have a negative impact on NFT games.

Currently, GRAC has not provided an official reason for the postponement. However, according to the SkyPeople development team, the reason for the delay is likely related to the "Special Financial Law" scheduled to be implemented in March 2021.

"The committee has postponed the game rating decision. Excluding the blockchain, the game itself is not an issue. In fact, the decision is likely related to the 'Special Financial Law' scheduled to be implemented in March next year."

This law strengthens anti-money laundering (AML) regulations for financial services (including cryptocurrencies). Therefore, it is speculated that the committee may be expecting SkyPeople to implement more comprehensive and stringent Know Your Customer (KYC) regulations to prevent NFTs from becoming potential tools for illegal fund transfers.

Death Certificate for Blockchain Games?

In fact, this is not the first time a blockchain game has been rejected by regulatory authorities. The NFT game "Infinity Start" produced by South Korean game development company NodeBrick did not receive approval from GRAC in 2019. At that time, the regulatory agency explained that they could not rate games that allow the purchase, sale, and trading of virtual items on the Ethereum (ETH) blockchain. South Korean tech media Fn News even stated at the time:

"If NFTs have regulatory issues, it is equivalent to signing the death certificate for blockchain games."

Although "Five Stars" still has the opportunity to be listed on Google Play without GRAC's rating review, SkyPeople stated that they would still choose to respect the government agency's review system and provide services in compliance with South Korean gaming laws and regulations.