PAYMENTS: $3 Billion revenue video game Fortnite used for money laundering using in-game currency

Human nature does not change. We can have arcane towers of financial services and regulatory architecture, but the outcomes are a rhyming echo of our DNA. Let's start with this: Fortnite, a virtual place where 200 million people spent time playing a game in 2018, earned $3 billion for its parent company. The video streamer most popular for playing Fortnite on (essentially) TV earned $10 million for the entertainment he provided to 20 millions followers. One of his videos gathered nearly 700,000 views -- for comparison, Conan O'Brien gets about 1.3 million per night.

Fortnite makes money by selling cosmetic upgrades to players, and since they inhabit this rendered world like any other social network, our dopamine center and social pressures motivate purchases for status. Given the payments infrastructure of this game and its virtual currency (not on the blockchain!) are comparatively weak, criminals have started using in-game value for money laundering. A report from The Independent linked below finds that stolen credit card credentials are being used to purchase game currency and then cashed out at discount on eBay. Additionally, over 50,000 instances of online scams related to the game made their way to social media per month. Welcome to the Internet, everyone! We can't help but remind you that Steve Bannon (yes, that one) and Brock Pierce (EOS, Tether, Puerto Rico, etc.) once ran the largest World of Warcraft virtual money exchange.

So should we bring down the financial regulators on Epic (the maker of Fortnite) as hard as New York state came down on Bitcoin companies with the BitPay regime, freezing innovation? Should KYC/AML be required for all video games? Under the Chinese model, Tencent's "Honor of Kings" mobile game generates $2 billion in revenue per year and is under the same strict government control/license as financial products. Players are checked against a registration database to control for age and name, and (we expect) the play time data flows into a social credit score. But recent studies of KYC/AML policies persuade us otherwise. When looking at the amount of criminal proceeds actually seized by authorities based on those policies, the amount is less than 1%. The cost may not be worth the outcome.

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Source: Fortnite (IndependentSlateBitcoinist), Fortune (Streaming), Interest.co (Ron Pol on AML ineffectiveness), GamesIndustry (Tencent database), AML fines