Was 'digital ownership' a myth? The shadow of the decline of Web3 gaming.
The Web3 gaming industry is facing a massive collapse by 2025, exposing the once-innovative promise of "digital asset ownership" to the groundbreaking reality. The problem isn't simply a lack of technological prowess or ambition on the part of game companies, but rather the legal barrier of regulation.
When the game ends, your assets disappear.
Web3 games have long claimed to be able to issue NFTs and tokens via blockchain, allowing users to own them. However, the reality is quite the opposite. According to blockchain analytics platform DappRadar, 8% of all active Web3 games closed in the second quarter of 2025 alone. This is due to a 93% year-over-year decline in venture funding and market saturation.
During this process, major Web3 titles such as "Tatsumeeko," "Nyan Heroes," "Blast Royale," and "Rumble Kong League," which was linked to NBA star Stephen Curry, ceased service. Even the MMORPG "Ember Sword," which raised $200 million (approximately 288.8 billion won), was abruptly shut down, causing the real value of its related tokens and NFTs to evaporate overnight.
In particular, the virtual asset NYAN of 'Nyan Heroes' plummeted by more than 40% in a single day, and the market capitalization fell by 99% from its peak, clearly revealing the reality of digital asset ownership.
Web3 games face regulatory barriers
When Web3 gaming platforms directly upload assets to the blockchain, and NFT issuance and token trading become freely available, they are no longer considered simple games but rather "financial services." This means they are subject to global regulatory authorities, including the US Financial Crimes Enforcement Network (FinCEN) and the European Union's Markets in Cryptocurrency Assets Act (MiCA).
"Compliance in the Web3 games market is currently very low," said Magnus Söderberg, CEO of Trioloth Games, warning that many developers are either ignoring or unaware of legal requirements.
If subject to regulation, companies must meet complex and costly requirements, including user identity verification (KYC), anti-money laundering (AML), asset custody, and transaction record reporting. Obtaining a MiCA-based license in Europe and securing a money transmitter license in each state in the US alone can cost at least $10 million to $15 million (approximately KRW 14.441 billion to KRW 21.6615 billion).
Games that avoid regulation are losing trust.
Small and medium-sized game studios with limited financial resources often forgo regulatory compliance and rely on limited token usage within their games or rely on the basic functionality of existing blockchains to push ahead with launches. However, these approaches often lead to problems such as unfair token flows, such as insider allocations and dumping, and a fragmented economic system.
"Avoiding regulation doesn't save money; it actually costs players trust and asset value," Soderberg said.
The alternative is 'regulatory compliance infrastructure outsourcing.'
So, is there a way for developers to focus on their creations while still meeting regulations? Söderberg proposes a "compliance service" as the answer. Instead of acting as a financial institution, game companies can outsource KYC, AML, and token economy design to an external, certified service, thereby reducing their legal burden.
These services automatically apply wallet verification, transaction limits, and regional access restrictions at the smart contract level. This allows players to enjoy the game without feeling restricted, and developers can meet all legal requirements in advance. He emphasized, "The ideal structure is one where regulations are integrated into the game without compromising the player experience."
Web3 games: The next survival requirement is 'legality.'
The recent collapse of Web3 games clearly demonstrates the vulnerability of unregulated digital ownership. To secure both investment and user trust, we've entered an era where "legality" is as crucial as "technological prowess."
🔎 Market Interpretation
The 2025 Web3 gaming collapse clearly demonstrated the fictitious nature of digital asset ownership and the lack of regulation. Survival now hinges on regulatory compliance.
💡 Strategy Points
Games targeting global service must first review applicable regulations, such as MiCA and FinCEN.
Small and medium-sized developers should consider outsourcing their regulatory compliance infrastructure.
A structure that automates regulation at the smart contract level is key to securing trust.
📘 Glossary
- MiCA: The European Union's cryptocurrency regulation law, which includes provisions for distribution, operation, and protection.
- CASP (Crypto Asset Service Provider): Legal status granted to companies that provide cryptocurrency-related services.
- KYC/AML: Customer verification and anti-money laundering measures, mandatory when providing financial services.
💡 Want to know more? AI-prepared questions for you:
A. This structure utilizes blockchain technology to give players full ownership of game items, tokens, and NFTs. However, if the game ceases operation, these assets become effectively unusable, and ownership becomes meaningless.
A. If in-game assets can be converted into real currency or if user-to-user transactions are freely structured, they are classified as a financial service, not a regular game. Consequently, they must comply with complex regulations, such as KYC and AML, and noncompliance can lead to fines and service interruptions.
A. To legally operate in major regions, including Europe (Mica) and the United States (state-by-state licenses, etc.), initial licensing costs are approximately $10 million to $15 million (approximately KRW 14.4 billion to KRW 21.6 billion).
A. It's possible, but realistically difficult. Therefore, outsourcing regulatory processes—where third-party specialists handle compliance procedures on your behalf—is gaining attention as an alternative.
A. No. In the absence of regulation, insider-driven token distribution, dumping, and unfair trading would frequently occur, potentially causing the value of players' NFTs or tokens to plummet. Ultimately, regulation is essential to protect players.
TP AI Precautions
This article was summarized using a TokenPost.ai-based language model. Key points in the text may be omitted or inaccurate.
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