Axie Infinity – What is it, and Why the Attention from the BSP?
You may have seen it in recent news, and have no idea what it’s even about. News reports are filled with terms like Virtual Asset Service Provider (VASP) and Operator of Payment System (OPS). If you have no idea what those words mean, you are not alone. What even is Axie Infinity, and why is it getting so much attention from the Bangko Sentral ng Pilipinas (BSP)?
The headlines show that the BSP does not consider Axie Infinity as a VASP, but instead is looking to classify it as an OPS. If you google what Axie Infinity is, it looks like it’s just a game. However, if you google what OPSs are, the examples are GCash, PayMaya, and other online payment services. What gives?
NFTs and the Age of Digital Art
The long and short of it is that Axie Infinity is a game wherein you can earn NFTs. For the uninitiated, NFTs mean Non-fungible tokens. NFTs are a whole discussion in itself, but we will try to simplify it here.
Basically, the “non-fungible” part means that it is unique. An example of a fungible token in this context is the cryptocurrency Bitcoin. Trading it means you’re expecting to get exactly the same thing in return. On the other hand, a great example of a non-fungible item are trading cards. They vary in rarity, so if you trade it for a different card, you’re not gonna get the same thing. Maybe one super rare card is equivalent to many, less rare cards. Or better yet, one trading card can be equivalent to “real-world” money (or what we call fiat currency).
RELATED: Cryptocurrency Basics, and Why Filipinos Should Pay Attention
NFTs are varied, but the best example is digital art. One of the more popular examples is this video by Canadian Singer Grimes, which sold for a whopping $388,938.00 in an online auction. Again, this is a whole discussion in itself, but the important thing to keep in mind is that NFTs are actually worth some cold, hard cash.
Axie Infinity, Blockchain, and Crypto
Back to Axie Infinity. It’s developed by Sky Mavis, a tech-focused game studio. Think of it as a cross between Pokemon and Tamagotchis. You breed, raise, and battle creatures (called, you guessed it, Axies). However, you can also trade them in the platform’s own marketplace.
The clincher here is that it all works off of cryptocurrency and blockchain technology. Every single Axie is actually an NFT. A lot of people are actually earning real cash while they play Axie Infinity. Breeding, training, fighting, and collecting rare Axies means that you accumulate NFTs.
In addition to this, you need what the game calls Smooth Love Potions (SLP) to breed Axies. SLP is officially a cryptocurrency, which, as the time of this writing, is worth ₱7.53. Just like all cryptocurrencies, they are subject to market fluctuation, making it exactly like trading stocks.
There’s a lot more to unpack with Axie Infinity, but we’ll stop here. It’s really best to just experience it for yourself. However, note that it costs real money to play. In fact, you even need an official crypto wallet to even start playing the game.
It’s a wonderful platform, as it introduces a lot of people to the world of blockchain and crypto in a fun and entertaining package. But, since it involves NFTs who have equivalent monetary value, they have real world consequences.
The Bangko Sentral ng Pilipinas, VASPs, and OPSs
Enter the BSP, which is actively monitoring Axie Infinity. They are paying particular attention to how players are using and exchanging SLP as a form of payment for goods or services.
The BSP’s jurisdiction over crypto covers Virtual Asset Service Providers, or VASPs, under BSP Circular No. 1108. This details the guidelines for platforms that exchange what they define as “virtual assets” (e.g. cryptocurrency) for fiat currency. However, it also excludes “digital units of exchange used as in-game tokens”. Therefore, the BSP has ruled that the SLPs in Axie Infinity are excluded from this definition.
What the BSP is looking at now is actually classifying Axie Infinity activities under Operator of Payment Systems, or OPS. Under their regulations, OPS includes cash-in service providers like GCash and PayMaya. Basically, if BSP rules that the trading and selling of SLPs in Axie Infinity is similar to loading up your digital wallet with fiat currency and using it trade with other people for services, then they will classify it as an OPS.
This means that based on BSP Circular No. 1049, Sky Mavis or its local partner will need to register with the BSP as an OPS. Otherwise, it should completely stop all operations in the country.
Not Some Get-Rich-Quick Scheme
As you can see, this is a developing story. It’s a very long and complicated topic, filled with both cryptocurrency, blockchain, and financial regulations of our central bank, so it’s completely understandable. However, it’s a perfect example of how the Philippines is slowly adapting to the technologies in the 21st century.
We hope that this gives you at least a basic idea of what all this news on Axie Infinity is all about. If this pushes you to actually try the game, then well and good.
But, just like in the ever-evolving world of blockchain and cryptocurrency, it pays to be aware of what you can actually earn or lose. As we said in our earlier article about cryptocurrency, it’s not some get-rich-quick scheme. This involves actual, real world money, which is also subject to the rise and fall of markets.
Axie Infinity is no different. However, it is definitely novel and exciting, and much like everything in this new future of finance and trading, is definitely worth paying attention to.
