Written evidence submitted by the
UK interactive entertainment association (Ukie)

Submission from the UK interactive entertainment association (Ukie) to the ‘Non-fungible tokens (NFTs) and the blockchain’ call for evidence

About Ukie

  1. Ukie is the trade body for the UK’s video games and interactive entertainment industry. A not-for-profit, it represents more than 500 games businesses of all sizes from start-ups to multinational developers, publishers, and service companies, working across online, mobile, console, PC, esports, virtual reality and augmented reality. Ukie aims to support, grow, and promote member businesses and the wider UK video games and interactive entertainment industry by optimising the economic, cultural, political, and social environment needed for businesses in our sector to thrive.

About the video games industry

  1. The UK video games industry is an economic powerhouse and a hotbed for the development of emerging technologies, supporting 73,000 FTEs and generating £5.26 billion in gross value added to the UK economy.
  2. Video games are also a significant part of modern popular culture with broad appeal to a diverse audience. 86% of people aged 16-69 in the UK have played games in 2020, and this is represented by an even gender split[1]. Ofcom’s recent Online Nation 2022 report found that 39% of UK adults and 56% of UK children play games online[2].


  1. Ukie welcomes the opportunity to respond to the Digital, Culture, Media and Sport Committee’s inquiry into NFTs and the blockchain. This submission builds on the experience of our members who form a cornerstone of the UK’s successful creative and digital sectors.

The video games industry and NFTs

  1. The video games industry has, for well over a decade, been at the forefront of the creation of unique or limited digital assets, virtual worlds and avatars, and virtual in-game currencies. These features offer a variety of rich and immersive experiences to enhance gameplay, from allowing players to personalise their experience and express themselves within the game, to rewarding achievement.


  1. The majority of video games companies prohibit, via their terms of service, the exchange or sale of in-game items or other in-game digital assets for real world currency. These in-game items are designed to enhance player experience, rather than act as a speculative financial tool. Ukie’s members spend significant sums of money enforcing these terms to protect the player experience.


  1. In recent years, blockchain technologies have emerged with various applications, including NFTs. An NFT is a unique unit of data, stored on a blockchain, and associated with a digital information or file. That unit of data (a series of numbers and written characters) stored on a blockchain makes the NFT unique and verifiably authentic. A blockchain is a digital ledger on which the authorship, ownership, scarcity, and transaction history of an NFT can be traced fully and transparently.


  1. Applications relying on blockchain technologies, such as NFTS, have sometimes been used as tools to facilitate financial speculation. Many consumers have lost significant amounts of money as a result, while others have made similarly significant sums. However, it is important to recognise that blockchain and applications such as NFTs, allow for financialisation but do not require it.


  1. So far, relatively few video games have adopted NFTs or other applications of blockchain technologies. There are international examples of active games or experiences that leverage this technology, such as The Sandbox or Decentraland, but there has not been any notable adoption in the UK market.


  1. Where companies in the video game industry are innovating with or exploring NFTs, they are typically used as in-game collectible and playable items such as skins, characters, avatars, inventory items, or cards, and are aimed at enhancing players’ experiences and providing opportunities to reward gameplay. In this context, NFTs have real, built-in utility in the game or platform they were originally issued in, but thanks to blockchain technology they may also be transferred to other users and potentially even be used on separate platforms. Developers may be able to integrate one game’s NFTs in other games (i.e. be interoperable), and thus NFTs may be able to acquire additional or new utility.


  1. An example of interoperability is NFTs of players’ avatars, representing their identity inside video games and virtual worlds. Because the avatar NFTs are owned by their holders, users are now able to digitally own their identity and use that identity across multiple virtual worlds that support those NFTs.


  1. In an increasingly digitised world, NFTs could be a key element in creative industries, such as online entertainment and gaming – much like figurines and trading cards were an integral part of prior generations’ experiences. Blockchain technology and NFTs could also be leveraged in the metaverse.


Approach to regulation of NFTs in the video games industry


  1. NFTs and other applications of blockchain technologies are still at an early stage of development, and an even earlier stage of adoption. This is true for NFTs in the video game industry too. Accordingly, Ukie believes that the correct approach to NFTs in this space is one that balances room for innovation and experimentation, while ensuring consumer safety.


  1. With this in mind, we wish to note that the European Commission (EC) recognised that NFTs that are unique and non-fungible, unlike cryptocurrencies, are exempt from the scope of the upcoming Markets in Crypto-Asset (MiCA) regulations.[3]


  1. Where NFTs and other blockchain technologies are used as financial instruments, we believe that these ought to be regulated appropriately by existing regulators. Where they are not used as financial instruments, or in other already regulated ways, we believe that intervention beyond existing laws and regulations which are already applicableespecially at this stage would be premature. We note that our industry is already subject to extensive consumer protection, e-commerce, distance marketing and data privacy protection requirements at both European and national levels. These regulations apply to NFTs.


Contact: Dominic Murphy, Head of Policy and Public Affairs, Ukie


[1] https://info.savanta.com/uk-gaming-attitudes-and-behaviours

[2] https://www.ofcom.org.uk/research-and-data/internet-and-on-demand-research/online-nation

[3] https://www.europarl.europa.eu/news/en/press-room/20220613IPR32840/cryptocurrencies-in-the-eu-deal-struck-between-parliament-and-council