Regulation Is Changing the Landscape of Web3 Gaming in India
The new set of regulations from India's Ministry of Electronics and IT means more clarity for the future of web3 gaming.
by Noah Roy, investment analyst
The Indian government has recently proposed a set of guidelines for the regulation of online gaming through the Ministry of Electronics and IT (MeitY). These guidelines are meant to modify the current Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules 2021, and are viewed as a step toward more comprehensive regulation of online gaming. The proposed rules aim to reduce the current fragmentation of regulation across different states. MeitY has been designated as the ministry responsible for overseeing the online gaming industry and the Ministry of Youth Affairs and Sports (MYAS) has been appointed as the nodal ministry for esports in multi-sport events. This move officially recognized esports as part of mainstream sports in the country.
What impact does this have?
The Draft Rules for online gaming in India include a requirement for companies to register with a self-regulatory body. Only games that have been cleared by this body will be able to legally operate in the country. The self-regulatory body will have a board of directors of individuals with diverse backgrounds, including online gaming, public policy, IT, psychology, and medicine. Additionally, these self-regulatory bodies must inform the Indian government about the games they have registered and provide a report on the criteria used for registration.
To ensure transparency and fairness, online gaming firms will be required to conduct additional due diligence, including verifying users' identities, transparent withdrawal and refund procedures, and fair distribution of winnings. For user verification, companies must abide by norms set by the Reserve Bank of India. MeitY is also anticipated to include clauses mandating game developers to include safeguards that prevent users under the age of 18 from making in-game transactions.
In addition to registering with a self-regulatory body, gaming companies will be required to obtain a Random Number Generation Certificate to guarantee that card game outcomes are random and unpredictable. They must also secure a ‘no bot certificate’ from a reputable certifying entity. Online gaming companies will not be allowed to engage in betting on game outcomes.
Similarly to social media and e-commerce companies, online gaming platforms will also have to appoint a compliance officer to ensure they meet the norms, a nodal officer to act as a liaison with the government and assist law enforcement agencies, and a grievance officer to resolve user complaints.
What stage is the web3 gaming industry in India at?
The online gaming industry has produced unicorns like Dream11, MPL, and Games24X7 in the country. Meanwhile, the number of gamers in the country rose 12% to 507 million by March 2022 (24% were paying users) from 450 million in March 2021. Many gaming companies have welcomed the government’s initiative to formulate these rules and bring online gaming under a comprehensive central regulation.
Source: India Leveling Up: State of India Gaming FY 2021-2022 by Lumikai
Additionally, the Animation, Visual Effects, Gaming and Comics (AVGC) Promotion Task Force, established last year, submitted its report to the Ministry of Information and Broadcasting (MIB). The report suggested the creation of a national AVGC Mission with a specific budget allocation to support the industry.
What advancements lie ahead in the next few years?
Over the next eight years, the Indian government intends to invest in the animation, VFX, gaming, and comics (AVGC) sector, which is expected to have a positive impact on the gaming industry. As a result, the web3 gaming segment of the cryptocurrency industry may be impacted in the following ways:
The proposal suggests organizing gaming industry events across the country to promote collaboration and innovation, which may lead to increased investment in the sector, leading to the development and wider adoption of blockchain-based gaming and esports platforms. Axie Infinity Scholarships have expanded across India with many guilds actively recruiting players. In fact, for many Indians, Axie truly was a game changer, positively impacting the lives of many gamers during COVID-19.
The plan includes training 70,000 new teachers in the AVGC sector, offering classes for middle and high school students, as well as undergraduate courses in animation, visual effects, graphic design, and digital filmmaking. This will result in a larger pool of skilled professionals available to work in the gaming industry. Many web3 gaming studios and companies have emerged in India such as Super Gaming which is building an Indo-Futuristic battle royale called Indus.
The establishment of an international AVGC platform, supported by co-production agreements, will provide Indian web3 gaming companies with the opportunity to partner with foreign companies to access new markets as well as help them raise funding. In 2022, web3 gaming companies in India managed to raise $620.5 million through 32 deals, a significant increase of nearly six times the amount raised in 2021, which was $115.3 million, through 39 deals. According to the State of India Gaming report by Lumikai, 30% of the 450 Indian web3 companies operate in the gaming space.
The task force states that India will have over two million workers in the AVGC sector by 2030, up from 185,000 direct employees and 30,000 indirect employees today providing the necessary talent pool for the gaming industry in India, which is one of the fastest growing in Asia.
The potential for web3 gaming in India is bright, given its steady growth in recent years. To capitalize on this potential, it is crucial to develop engaging and entertaining projects for players and provide them with methods to monetize their wins. The AVGC Task Force and the proposed draft regulations by MeitY aim to enhance the prospects of growth and advancement in India's gaming by attracting more investment, expanding the talent pool, protect gamers and providing regulatory clarity for online gaming companies, and creating opportunities for Indian gaming companies to enter new markets, which will ultimately lead to an increase in adoption of blockchain-based gaming and other web3 gaming applications.