A guest article from Ross Laurie, Co-founder, Reforged Studios.
I sense there is an “opportunity gap” that could be filled in the Web3 gaming space.
To be clear, Web3 is just Web2 with property rights, and Web3 gaming offers players the chance to create, store, and trade value from their gaming endeavours (if they choose to).
Most entrepreneurial activity comes from the insight that founding teams get from spending all their time in the future and spot that something is missing (Mike Maples Jnr, Floodgate) and I can see a potentially huge opportunity in the Web3 gaming space for the UK, and particularly, Scotland.
Scotland, with its rich heritage in financial services and a robust gaming industry, stands at a unique crossroads with the potential to become a global leader in the emerging Web3 and crypto gaming sector.
The following analysis explores the successes of both the finance and games sectors in Scotland, evaluates the synergy between these industries, and outlines strategic actions required to harness their combined potential for pioneering the future of gaming.
The Finance Sector in Scotland: A Pillar of Strength and Innovation
Scotland’s financial sector is distinguished by centuries of innovation and stability. With Edinburgh often referred to as the UK’s second financial hub, the country boasts a vibrant ecosystem comprising major banking institutions, investment firms, and a rapidly growing fintech scene.
Initiatives like the Financial Regulation Innovation Lab (FRIL), launched by FinTech Scotland in partnership with the University of Strathclyde and the University of Glasgow, illustrate Scotland’s commitment to embracing new technologies to revolutionise financial services.
FRIL’s mandate to explore and integrate cutting-edge technologies such as blockchain into financial regulation showcases Scotland’s proactive approach to shaping the future financial landscapes globally.
This initiative underscores the country’s readiness to innovate within the fintech sector, setting the stage for significant advancements in the integration of financial services with emerging digital economies, potentially including Web3 and crypto gaming.
The Scottish Gaming Industry: A Legacy of Creativity and Growth
Scotland’s gaming sector is recognised worldwide for its contributions to the global gaming landscape, with titles like “Grand Theft Auto”, “Red Dead Redemption” and “Lemmings” originating from its studios. The industry has seen remarkable growth, with a 26% increase in employment since April 2020, and a surge in the number of active gaming development companies. Institutions like Abertay University, offering world-leading courses in game development, and initiatives such as the UK Games Fund, further bolster the industry’s global standing and support for innovation.
This growth is testament to Scotland’s ability to not only produce globally acclaimed titles but also to foster an ecosystem conducive to the development of cutting-edge gaming technologies. However, challenges such as entrepreneurship, commercialisation, and strategic focus need to be addressed to sustain and amplify this growth trajectory.
The gaming sector has constantly evolved and Web3 is the next natural evolution, not because games developers want it, finance will find its way into any opportune sector, but the players themselves need to start seeing some value from their efforts in addition to dopamine hits and this new sector of games provides an opportunity for players to create, store, and trade value in their endeavours.
Scotland’s gaming industry is complemented by strengths in AI, cybersecurity, and fintech, essential for Web3 and crypto gaming. The synergy between these innovative sectors, supported by over 850 high-growth tech businesses and a collaborative ecosystem of academia and industry, underscores Scotland’s readiness to lead in the emerging Web3 gaming landscape. This robust foundation of creative prowess and technological innovation positions Scotland at the forefront of gaming and finance’s future.
There are remarkable parallels between the discussion the games sector had about F2P mobile (now the largest sector in gaming) and Web3 gaming and if we can learn anything from that, it’s that it is coming and the time is now to start planning how to capitalise on it.
Bridging Finance and Gaming for Web3 Leadership
The convergence of Scotland’s financial services and gaming sectors presents a unique opportunity to lead in the nascent Web3 and crypto gaming market. To capitalise on this, Scotland must embark on a strategic path that includes:
Encouraging Cross-Sector Collaboration
Initiatives like FRIL can serve as a blueprint for fostering collaboration between the finance and gaming industries. By facilitating partnerships that leverage financial technological innovation and gaming creativity, Scotland can develop secure, immersive, and financially integrated gaming experiences.
Enhancing Regulatory Frameworks
The success of Web3 and crypto gaming in Scotland will hinge on progressive and clear regulatory frameworks that protect consumers while encouraging innovation. Drawing on the financial sector’s experience in navigating regulatory landscapes and the gaming industry’s need for creative freedom, Scotland can establish itself as a safe and innovative environment for Web3 gaming development.
Enhancing Regulatory Frameworks for Web3 Gaming and in Scotland
The intersection of gaming and gambling regulations represents a significant challenge, especially as we venture into the territories of Web3 and crypto gaming. Currently, both sectors often fall under similar regulatory purviews, which can muddy the waters for developers, entrepreneurs, and regulators alike.
This conflation is not ideal for several reasons, particularly because video gaming and gambling are fundamentally different in their objectives, audience engagement, and potential risks – the differences between gambling and video gaming are stark; gambling is predatory entertainment whereas gaming is enriching, skill-enhancing leisure that fosters creativity, social connectivity, and intellectual growth.
Moreover, as we progress into the realm of Web3 gaming, where the lines between gaming for entertainment and potential financial gain become even blurrier, the need for distinct and clear regulatory frameworks becomes increasingly critical.
The Problem with Current Regulatory Overlaps
1. Different Sector Objectives: Video gaming primarily focuses on providing interactive entertainment, whereas gambling is centred around wagering with financial stakes. Treating them under the same regulatory framework can stifle innovation in the gaming industry and unnecessarily constrain it with rules more suited to gambling (even when it comes to simple tasks like setting up a business bank account).
2. Audience Engagement and Risks: Video games often target a broader demographic, including minors, who should be protected from gambling’s addictive risks. Merging regulation could inadvertently expose vulnerable audiences to gambling content or mechanics not intended for their consumption.
3. Innovation Stifling: The unique nature of Web3 gaming, which can incorporate elements of ownership and financial reward through mechanisms like NFTs and cryptocurrencies, requires a nuanced understanding. A one-size-fits-no-one regulatory approach can hinder the development of new gaming models and technologies.
Scotland’s Opportunity to Lead
Scotland has the potential to pioneer in establishing a regulatory framework that distinctly and effectively governs Web3 gaming and gambling. This would involve:
1. Creating Separate Regulatory Bodies: Establish initiatives to differentiate between gaming and gambling at the regulatory level. This separation would allow for the development of specific guidelines tailored to the unique aspects and challenges of each sector.
2. Developing Web3-Specific Regulations: Recognise the unique characteristics of Web3 gaming, such as the integration of blockchain technology and the use of digital currencies and assets. Scotland can lead by crafting regulations that address the unique challenges of digital ownership, crypto assets, and their integration into gaming platforms, ensuring consumer protection without stifling innovation.
3. Fostering Industry Collaboration: Engage with developers, legal experts, and other stakeholders in both the gaming and gambling sectors to establish clear guidelines. Collaboration can help ensure that regulations are practical, enforceable, and supportive of technological advancements while safeguarding against risks associated with gambling.
4. Piloting Innovative Regulatory Models: Experiment with regulatory sandboxes that allow for the testing of new Web3 gaming products and services in a controlled environment. This can help regulators understand the implications of new technologies, inform policy development, and establish best practices for consumer protection.
5. International Collaboration and Benchmarking: Work with international regulatory bodies and gaming communities to share knowledge, challenges, and solutions. Global cooperation can help Scotland not only to refine its regulatory frameworks but also to position itself as a leader in setting standards for Web3 gaming worldwide.
Fostering Talent and Innovation
Investing in education and skill development is crucial. By integrating blockchain and crypto gaming modules into curriculum offerings at universities and promoting continuous professional development in these areas, Scotland can build a workforce ready to lead in the global Web3 gaming sector.
Imagine a collaboration between a leading Scottish fintech firm and a game development studio, creating a blockchain-based platform that revolutionises game financing models, enabling players to invest in game development stages for future rewards. Such partnerships could set new standards in gaming engagement.
Strategic Investment in Infrastructure
To support the growth of Web3 and crypto gaming, Scotland must enhance its digital infrastructure and provide financial incentives to attract startups and established companies in the space. By creating a supportive ecosystem for innovation, Scotland can become a hub for Web3 gaming development and investment.
Conclusion
Scotland’s financial services and gaming sectors are poised to play a pivotal role in the global Web3 and crypto gaming revolution. By leveraging its historical strengths, fostering collaboration across sectors, and creating a supportive environment for innovation, Scotland can position itself as a global leader in this emerging field. The future of gaming is on the cusp of a new era, and Scotland has all the necessary ingredients to lead the charge, whether or not we do it is a different question all together…
