Uphold has recently been selected as the official infrastructure provider to enable IMVU, the third-largest avatar gaming platform, to let its 7m monthly active users exit the platform and change their VCOIN into any of the 27 national currencies that Uphold supports, including US dollars. This follows regulatory approval by the SECthat allows users to turn VCOIN, its in-game virtual currency, into actual money.
Robin O’Connell is Chief Revenue Officer at Uphold, leading Growth and Partnerships globally. Robin is a seasoned business development executive with experience growing business for both payment start-ups as well as large global payment providers
Here he shares his thoughts on the IMVU and Uphold partnership, and how it could be a game-changer for virtual world currencies.
Virtual Social Platform IMVU has been around for years. It sports its own in-game economy and has users in over 140 countries. Now, its creators have been given the green light to enable users to turn their in-game rewards, known as VCOIN, into real-world cash. Thanks to an established partnership with digital wallet provider, Uphold, IMVU’s VCOIN can be converted into a variety of national fiat currencies, such as USD and EUR.
The team has, in fact, already received approval from the U.S. Securities and Exchange Commission (SEC), thanks to a year long review process and strict adherence to Anti-Money-Laundering and Know-Your-Customer (AML and KYC) policies. As a result, VCOIN became the world’s first in-game, transferable digital currency, following receipt of a No-Action Letter from the SEC in November 2020. The No-Action Letter permits IMVU to sell VCOIN as a transferable non-security to users of its social-gaming platform and metaverse.
This is a huge step forward for IMVU, but could in fact pave the way for many other virtual worlds to begin using VCOIN or issuing their own cryptocurrencies. This in turn could change the nature of online gaming, forever.
A New Economy
Let’s begin by taking a look at the IMVU platform itself. Originally founded in 2000, IMVU offers users the ability to create their own avatars and explore a 3D environment where they can socialise, create, trade and play games. For years the digital universe has had its own internal economy that mirrors those used in many similar virtual worlds. “IMVU credits,” as they have been traditionally referred to, can be slowly earned by engaging with games and item creation, or can be bought directly with credit or debit card purchases. These credits can then be used to buy items inside of the platform, such as clothes and accessories for avatars.
Until recently all credits earned on the IMVU platform stayed on the platform or users had to make use of off-platform “grey market” side deals to cash-out. Because of this, oversight was impossible and security could be questionable at best. Deals were generally made between individuals and there were very few options available for anyone who got “ripped off.”
However, this new system will bring virtually all traffic onto IMVU itself, because VCOIN is an asset built on the Ethereum network, known as an ERC-20 token. What makes this important is that these new tokens have genuine transferability, as they are all backed up by blockchain technology, the same technology that powers Bitcoin and similar cryptocurrencies. This means tokens cannot be counterfeited and have an immutable history, which is great, but it goes even further.
As mentioned, IMVU has formed a partnership with Uphold, who are best known for providing the payments platform behind Brave Browser’s Basic Attention Token (BAT). Uphold will be providing their existing infrastructure to facilitate all VCOIN transfers within IMVU and the exchange of VCOIN for real-world, “fiat,” currencies. These will include the US Dollar, the Euro, and over 20 other currencies supported by the platform. The current plan is for the exchange rate of VCOIN to be set at a fixed amount, tentatively proposed to be 250 VCOIN = $1 USD. This makes the asset work somewhat like a Stablecoin, that is, cryptocurrencies with set valuations. Despite the similarities, Chief Strategy Officer John Burris has explained they follow slightly different rules behind the scenes:
“You know how, USDC, those guys put away exactly a dollar when you buy a coin? We’re not doing that exactly, we have some flexibility in how we pay out users.” He then elaborates, “as we sell VCOIN, we’re setting aside cash to purchase back VCOIN… So any user that either is on IMVU’s platform, or that comes in and creates an Uphold account, can convert into cash.”
Working with the SEC
In November of 2020 IMVU received an official No-Action Letter from the SEC. What this means is that IMVU is being given formal permission to sell VCOIN as a “transferable non-security.” This is important because had VCOIN been labelled a security, it would have been subject to fairly strict guidelines on how it could be sold and to whom. This would pretty much make it useless as a general-purpose currency in a digital metaverse.
Fortunately, for only the third time in history, the SEC has officially declared a crypto asset as not a security. What sets VCOIN apart comes down to certain aspects of how the token is used both inside and outside of IMVU. For example, proceeds from the sale of VCOIN will not be used to expand the IMVU platform. Furthermore, users will be subject to the usual AML/KYC guidelines that have become standard on most legal cryptocurrency exchanges. Lastly, the explicit agreement that VCOIN will be issued indefinitely and at a fixed price.
This is basically how IMVU and Uphold have shown that we are taking great strides in playing along with the rules laid down by the SEC. Getting this approval ensures that VCOIN can be used not only for “closed-loop” economics, AKA in-game transactions, but also as a bridge, or “open loop,” to the world of real money. Users will be able to earn actual income on the IMVU platform, and this all will be managed by Uphold to ensure that compliance is maintained every step of the way.
A Roadmap for Regulatory Approval
It’s not exactly surprising that such proactive steps needed to be taken to make sure this asset got off the ground. Issues surrounding the stablecoin Tether and Ripple’s XRP have been making headlines for some time now. However, by providing a general roadmap for how to launch a regulatory compliant digital asset, it would not be surprising to see others follow in IMVU’s footsteps. There’s no shortage of other games that could benefit from tangible currency, such as Minecraft, Roblox or Fortnite. It is possible that some of these platforms could partner directly with Uphold and begin accepting VCOIN themselves.
On top of this, it’s safe to expect some competing cryptocurrencies will also begin to enter the space. It’s even conceivable that in time new exchanges could form specifically designed for authorised trade between different regulatory approved currencies, all powered by an underlying blockchain. This would be revolutionary for both gaming and economics, as many of the ways that gamers monetise their playing, such as creating unique content or finding sponsors, could now be supported inside the native platforms themselves.
While VCoin is in its early stage of adoption, it has some early mover advantage, especially considering complete SEC approval. IMVU and Uphold are likely paving the way for many future developments in virtual economies, and it is a change that gamers have been craving for some time. Pretty soon users may be able to build entire careers around their engagements in these online communities, and this announcement will be remembered as the first step towards that.