Context:
A report by the Digital India Foundation (DIF) has identified money laundering as a significant threat undermining the integrity and long-term success of the Indian online gaming industry.
Relevance:
GS II: Polity and Governance
Dimensions of the Article:
- Key Findings from the Report on Money Laundering in Online Gaming
- Understanding Online Gaming: Regulations and the Code
- Online Gaming Market in India
Key Findings from the Report on Money Laundering in Online Gaming
Growth and Impact of the Online Gaming Industry in India
- Expansive Growth: The online gaming industry in India has seen a Compound Annual Growth Rate (CAGR) of 28% from FY20 to FY23.
- Projected Revenue: It is projected that the sector’s revenue will reach USD 7.5 billion within the next five years.
- Gamer Population and Job Creation: With 568 million gamers, the industry is poised to create significant employment opportunities, potentially offering 250,000 jobs by 2025 in fields like fintech, cybersecurity, and cloud services.
- Start-Up Ecosystem: The vibrant sector supports over 400 startups and engages 100 million daily gamers.
Mechanisms of Money Laundering in the Sector
- Use of Proxy Technologies: Many platforms use mirror sites and Virtual Private Networks (VPNs) to circumvent restrictions.
- In-game Financial Systems: In-game currencies and assets are frequently exploited for illicit financial activities.
- Cryptocurrency Transactions: The anonymity provided by cryptocurrencies aids in facilitating cross-border money laundering.
- Mule Accounts: These accounts help in masking the origins of illicit funds by facilitating complex transactions.
- Transaction Strategies: Techniques such as smurfing and money dumping involve small transactions to escape detection.
Understanding Online Gaming: Regulations and the Code
- Online gaming refers to playing games over the internet, enabling players to connect and collaborate regardless of physical locations, accessible on various devices such as computers and mobile phones.
- Distinguishing Gambling and Online Gaming: Gambling involves placing bets on uncertain outcomes to win money or possessions, posing a risk of loss. In India, games of skill are distinguished from games of chance, and the Supreme Court considers competitions substantially involving skills as not falling under gambling.
Code Alignment with Government Regulations:
- Public Gambling Act, 1867: While primarily addressing physical gambling, this act extends its relevance to online gaming, providing a legal framework for regulation.
- Information Technology Act, 2000: Sections 66, 67, 67A, and 67B empower authorities to formulate laws regarding online gaming, recognizing the need for discretion in regulating chance-based activities. This aligns with the constitutional division, placing gambling under state jurisdiction.
- Self-Regulatory Bodies: The Ministry of Electronics and Information Technology permits the establishment of self-regulatory bodies within the online gaming industry, emphasizing industry self-governance.
- Inter-Ministerial Task Force Recommendations: Proactively addressing the sector, the government’s recommendations from the inter-ministerial task force contribute to formulating rules for online gaming, emphasizing a balanced approach between industry growth and consumer protection.
Online Gaming Market in India
Types of Online Gaming:
- e-Sports: Professional players compete online individually or in teams in structured tournaments.
- Fantasy Sports: Players create teams of real sports players and earn points based on their real-life performance.
- Online Casual Games: These include both skill-based games and chance-based games. Skill-based games rely on mental or physical skills, while chance-based games involve random elements, such as rolling dice. Games involving betting of money or valuables can be considered gambling.
Market Size:
- Growth Rate: Between 2017 and 2020, the Indian online gaming industry experienced a high compound annual growth rate (CAGR) of 38%. In comparison, China had a growth rate of 8% and the US had a growth rate of 10%.
- Revenue Projections: The Indian mobile gaming industry’s revenue is expected to surpass $1.5 billion in 2022 and is estimated to reach $5 billion by 2025.
- Increasing Paying Players: According to a FICCI report, the revenue from transaction-based games increased by 26% in India. The number of paying players also rose from 80 million in 2020 to 95 million in 2021, representing a 17% increase.
Issues:
- Regulatory Oversight: The online gaming industry lacks consistent regulatory oversight, leading to challenges in creating a standardized framework.
- State Subject: Online gaming falls under the jurisdiction of individual states, resulting in regulatory inconsistencies across different regions of the country.
- Societal Concerns: There are concerns about the impact of online gaming, particularly related to addiction and the potential for financial losses leading to severe consequences like suicides.
-Source: The Hindu
