Digital Gaming Business Models in the UAE
Within the United Arab Emirates, Web2.5/3 gaming developers typically opt for formal corporate structures rather than operating informally, primarily to secure intellectual property rights and minimize regulatory exposure. The nation provides an extensive array of business licensing options tailored to the gaming sector and Web3 services, including specialized categories like Offshore Gaming Operations.
However, a distinctive pattern has emerged in how UAE-based gaming enterprises manage their virtual asset operations. Rather than handling these aspects internally, companies frequently delegate virtual asset management, including NFT operations, to external partners. This strategic approach stems from the UAE's stringent licensing requirements for virtual asset services, which involve substantial financial investment, administrative complexity, and extended approval timelines.
To navigate these challenges, UAE gaming companies typically pursue one of two strategies:
- Partnering with licensed international third-party providers
- Establishing subsidiary operations in jurisdictions with more streamlined virtual asset regulations
These arrangements are typically formalized through user agreements that explicitly separate the UAE entity's gaming operations from virtual asset management, thereby limiting liability exposure. This structure enables businesses to maintain their prestigious UAE presence while efficiently managing virtual asset operations through more accommodating regulatory frameworks elsewhere.
Hong Kong
The situation in Hong Kong is more complex compared to regions like the UAE. While some developers proceed with setting up companies, others, as it appears, may operate without establishing formal entities. Developers with registered companies often stress that they do not provide financial services but merely facilitate administrative functions via their platforms. Interactions typically occur directly between users as buyers and sellers or between users and external platforms. Notably, game developers avoid taking responsibility for any transactions involving virtual assets. This cautious stance likely stems from Hong Kong’s stricter licensing and regulatory frameworks, including anti-money laundering regulations, which may apply to certain game creators.
Offshore
When establishing Web2.5 or Web3 projects in offshore jurisdictions, companies typically prioritize regions with supportive regulatory frameworks, attractive tax incentives, and business-friendly policies. Importantly, in the evolving virtual asset space, "offshore" should not imply unregulated or ambiguous operations. Many leading offshore jurisdictions have already implemented regulations governing virtual assets.
From a business structuring perspective, Web2.5 and Web3 projects often set up multiple legal entities, assigning specific roles to each or outsourcing tasks such as KYC processes to external providers. Additionally, various offshore regions offer innovative solutions for structuring. For example, Foundation Companies in the Cayman Islands provide distinct advantages tailored to Web3 projects.
By understanding these factors, companies can strategically plan where and how to structure their Web2.5 or Web3 ventures to maximize the benefits of operating in offshore jurisdictions.
Digital assets ownership
Who owns virtual assets is a very important issue. Please note that owning digital assets and owning the IP are 2 different things. If a gamer has virtual assets, this does not mean that she or he is a rightholder. Depending on the answer to the question of who is the owner, we can judge which era we are closer to - Web 2 or Web3. Below we will share our observations.
Japan
Ownership of virtual assets in Japan is primarily governed by Japan's Civil Code and the terms of use set by the platform or project. The Civil Code recognizes virtual assets as property, allowing for their ownership and transfer, provided the terms of use grant these rights to the user. These terms of use are legally binding agreements that detail the rights and responsibilities of both the users and the platform regarding virtual assets. This framework ensures that virtual asset ownership is clear, secure, and enforceable within the legal system of Japan.
UAE
In the UAE, under the regulations, the virtual assets are commodities, and the transfer of rights to them is real. However, in the UAE, the main problem is that the rules of the rightholder of the game do not cover the issue related to the ownership of virtual assets, since third-party partners or group companies are actively involved. For this reason, players need to study the rules of a specific third party every time, who helps to perform actions with virtual assets, and see how such a third party looks at this issue.
Hong Kong
In Hong Kong, virtual assets are property, and in case of disputes, the courts primarily look at how the rights to virtual assets are reflected in terms of use (they can even compare different versions of this document that were at different times, and how the ownership provisions changed over time). There are different options for who owns virtual assets after all. In Hong Kong, there are games in which players do not receive full ownership, but rather a license. Nonetheless, there are also the companies that say that the owner of the asset is the user, but at the same time, he or she provides a fairly broad license to the company to use them. But even in this case, the ownership of the virtual assets of the players is not absolute. For instance, at this point in time, nothing can stop the amending of the terms of use so that the digital asset owner will change. Besides, there are games in which the rules regarding the ownership of virtual assets have not been properly developed, and here there is a gray area where users act at their own risk.
Offshore
The choice of a specific offshore jurisdiction will depend on the particular needs of your business model. However, we can refer to the Cayman Islands, the British Virgin Islands (BVI), Seychelles, and Malta to illustrate how offshore jurisdictions approach virtual assets.
In all of these jurisdictions, virtual assets are considered property, and their ownership is primarily governed by the terms of use agreements set by the platforms or projects. These agreements are legally binding and must comply with local regulations to ensure the protection of users’ rights. The regulatory frameworks in these jurisdictions require that terms of use are clear and enforceable, providing legal certainty regarding the ownership of virtual assets.
