GameStop to withdraw digital wallets due to ‘regulatory uncertainty’

GameStop – upload.wikimedia.org

Gaming retail giant GameStop will pull its digital wallets from the market due to “regulatory uncertainty of the crypto space,” the company announced on its website.

Per November 1, GameStop’s wallets will be inaccessible on iOS and Chrome Extension. Users can still use their wallets until October 1. The company advises users to back up their wallet’s secret “passphrase” before the shutdown.

Last year, GameStop ventured into the NFT marketplace, focusing on the Ethereum ecosystem. In May 2022, the company launched its own Ethereum-based wallet service, allowing users to manage cryptocurrencies and NFTs. GameStop’s venture into Web3 marked a shift from traditional brick-and-mortar retail stores to digital asset exploration.

GameStop did not explicitly specify the exact aspects of its regulatory concerns. However, the company announcement closely followed recent developments in the crypto industry, including increased enforcement actions by the U.S. Securities and Exchange Commission (SEC) under Gary Gensler’s leadership.

The SEC recently filed lawsuits against major exchanges like Coinbase and Binance. Its regulatory crackdown has led to the removal of certain tokens from popular trading platforms. Robinhood, for instance, delisted tokens like Cardano (ADA), Polygon (MATIC) and Solana (SOL) in June.

The tightening regulatory environment in the U.S. has also led some companies to relocate overseas until there is regulatory clarity in the jurisdiction. Crypto proponents criticize the SEC for hindering innovation within the sector.

Shift in leadership

GameStop’s plan to withdraw its digital wallets follows the dismissal of CEO Matt Furlong nearly two months ago. Furlong was at the helm during the launch of the wallet and marketplace, as well as the company’s partnership with the Ethereum scaling network Immutable X.

The partnership allows GameStop users to trade in-game items without incurring gas fees and uses a carbon-neutral minting process. The collaboration also grants access to digital assets from projects such as Gods Unchained and Illuvium.

At that time, the company said its foray into the NFT space aligned with the mission of empowering players by providing a dynamic platform for gaming enthusiasts. As part of the deal, the company set up a $100 million incentives fund for developers building on the Ethereum network.

However, prior to his departure, Furlong had already signaled GameStop’s shift away from its emphasis on NFTs and cryptocurrencies. In a December 2022 earnings call, he said the company “will not risk meaningful stockholder capital” in the crypto industry.

GameStop continued to operate over 4,400 physical stores worldwide as of January. However, the video game industry’s shift toward digital delivery has prompted several rounds of layoffs. The company also experienced turbulent swings in its stock price due in part to the “meme stock” craze in early 2021.

Ryan Cohen assumed the role of executive chairman after Furlong’s departure and an announcement of a larger-than-expected loss in Q1. With a vision to transform the company into a dominant e-commerce player, Cohen made significant changes to the leadership team, although many of these hires did not stay long in their positions.

Cohen re-adjusted the company’s e-commerce strategy. Instead of focusing on digital assets, he prioritizes using GameStop’s physical stores as convenient locations for customers to pick up online orders.