Square Enix believes recent blockchain volatility can benefit its game plans

Final Fantasy publisher Square Enix has again used its New Year letter to promote its “aggressive” investment into blockchain games, claiming that recent volatility in the market could ultimately benefit its plans.

Square Enix was one of the first major publishers to declare support for “blockchain entertainment”, which uses a form of digital ledger to effectively allow users to own, buy and sell digital items.

In its New Year letter last year the company committed to making blockchain and NFT games. Later in 2022, it announced plans to sell NFTs as part of what it calls the “first digital collectible art project designed from the ground up for Web3 fans”.

In a new letter discussing its plans for 2023, Square Enix president Yosuke Matsuda has now said blockchain remains the biggest focus for its medium-term investments, despite what he called “volatility” in the blockchain space in 2022.

Matsuda argued that lessons learned and likely regulation to come could benefit the growth of the blockchain field and its plans to develop games based on the technology.

“In terms of new business domains, we named three focus investment fields under our medium-term business plan,” the exec wrote. “Among those, we are most focused on blockchain entertainment, to which we have devoted aggressive investment and business development efforts.

“Looking externally, I think it is fair to say that blockchain gained significant recognition as a field in 2022, as evidenced by ‘Web 3.0’ becoming a firmly established buzzword among businesspeople.

“However, the year also saw volatility in the cryptocurrency and NFT (non-fungible token) markets that tracked the dramatic shifts in the macroeconomy described above. The latter half of the year in particular produced a somber string of news stories with blockchain connections, including the scandalous bankruptcy filing of FTX in November.”

He continued: “In the wake of these developments, we hear rumblings from some countries of early moves to regulate such businesses more strictly. In Japan, meanwhile, the drive to encourage such businesses has gained momentum, led by the government.”

Matsuda goes on to cite Japan’s ‘Priority Policy Program for Realizing a Digital Society’, a plan signed off in June 2022 regarding the promotion of the Web 3.0 concept, including the use of NFTs based on blockchain technology.

“New technologies and frameworks lead to innovation, but they also create considerable confusion,” he wrote. “Having ridden out such societal tides, some such technologies and frameworks gradually become part of people’s lives, eventually giving rise to new businesses and growth.

“Following the excitement and exhilaration that surrounded NFTs and the metaverse in 2021, 2022 was a year of great volatility in the blockchain-related space. However, if this proves to have been a step in a process that leads to the creation of rules and a more transparent business environment, it will definitely have been for the good of the growth of blockchain entertainment.”

Matsuda concluded by acknowledging that much of the discussion around blockchain games was previously driven by investors, and as such focussed on the monetisation opportunities the technology could unlock.

He argued that increased discussion among the general public, and lessons learned from recent market turbulence, could now steer blockchain gaming in a direction that is ultimately more appealing to consumers.

“Multiple blockchain gaming events held overseas recently produced more active discussion than ever before about what makes the games exciting and what their user community looks like,” he wrote.

“The market was driven more by speculative investors than by gamers through 2021. In other words, the content that was at the forefront was created based on the premise that blockchain and NFTs should result in monetization.

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“However, in the wake of the aforementioned turbulence in the cryptocurrency industry, there is now a trend to view blockchain technology as a mere means to an end and to discuss what needs to happen to achieve the end of delivering new experiences and excitement to customers. I see this as a very beneficial development for the future growth of the industry.”

Square Enix has multiple blockchain games based on original IPs in development, some of which are already announced and others planned to be shown this year.

“Blockchain has been an object of exhilaration and a source of turmoil, but with that in the rearview mirror, we hope that blockchain games will transition to a new stage of growth in 2023,” Matsuda wrote.