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Could have the option but force showing it if you're in a competitive pvp area like a spar room or tower.
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Main reason why this is bad.
People would use a vpn, enter arena, spar, leave the arena, hide their flag, then take off their vpn.
I really like knowing what country someone is from. Shows a lot of variety around the map. In cases when they are from South America, it's easier for me to respond to their questions, in Spanish.
I see no reason to hide your flag, other than to avoid racist remarks.