The Bank of England (BoE) is warning that “robust consumer protection” would be needed if cryptocurrencies achieved widespread use inside the metaverse.
BoE researchers Owen Lock and Teresa Cascino wrote in a Tuesday (Aug. 9) blog post that a fully-realized metaverse could host large volumes of transactions carried out using cryptocurrencies. The larger the volume of those transactions, the greater the risk, Cascino and Lock said.
“The importance of cryptoassets in the open-metaverse means that if an open and decentralized metaverse grows, existing risks from cryptoassets may scale to have systemic financial stability consequences,” the researchers wrote.
“An important step is therefore for regulators to address risks from cryptoassets’ use in the metaverse before they reach systemic status,” they added.
Lock and Cascino also noted that if a large-scale open metaverse came to fruition, households could hold a larger share of their wealth in crypto to make payments or investments in the metaverse. In addition, companies might increase acceptance of crypto for payments for goods and services, or sell digital assets such as clothing non-fungible tokens (NFTs) in the metaverse.
“Indirectly, if people are increasingly employed in jobs in metaverse-based settings, their employment outcomes may be affected by risks from cryptoassets (a loss of confidence in the cryptoasset ecosystem could result in reduced metaverse-based activity and subsequent job losses),” the blog post stated.
Despite a tidal wave of hype, the metaverse remains a vague concept, and not just because the technology needed to provide an immersive experience its proponents envision is still years away.
However, that hasn’t kept companies such as Meta, Microsoft, Alibaba and Ikea from launching an organization to figure out what the metaverse is.
“And while the Metaverse Standards Forum (MSF) is in many ways similar to the World Wide Web Consortium (W3C) that developed the modern internet, the sheer scale of the technical issues it is working on — ranging from photorealistic content authoring and geospatial systems to physical simulation and online economies — shows just how unfinished a concept it is,” PYMNTS wrote in June.
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