Regulators should be aware of the systemic risks posed by potential increased use of the metaverse and be prepared to mitigate those risks, say the Bank of England researchers.
If an open metaverse develops, existing risks related to digital assets could have systemic implications for financial stability, they said in a blog post on Tuesday. Regulators, including the BoE, the international financial watchdog Financial Stability Board, and the Basel Committee on Banking Supervision, the global standard setter for banking regulations, want to set standards and regulations to limit the potential crypto risks.
“Widespread adoption of crypto in the metaverse, or any other setting would require compliance with robust consumer protection and financial stability regulatory frameworks,” economist Owen Lock and policy analyst Teresa Cascino wrote.
The metaverse is a virtual reality where people can buy and sell digital properties using non-fungible tokens linked to the blockchain. Some see it as a digital representation of the real world, where people even have jobs. Some artists have already set up galleries and even banks have dived into it. In February, it was described by Morgan Stanley as a $ 5 trillion opportunity.
A large metaverse means that households may hold a significant portion of their assets in cryptocurrencies, and many businesses may decide to accept payments in cryptocurrencies, the researchers said. Financial institutions and banks may decide to increase their exposure to cryptocurrencies.
Additionally, people working in the metaverse could risk losing their jobs if the cryptocurrency market undergoes lower performance and metaverse activity declines, the researchers said.
“An important step, then, is for regulators to address the risks of using cryptocurrencies in the metaverse before they reach systematic status,” said the researchers.
