Crypto and Opportunities in the Metaverse

The economy of the Metaverse is increasing year on year. According to Citi Group, “interest in the virtual world spiked at the end of 2021 following a rise in sales of non-fungible tokens (NFTs) as well as announcements from Big Tech players indicating their interest and investment in the space.” With the totally addressable market estimated by Citi at “between $8 trillion and $13 trillion by 2030, with total Metaverse users numbering around five billion.”. Considering the metaverse as the next iteration of the internet, the Metaverse provides “a single, shared, immersive, persistent, 3D virtual space where humans experience life in ways they could not in the physical world.”. In recent experience, it has become a market for designers, producers and increasingly companies to provide digital products within the created market environments (Second Life, Roblox etc.) and to sell  digital merchandise in real time.

This will create additional pressures on regulators, who already are trying to catch up on the regulation of the ever-increasing numbers and varieties of crypto payment technologies. Crypto assets are merely codes that are stored and accessed electronically. They may or may not be backed by physical or financial collateral. They also pose a different set of AML/CFT challenges for firms to assess over traditional AML/CFT screening of customers and transactions. Some traditional elements, including the identification of the source of funds, the liquidity risk and the volatility risk need an entirely different set of tools in order to properly identify and verify the risks. The coming global environment, in which the total numbers of the means of payments and the total numbers of the opportunities for exchanges to occur globally, will present an ever-challenging environment for regulators to ‘keep up’ if they are to control the payment flows through these new systems.