By Shelly Melancon (Switzerland)
According to researchers at the Bank of England (BoE), the increased usage of digital currencies in the metaverse could affect global financial stability. Since the inception of the metaverse concept, one major discussion has centred on how people would trade.
Meanwhile, several entities believe that crypto would be the currency in the virtual world. However, some researchers believe this is not good for the global economy.
Usage Of Crypto In The Metaverse Might Cause Financial Instability
Two researchers at the BoE, Teresa Cascino, and Owen Lock, believe that crypto usage could skyrocket in the metaverse. As a result, this would affect the financial stability of the global economy.
This would be due to the large volume of digital transactions carried out daily. Also, a drop in the price of digital currencies could, in turn, affect financial systems in the real world.
According to the researchers, operating such a financial system in the virtual world would need frameworks for consumer protection. This is to prevent fraud and other criminal activities in the virtual space.
Under normal circumstances, Cascino and Lock believe users would spend more money and time in the metaverse. Consumers would engage in entertainment, socializing, employment, and shopping.
Additionally, some households will keep a portion of their funds in crypto. This is to allow for easy payment in the metaverse.
As a result, several firms would have to embrace crypto usage for payment purposes. Also, the firm may even sell crypto assets as NFTs.
According to the researchers, this would mean non-banking firms in the metaverse would hold more crypto. This is to allow for easy payment.
Both Researchers Call For Regulation To Prevent Such Risks
Additionally, crypto lending firms could cash in on the opportunity, leading to another crisis. Banks could even join the frenzy and become custodians of digital assets.
When this occurs, a drop in the price of digital currencies could lead to losses for corporate firms and households. Additionally, it could lead to massive crypto sell-offs to offset loans or meet demands.
Therefore, both officials have called for a regulation of the sector. This regulation should address the risks posed by crypto usage in the metaverse.
Meanwhile, several notable companies, including the big names like Meta, Microsoft, and Samsung, have invested in the metaverse. However, there are still some uncertainties about the metaverse concept.
One of them is if one single currency would be used in the metaverse or if there would be several tokens. There is also the question of who would control and govern the activities in the virtual space.
According to Cascino and Lock, it is uncertain how the metaverse would operate. However, their fears could be a reality, given that there are various possibilities.
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