New research from the Bank of International Settlements (BIS) urges policymakers to “future-proof” themselves against the negative impacts of an unchecked metaverse on the digital economy.
The BIS research stated that to keep the metaverse from fragmenting and being controlled by vital commercial interests, regulation-backed interoperable payment systems will be required.
BIS Warns Against Unregulated Metaverse: A Call to Prevent Fragmentation and Corporate Control https://t.co/6WLLwc9SSs
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The BIS report
According to the BIS report, it is not a foregone conclusion that the metaverse will achieve widespread adoption. Interest in the metaverse, also known as immersive computer-generated environments, peaked in early 2022, with Facebook changing its name to Meta.
If you are wondering why has Facebook changed its name to Meta and What is the Metaverse then here we provide you a complete guide.https://t.co/swSUxVCiJw#ddelhi #facebook #trending #meta #facebookmeta #metafacebook #trends #latest #mustread #metaverse pic.twitter.com/yZghNvVPkl
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The 31-page report also issues a warning, stating that virtual and money ecosystems in the future may “become fragmented and dominated by powerful private firms.” To offset this threat, the BIS report recommends that policymakers “promote more efficient, interoperable payments that can fulfill user demands.
To “provide clear standards on data privacy, digital ownership, and consumer protection,” the report urges regulators to create frameworks. However, the report divides the metaverse into centralized and decentralized platforms.
Centralized and Decentralized Metaverse
A centralized metaverse (where, for example, a future Zuckerberg eventually decides how payments function inside the ecosystem) would not be interoperable, according to the BIS’s most recent assessment.
According to BIS, fees could lead to top-down “rent-seeking behavior” among users. Additionally, they can lose control of their transaction information.
However, a decentralized metaverse, also known as the Web3 model, allows users direct control over the system’s regulations, maybe through voting rights similar to those found in many modern blockchains. According to the paper, these techniques might simply create the appearance of involvement.
Citing a study on the Web3 game Decentraland, the report said that in almost 27% of all polls, the most influential voter essentially decided the outcome, which was not necessarily in line with the consensus among the other voters.
BIS believes that the volatility of current cryptocurrencies makes them suitable as its native form of payment, irrespective of whether the metaverse is centralized or decentralized. The report also proposes stablecoins as a plausible alternative. Still, it warns that centralized issuers like Tether or Circle could “act as a kind of dominant bank,” which would ultimately not be suitable for users if that bank were to fail.
The author’s concern
The authors highlighted additional studies demonstrating that users prioritize usability over all other considerations and frequently show little concern for the technical details of metaverse governance. In contrast to the centralized metaverse, they said, the decentralized metaverse is “tiny.”
What is the potential economic impact of services in the #Metaverse? Widespread adoption of tech like #VR and #AR could mean a blurring of lines between tradables and non-tradables, greater cross-border integration and new demands on payment services https://t.co/xoSv1tF9gx pic.twitter.com/TGiuXVlpN0
— Bank for International Settlements (@BIS_org) February 7, 2024
By increasing worldwide spatial integration, changing the labor market, and “blurring the lines between the tradable and non-tradable sectors of the economy,” the metaverse has the potential to impact the global economy significantly. Central banks and authorities should take note to capitalize on the potential advantages of the developing metaverse.
The authors also stated that to prevent virtual environments and money from becoming fragmented and dominated by influential private firms, authorities may wish to reinforce efforts to promote more efficient, interoperable payments that can fulfill user demands.
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