Will the Metaverse Be Next in the Regulator’s Sights?
The increasing capacity for crime in the metaverse has primed it for regulation, according to a recent report.
Corporations have already started exploring the potential of the metaverse for new economic opportunities, according to crypto researcher Elliptic Connect. In addition to mounting Google searches for ‘metaverse,’ Elliptic’s recent report also emphasized Facebook’s recent rebranding to Meta.
The report acknowledged that, like Meta, many businesses are struggling to find an immediately profitable use case for the technology. However, it found that at least 58% of respondents expected the metaverse to deliver some commercial opportunity for their business within the next five years. Additionally, Citibank predicts that the metaverse will be worth up to $13 trillion by 2030. While this suggests significant potential for investment, this is also the case for crime.
Crypto Crime in the Metaverse
Elliptic’s report focused on the increasing number of ways criminals are stealing from users in the metaverse. It included standard financial crimes, such as scams and fraud, in addition to those more specific to digital assets. These include the hacking and theft of digital assets belonging to users of services in the metaverse.
However, it also highlighted crime that is especially facilitated by the shared digital space. One item growing in popularity is ‘wearable’ non-fungible tokens, such as digital fashion and luxury items that can be worn in the metaverse. According to the report, these items could open up new avenues for digital money laundering. It also warned against the metaverse facilitating sex-related crimes, like non-consensual porn and sexual harassment.
Regulation in the Shared Digital Space
Consequently, the report suggested that the growing risks would draw the attention of regulators in the coming year. In some cases, the process could be relatively straightforward. For instance, simply clarifying where pre-existing regulation extends to activity conducted in the metaverse.
However, as the new paradigm offers new opportunities for crime, regulators will also require new approaches. One suggestion the report offers is leveraging regulatory sandboxes to engage developers in the DeFi space. According to the report, this is already being done in Abu Dhabi Global Market. Elsewhere in the United Arab Emirates, Dubai’s Virtual Assets Regulatory Authority has set a precedent by establishing a presence in the metaverse.
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