The team of the Bank of England predicts the systemic risk due to the growing metaverse and the use of cryptocurrency in the virtually created world. In a recent report, BoE warns regulators to already prepare for the consequences of financial stability and adoption of crypto in the metaverse.
You all know about the metaverse buzz and how it is grabbing everyone’s attention towards it. Everything we can think of is under the umbrella of the metaverse, from a splendid gaming experience (Minecraft, Roblox) to owning digital assets in the form of NFTS, is available in the metaverse. As with every innovation comes a threat too. Regulatory authorities, including the Financial Stability Board, Bank of England, and other organizations, have highlighted the expected risks of the metaverse. The potential dangers of metaverse are virtual property rights, financial market regulation, and risk for people intending to sell and buy non-fungible tokens. Regulatory organizations are planning to provide a proper framework to handle crypto risks to cater to all such issues.
Moreover, the use of cryptocurrency in the metaverse also needs to ensure consumer protection by all means. Everyone from celebrities to artists is investing in the metaverse, buying plots and houses, setting up businesses, and looking forward to every other opportunity. It is essential to mention here that households may get a considerable portion of their money in crypto with open metaverse opportunities. Banks and other firms may plan to carry out transactions in cryptocurrencies, for instance, Bitcoin. So when the transaction begins, it will continue to expand, and the impact on absolute financial stability will be on the households if the crypto market slows down.
Additionally, folks working in the metaverse could be vulnerable to the risk of unemployment in case of the crypto market slowdown or crashes. This could lead to significant financial risk and needs to be addressed, as per BoE researchers. Right now, the metaverse is in the initial development stages, but more people will enjoy the augmented reality world in the future.
Therefore, regulatory bodies are working hard to set standards and guidelines to protect consumers from losing their wealth. The Bank of England says It’s better to deal with the financial risks before and be prepared to either lose or profit when trading digital currency.