Sunday, November 27, 2022
HomeMetaverseBoE researchers: Crypto assets in metaverse may risk integrity of financial system

BoE researchers: Crypto assets in metaverse may risk integrity of financial system

BoE researchers say banks and households could become more exposed to cryptocurrencies in the metaverse, and the risks associated with digital assets might rise.

According to Bank of England (BoE) researchers Teresa Cascino and Owen Lock in a blog post published on August 9, decentralised digital world “metaverse” and platforms might support sizable amounts of real-world financial transactions made using crypto tokens like Bitcoin and Ether once they are developed. They claimed that if prices fell, the potential impact on real-world financial stability would be greater the more crypto transactions there are.

BoE researchers stated that widespread use of crypto assets in a fully developed metaverse might risk the integrity of the financial system and called for “strong consumer protection” frameworks.

Lock and Cascino imagined a world in which people spend more of their time and money in the metaverse by attending virtual events, working as salespeople in an online shop, and socialising with friends there. According to their predictions, households would store some of their money in crypto to make payments in the metaverse, while corporations might offer non-fungible tokens (NFTs) or take crypto more frequently.

According to Lock and Cascino, “the relevance of crypto assets in the open-metaverse indicates that if the metaverse expands, current vulnerabilities from crypto assets may scale to have ramifications for systemic financial stability.” 

Lock and Cascino warned that falling crypto prices could result in “balance sheet losses for households and corporates, an impact on unemployment, fire-sales of traditional assets from non-banks to meet margin calls on crypto-asset positions, and negative profitability impacts on exposed banks.”

According to Lock and Cascino, the metaverse’s development is unpredictable, and the aforementioned scenario is only a possibility.

Investors should exercise caution when dealing with crypto assets and be prepared to lose all of their money when purchasing digital tokens. According to the Bank’s Deputy Governor, Jon Cunliffe, a digital form of the pound is not likely to function like currency and is not anticipated to be released until the second part of this decade.

Read more latest crypto news on cryptoshrypto:

 

Vaishali Goel
Technology enthusiast, explorer and academic scholar. Currently exploring the crypto world. Join me in my journey to see how crypto, NFT and Metaverse will change the world.
RELATED ARTICLES

LEAVE A REPLY

Please enter your comment!
Please enter your name here

two × five =

- Advertisment -

Most Popular