Bank of England Analysts See Crypto Playing a Big Role in the Metaverse – Discuss the Need for Regulation – Metaverse Bitcoin News

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Bank of England Analysts See Crypto Playing a Big Role in the Metaverse – Discuss the Need for Regulation – Metaverse Bitcoin News

Bank of England analysts say crypto assets could play an important role within the metaverse. “Wide adoption of crypto in the metaverse…would require adherence to strong consumer protection and financial stability regulatory frameworks,” they added.

Bank of England Analysts on Metaverse, Crypto and Regulation

Bank of England economist Owen Lock and political analyst Teresa Cascino published a blog post titled “Cryptoassets, the metaverse and systemic risk” on Tuesday.

“Crypto-assets could play an important role in the metaverse,” they began, warning:

If an open, decentralized metaverse develops, existing crypto-asset risks may evolve to have systemic consequences for financial stability.

“Wide adoption of crypto in the metaverse, or any other framework, would require compliance with strong consumer protection and financial stability regulatory frameworks,” they pointed out.

Lock and Cascino explained that “the open metaverse will require a way to own and process digital objects that are interoperable across virtual worlds,” adding, “We believe crypto-assets are well positioned to play an important role here. »

They detailed:

If a large open metaverse materializes, households could hold more of their wealth in cryptoassets to make metaverse-based payments or for investment purposes.

Additionally, businesses can increasingly accept crypto payments for goods and services and sell digital assets, such as non-fungible wearable tokens (NFTs), in the metaverse, they added.

The authors also pointed out that non-bank financial institutions could increase their crypto holdings if a growing open metaverse improves the investment prospects of crypto assets and their supporting infrastructure.

Lock and Cascino noted that “this evolution of the metaverse is uncertain”, adding that their view is a possibility rather than a certainty.

“That said, if these exposures materialize, crystallization of crypto-asset risk could lead to: balance sheet losses for households and businesses, impact on unemployment, sell-offs of traditional assets to non-banks to respond to margin calls on crypto-asset positions, and negative impacts on the profitability of exposed banks,” they warned.

“Other things being equal, the larger the size of the crypto-asset market, the greater the risks and the more systemic they could become,” the authors concluded, noting:

An important step is therefore for regulators to address the risks associated with the use of crypto-assets in the metaverse before they reach systemic status.

Do you agree with the Bank of England economist and policy analyst? Let us know in the comments section below.

Kevin Helms

An economics student from Austria, Kevin discovered Bitcoin in 2011 and has been an evangelist ever since. His interests include Bitcoin security, open source systems, network effects, and the intersection between economics and cryptography.




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