Will the Regulators go after the next metaverse?

According to a recent report, the growing potential for crime in the metaverse has made it ready for regulation.

According to cryptocurrency researcher Elliptic Connect, corporations are beginning to discover the potential of the metaverse for new economic opportunities. In addition to increasing Google searches for the ‘metaverse’, a recent report from Elliptic also highlights Facebook’s recent rebranding to Meta.

The report acknowledged that, like Meta, many businesses are struggling to find an immediate profitable use case for the technology. However, it found that at least 58% of respondents expected the metaverse to provide some business opportunity for their businesses over 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, it is also a matter of offence.

crypto crime in the metaverse

Elliptic’s report focuses on the growing number of ways in which criminals are stealing from users in the Metaverse. This included standard financial crimes, such as scams and fraud, as well as more specific to digital assets. These include hacking and theft of digital assets belonging to users of services in the Metaverse.

However, it also exposed crime that is particularly 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 can open new avenues for digital money laundering. It also warned against the metaverse promoting non-consensual porn and sex-related crimes such as sexual assault.

Regulation in the Shared Digital Space

As a result, the report suggested that the growing risk would attract the attention of regulators in the year ahead. In some cases, the process may be relatively straightforward. For example, simply clarifying that pre-existing regulation extends to activity conducted in the Metaverse.

However, as the new paradigm provides new opportunities for crime, regulators will also need a new approach. One suggestion the report offers is taking advantage of the regulatory sandbox for developers to engage in the DeFi space. According to reports, this is already being done in the Abu Dhabi Global Market. Elsewhere in the UAE, the Virtual Assets Regulatory Authority of Dubai has set a precedent by establishing a presence in the Metaverse.