Metaverse will bring more connected economies and new payment dynamics, says the Bank for International Settlements.
The growth of the Metaverse will bring more connected economies and faster, programmable, and cross-border payments, according to a report by the Bank for International Settlements (BIS). The agency notes that while many developers of metaverse applications point to a role for cryptocurrencies and other tokens, FPS (domestic fast payment systems), CBDCs (central bank digital currency), or tokenized deposits could play the same role. The agency indicates that to avoid a fragmentation of the economy and the domination of the virtual world by a few private companies, clear regulations on payments, data privacy, digital property, and consumer protection will be necessary.
Although still far from the interest it caused at the end of 2021, when Facebook changed its name to Meta, Metaverse companies continue to work and develop products for virtual worlds. The BIS report points out that the macroeconomic implications of the virtual world, anchored in technologies such as virtual reality (VR) and augmented reality (AR), among others, could catapult its use in the services and payments sector.
One of the main changes that the Metaverse will bring is the absence of geographical boundaries in the virtual world. It shifts how the world’s commercial and economic activities are perceived. BIS mentions how the absence of these boundaries blurs the lines for tradable and non-tradable sectors of the economy. The word tradable refers to goods and services that can be traded and consumed outside the place they are produced, such as automobiles. Non-tradable accounts for goods that can only be acquired or consumed in a place where people produced them since they are not portable (services, real estate).
These types of commercial limitations generally impact the prices of such goods. However, a geographically connected virtual ecosystem changes global trade and markets. In addition, the virtual world or Metaverse could help consolidate a new range of virtual goods and services, such as entertainment content, digital art, or virtual experiences, says the BIS.
Global economic integration
The Metaverse eliminates geographic barriers regarding the limitations for goods exchanges and services between countries. The result would be greater integration of economies. Businesses and professionals could offer their services to customers worldwide as current applications scale and encompass new areas.
Similarly, this flexible environment would bring novel virtual experiences, enabling a boost in productivity and a transformation in work dynamics. However, as BIS points out, there are questions about how such interactions will play out when jurisdictions in two countries must enforce their laws and regulations.
New payment dynamics
The implementation of metaverse-based business relationships demands new forms of payments for services. Especially as virtual worlds become essential in macroeconomic terms, explains the BIS. This demand would lead to greater availability and adoption of digital payments, traditional payment cards, cryptocurrencies, stablecoins, tokenized deposits, CBDC, and domestic fast payment systems (FPS).
Metaverse systems (virtual worlds) have a great diversity of payment options. The BIS study cites a survey commissioned by PayPal in 2023, highlighting the use of cryptocurrencies and stablecoins for payments in the virtual world. BIS researchers predict that despite the challenges, stablecoins will be a plausible means of payment in the virtual world.
CBDCs, under an interconnected approach, will represent a standard for metaverse services by facilitating payment solutions and vouchers in a domestic or cross-border environment. The study mentions that the convenience of real-time transactions will be critical to establishing itself as a beneficial payment system for Metaverse users.
On decentralized or Web3 Metaverses, powered by blockchain technology, the BIS report points to the examples of Decentraland and The Sandbox. These two virtual ecosystems use the speculation on acquiring virtual land in NFT format and its Bitcoin correlation and cryptocurrency prices. The BIS outlines these blockchain Metaverses as small and largely speculative decentralized applications.
In addition to its implications for economies and payments, the Metaverse will have potential benefits in sectors such as healthcare, education, e-commerce, and video games. In this sense, the Metaverse would bring unique opportunities to e-commerce, such as the possibility for users to virtually try out pieces linked to brands, thanks to the potential of VR and AR. On the other hand, BIS points out that the virtual world has the potential to offer a more effective and inclusive education through a learning environment without geographical boundaries and with better social interaction and participation.
The challenges for its application in education relate to overcoming technical, economic, and technological difficulties. Finally, the opportunities of the Metaverse in the health sector focus on medical care and services without geographical limitations. The immersive features of the Metaverse provide physicians with the risk reduction of disease transmission, new forms of rehabilitation and therapy, or better understanding and explain the disease process. Surgeons, for example, can use the virtual world, its immersive technology, and 3D design to test anatomical models to plan surgeries.
Clear regulatory standards
The BIS indicates that the participation and control of the Metaverse by large technology companies, as well as their influence on economies and payments, will require the commitment of the authorities to promote regulatory standards and clear public policies on privacy, data, and consumer protection.
Likewise, the authorities should promote the use of interoperable and efficient payments capable of meeting the needs of users, the BIS points out.