Widespread adoption of cryptoassets in a fully developed metaverse could pose systemic risks to financial stability and would require a robust consumer protection framework, according to Bank of England staff.
Bank of England researchers Owen Lock and Teresa Cascino said in a blog post on Tuesday that once built, a decentralized digital world and platform could host a multitude of real-world economic transactions through crypto tokens such as Bitcoin and Ethereum. The greater the number of these crypto transactions, the greater the potential impact on real-world financial stability if prices collapse.
The importance of cryptoassets in the open metaverse means that if an open and decentralized metaverse grows, existing risks from cryptoassets could expand to have systemic financial stability consequences.
Therefore, an important step is for regulators to address the risks of cryptoassets being used in the metaverse before they reach a systemic state.