Exploring Economic Implications of Metaverse Services: Insights from BIS Report
The Bank for International Settlements (BIS) has released a comprehensive report, BIS Papers No. 144, authored by Carlos Cantú, Cecilia Franco, and Jon Frost, delving into the economic implications of services within the metaverse. The document explores the potential impact of immersive computer-generated environments on the digital economy and outlines key considerations for policymakers and industry stakeholders.
The report acknowledges the rapid growth in investment in virtual worlds but highlights the current limitations in achieving fully immersive experiences. Despite initial enthusiasm, the authors note a decline in interest over the past two years, with some use cases demonstrating promise, such as gaming, education, and healthcare, while others appear more gimmicky, such as virtual bank branches and land speculation.
The potential success of the metaverse could lead to significant changes, including a blurring of lines between tradable and non-tradable sectors, increased cross-border economic integration, and new demands on payment services. The report suggests that retail fast payment systems, retail central bank digital currencies (CBDCs), or tokenized deposits could be designed to support services in the metaverse.
The report emphasises the need for public policies supporting efficient, interoperable payments to prevent fragmentation and dominance by powerful private firms. Clear standards on data privacy, digital ownership, and consumer protection are also crucial considerations.
The authors caution that immersive virtual environments still need to realise their full potential, and widespread adoption of the metaverse is not guaranteed. However, amid hyperbolic claims, the report highlights useful potential applications, particularly in gaming, education, and healthcare, which could address real needs for households and businesses.
Adopting these use cases could have significant implications for the digital economy, including blurring lines between tradable and non-tradable, greater cross-border economic integration, and new demands on payment services.
As the report points out, while many metaverse applications propose a role for cryptocurrencies and tokens, retail fast payment systems, CBDCs, or tokenized deposits could fulfil similar functions. Policymakers are urged to consider the direction of metaverse applications' development and the actors' incentives when evaluating the most widely used instruments.
The report highlights the need for further research in various areas, including economics, technology, law, and sociology. It emphasises the importance of understanding new forms of exchange, market and business models, technology choices, regulatory compliance, and societal processes accompanying metaverse technology developments. As the metaverse captures imaginations worldwide, the report underscores the significant work ahead to shape its impact on (virtual) reality.