- The Bank for International Settlements (BIS) researchers report state-backed tokens are a better path for safe, table virtual worlds.
- While truly immersive environments have not reached a level of mass acceptance — that might not last.
- The BIS researchers say that for the metaverse to be successful, it must be underpinned by public policy that promotes efficient, interoperable payments and sets clear standards for data privacy, digital ownership, and consumer protection.
The Bank for International Settlements (BIS) researchers champion state-backed tokens as a superior means of ensuring safety and stability within virtual worlds, compared to the solutions currently provided by decentralized finance (DeFi) and native web3 projects.
In the report, the BIS team acknowledges that the digital economy, particularly through the emerging concept called the metaverse, spatial computing or Web3, stands at a crossroads between innovation and the need for regulation.
The metaverse — essentially immersive, computer-generated environments where users interact through avatars — has seen its potential for impact on the digital economy both lauded and scrutinized.
Despite rapid investment and the promise of revolutionizing sectors like gaming, education and healthcare, the technology has not yet achieved the fully immersive experiences. The team writes that some applications—like virtual bank branches and land speculation—appear more gimmicky than groundbreaking.
However, as progress on immersive technologies improves — such as the recent headlines around Apple’s Vision Pro and Meta Quest 3 — it could blur the lines between tradable and non-tradable sectors, foster greater cross-border economic integration, and create new demands on payment services, according to the report. The BIS researchers suggests that retail fast payment systems, retail central bank digital currencies (CBDCs), or tokenized deposits could be designed to support services in the metaverse, provided they are underpinned by public policy that promotes efficient, interoperable payments and sets clear standards for data privacy, digital ownership, and consumer protection.
The team writes: “To prevent virtual environments and money from becoming fragmented and dominated by powerful private firms, public policy would need to support efficient, interoperable payments and provide clear standards on data privacy, digital ownership and consumer protection.”
The researchers paint the following scenario: Virtual reality (VR) and augmented reality (AR) technologies are advancing significantly, allowing for the creation of new, three-dimensional virtual worlds. These worlds are accessible via an array of devices, including VR and AR headsets, smart glasses, phones and computers. The potential for users to spend substantial amounts of time, attention and money in these virtual worlds has sparked interest among companies, investors, and enthusiasts, all of whom see business opportunities and digital scarcity as avenues for profit.
Despite the enthusiasm, the future of the metaverse remains uncertain, with its full potential still out of reach and widespread adoption not guaranteed. Yet, amidst the hyperbolic claims, there emerge genuinely promising applications that could meet real needs within society. As the digital economy evolves, the implications for tradables and non-tradables, cross-border integration, and payment services are profound.
The report states: “While the idea of virtual worlds has existed for several decades, the last few years have seen companies, investors, and enthusiasts scale up their ambitions.”
The BIS’s stance on state-backed tokens over DeFi and web3 solutions underscores a broader conversation about the direction of the metaverse and the digital economy at large. It highlights the need for continued research across disciplines—from economics to computer science, legal studies, and beyond—to understand the complexities of virtual worlds and their impact on society. As the metaverse transitions from science fiction to reality, the role of public policy and regulation in shaping its development becomes increasingly critical.
According to BIS, there’s still time left — and more work to be done.
They write: “There is still ample room for further research in this area. For economists, this includes understanding new forms of exchange and new market and business models that may or may not resemble services currently performed in the real world… For computer scientists, substantial work is to be done to understand technology choices and their impact on user outcomes, (cyber)security, scalability and more.”