THE METAVERSE IS increasing concerning authorities as a new playground of fraudsters and scam artists.
The metaverse — immersive 3D virtual environments accessed through virtual and augmented reality and seen as the next disruptive iteration of the internet — is attracting hype and investment in equal measure, fertile ground for swindlers and other criminals.
On February 18, the China Banking and Insurance Regulatory Commission and more than a dozen government agencies warned of phoney metaverse projects and that scams were multiplying amid the frenzy that the metaverse is generating.
The commission gave four common examples:
- pitching fake metaverse projects to investors and then disappearing with the funds invested;
- bogus play-to-earn games that coax players to invest heavily in the game’s tokens in the hope of outsized returns later;
- fake cryptocurrencies presented as ‘the next big thing’ that investors need to rush to buy before it is too late ‘to get in on the ground floor’; and
- hyping plots of land on the metaverse falsely to inflate their value. In December, state media had carried warnings about the risks in virtual property sales.
The rush to the metaverse in China has been frenetic. Last year, more than 1,000 Chinese firms, including Alibaba, Baidu, Huawei and Tencent, reportedly applied for around 10,000 metaverse-related trademarks.
China has banned cryptocurrency trading and mining, but it has allowed the development of metaverse and non-fungible tokens (NFTs) and allowed leeway to metaverse projects with some crypto involvement.
Now, as with other tech sectors, that space is being narrowed. Starting with cracking down on fraudsters, authorities will likely next make it clear to metaverse companies that they will not be allowed unfettered growth.
There will be no ‘disorderly’ allocation of capital in the metaverse any more than in the real world.
It is to be expected that authorities will police the metaverse, aware of its potential social risks and fearing a threat to national security. The China Institutes of Contemporary International Relations, a think tank associated with the Ministry of State Security, issued a report last November warning that the metaverse might bring national security risks.
It recommended that the government play a coordinating and supervisory role in developing the metaverse, including as a vehicle for delivering public services and a way to monitor and shape public opinion.
Like other tech companies, metaverse companies are on notice that they need to be aligned with other policy goals.