/The Metaverse: Should It Be Regulated?

The Metaverse: Should It Be Regulated?


The metaverse is a concept that covers a broad range of aspects of the internet and can’t be defined itself as a whole. When Facebook rebranded itself to ‘Meta,’ it sparked discussions about the concept of the metaverse and how it should impact the lives of the common internet user.

The metaverse can envision a digital economy, a virtual reality, and a digital world. This single all-around concept remains widely discussed nowadays when we talk about web 3 and emerging technologies.

The fact is that the metaverse industry keeps growing at a very faster pace, with emerging companies strengthening their business units to offer the best of this ‘world.’ For the entertainment, economy, eCommerce, etc, the metaverse is here to stay.

Even mainstream companies like Meta, formerly Facebook, have started to tread waters in such a booming industry. The metaverse and NFT are concepts very compatible with each other and have grown in parallel across the board as well, so there is a potential for an emerging technology like the metaverse to keep gaining momentum.

However, there are also discussions about the regulatory aspect surrounding the metaverse. As we discussed in our recent analysis of NFTs, there are concerns about how criminals and bad actors could rely on the metaverse to commit fraud,  money laundering 
Money Laundering

Money laundering is a blanket term to describe the process by which criminals disguise the original ownership and proceeds of criminal conduct by making such proceeds appear to be derived from a legitimate source.Money laundering is an issue that traverses countless industries and sectors, which includes the financial services space. Though criminal money may be successfully laundered without the assistance of the financial sector, billions of dollars’ worth of criminally derived money are laundered through financial institutions each year.This is not entirely surprising given the structure of the financial services industry and the nature of products and services offered by its participants.An ecosystem that involves the management, control, and processing of finances is inherently vulnerable to abuse by money launderers.Money Laundering ExplainedThe act of laundering is committed in circumstances in which an individual or entity is engaged in an arrangement that involves the proceeds of crime. These arrangements include a wide range of business relationships, i.e. banking, fiduciary and
investment management.However, the degree of knowledge or suspicion will depend upon the specific offense but will usually be present where the person providing the arrangement, service or product knows, suspects or has reasonable grounds to suspect that the property involved in the arrangement represents the proceeds of crime. In some cases, the offence may also be committed where a person knows or suspects that the person with whom he or she is dealing is engaged in or has benefited from criminal conduct.One of the primary criticisms against cryptocurrencies has been their propensity for money laundering. Their anonymous nature and unregulated network structure make them ideally suited for money launders.

Money laundering is a blanket term to describe the process by which criminals disguise the original ownership and proceeds of criminal conduct by making such proceeds appear to be derived from a legitimate source.Money laundering is an issue that traverses countless industries and sectors, which includes the financial services space. Though criminal money may be successfully laundered without the assistance of the financial sector, billions of dollars’ worth of criminally derived money are laundered through financial institutions each year.This is not entirely surprising given the structure of the financial services industry and the nature of products and services offered by its participants.An ecosystem that involves the management, control, and processing of finances is inherently vulnerable to abuse by money launderers.Money Laundering ExplainedThe act of laundering is committed in circumstances in which an individual or entity is engaged in an arrangement that involves the proceeds of crime. These arrangements include a wide range of business relationships, i.e. banking, fiduciary and investment management.However, the degree of knowledge or suspicion will depend upon the specific offense but will usually be present where the person providing the arrangement, service or product knows, suspects or has reasonable grounds to suspect that the property involved in the arrangement represents the proceeds of crime. In some cases, the offence may also be committed where a person knows or suspects that the person with whom he or she is dealing is engaged in or has benefited from criminal conduct.One of the primary criticisms against cryptocurrencies has been their propensity for money laundering. Their anonymous nature and unregulated network structure make them ideally suited for money launders.
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, and other cybercrimes, like it could happen in any other digital environment.

Challenges Ahead

Experts who talked with Finance Magnates agreed that there are some regulatory challenges ahead with the bullish trend that is having the metaverse in terms of adoption.

Jamilia Grier, Founder and CEO at ByteBao

Jamilia Grier, Founder and CEO at ByteBao

Jamilia Grier, Founder and CEO at ByteBao, told Finance Magnates that it presents a range of challenges for governments and lawmakers. “One key question is how to deal with crime in the virtual world. There is really no easy answer, but as this space continues to grow in popularity, it’s inevitable that some users will take advantage of others and that crimes will be committed—and sadly, we can already see some of those happening now. Just as we have laws to address crimes in the physical world, it’s also important to have laws in place to deal with crimes committed in the metaverse,” she commented.

Grier believes that now is actually the ‘best time’ for governments to create new laws or apply existing laws to regulate transgressions in virtual spaces: “Assault, for example, should be addressed on a case-by-case basis by applying the laws of relevant jurisdictions. Some jurisdictions may remain silent, while others may actively pursue bad actors in order to ensure the safety of its current and future users, including our children.”

A Regulation is Needed

Margaret Paproski, Co-Founder of InvestDEFY

Margaret Paproski, Co-Founder of InvestDEFY

Also, Margaret Paproski, COO, General Counsel and Co-Founder of InvestDEFY, agrees that the metaverse needs some form of  regulation 
Regulation

Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (FCA), the US’ Securities and Exchange Commission (SEC), Australian Security and
Investment Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC) are the most widely dealt with authorities in the FX industry.In its most basic sense, regulators help ensure the filing of reports and transmission of data to help police and monitor activity by brokers. Regulators also serve as a countermeasure against market abuse and malpractice by brokers. Brokers adhering to a list of mandated rules are authorized to provide investment activities in a given jurisdiction. By extension, many unauthorized or unregulated entities will also seek to market their services illegally or function as a clone of a regulated operation.Regulators are essential in snuffing out these scam operations as they prevent significant risks for investors.In terms of reporting, brokers are also required to regularly file reports about their clients’ positions to the relevant regulatory authorities. The most-recent regulatory push in the aftermath of the Great Financial Crisis of 2008 has delivered a material shift in the regulatory reporting landscape.Brokers typically outsource the reporting to other companies which are connecting the trade repositories used by regulators to the broker’s systems and are handling this crucial element of compliance.Beyond FX, regulators help reconcile all matters of oversight and are watchdogs for each industry. With ever-changing information and protocols, regulators are always working to promote fairer and more transparent business practices from brokers or exchanges.

Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (FCA), the US’ Securities and Exchange Commission (SEC), Australian Security and Investment Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC) are the most widely dealt with authorities in the FX industry.In its most basic sense, regulators help ensure the filing of reports and transmission of data to help police and monitor activity by brokers. Regulators also serve as a countermeasure against market abuse and malpractice by brokers. Brokers adhering to a list of mandated rules are authorized to provide investment activities in a given jurisdiction. By extension, many unauthorized or unregulated entities will also seek to market their services illegally or function as a clone of a regulated operation.Regulators are essential in snuffing out these scam operations as they prevent significant risks for investors.In terms of reporting, brokers are also required to regularly file reports about their clients’ positions to the relevant regulatory authorities. The most-recent regulatory push in the aftermath of the Great Financial Crisis of 2008 has delivered a material shift in the regulatory reporting landscape.Brokers typically outsource the reporting to other companies which are connecting the trade repositories used by regulators to the broker’s systems and are handling this crucial element of compliance.Beyond FX, regulators help reconcile all matters of oversight and are watchdogs for each industry. With ever-changing information and protocols, regulators are always working to promote fairer and more transparent business practices from brokers or exchanges.
Read this Term
. “The challenge is establishing who should be setting those regulations, how they should be set and what they should be. In the real world, we rely on Governments to implement safeguards, including consumer protections, privacy regulations, and protection against fraud. However, these safeguards fluctuate from one country to another, which is not particularly conducive to the metaverse,” Paproski pointed out.

She said that one alternative is to create a separate metaverse government to establish appropriate rules and regulations, although she recognizes there are still challenges to address. “However, there would be challenges around enforcement that would need to be navigated. There are also countries that would not be onboard to allow its residents to be outside of its rules and regime (even virtually).”

Experts also agreed that whatever approach is taken, regulating the metaverse will be a complex and ‘daunting task’ for governments around the world, as Grier highlighted.

The metaverse is a concept that covers a broad range of aspects of the internet and can’t be defined itself as a whole. When Facebook rebranded itself to ‘Meta,’ it sparked discussions about the concept of the metaverse and how it should impact the lives of the common internet user.

The metaverse can envision a digital economy, a virtual reality, and a digital world. This single all-around concept remains widely discussed nowadays when we talk about web 3 and emerging technologies.

The fact is that the metaverse industry keeps growing at a very faster pace, with emerging companies strengthening their business units to offer the best of this ‘world.’ For the entertainment, economy, eCommerce, etc, the metaverse is here to stay.

Even mainstream companies like Meta, formerly Facebook, have started to tread waters in such a booming industry. The metaverse and NFT are concepts very compatible with each other and have grown in parallel across the board as well, so there is a potential for an emerging technology like the metaverse to keep gaining momentum.

However, there are also discussions about the regulatory aspect surrounding the metaverse. As we discussed in our recent analysis of NFTs, there are concerns about how criminals and bad actors could rely on the metaverse to commit fraud,  money laundering 
Money Laundering

Money laundering is a blanket term to describe the process by which criminals disguise the original ownership and proceeds of criminal conduct by making such proceeds appear to be derived from a legitimate source.Money laundering is an issue that traverses countless industries and sectors, which includes the financial services space. Though criminal money may be successfully laundered without the assistance of the financial sector, billions of dollars’ worth of criminally derived money are laundered through financial institutions each year.This is not entirely surprising given the structure of the financial services industry and the nature of products and services offered by its participants.An ecosystem that involves the management, control, and processing of finances is inherently vulnerable to abuse by money launderers.Money Laundering ExplainedThe act of laundering is committed in circumstances in which an individual or entity is engaged in an arrangement that involves the proceeds of crime. These arrangements include a wide range of business relationships, i.e. banking, fiduciary and
investment management.However, the degree of knowledge or suspicion will depend upon the specific offense but will usually be present where the person providing the arrangement, service or product knows, suspects or has reasonable grounds to suspect that the property involved in the arrangement represents the proceeds of crime. In some cases, the offence may also be committed where a person knows or suspects that the person with whom he or she is dealing is engaged in or has benefited from criminal conduct.One of the primary criticisms against cryptocurrencies has been their propensity for money laundering. Their anonymous nature and unregulated network structure make them ideally suited for money launders.

Money laundering is a blanket term to describe the process by which criminals disguise the original ownership and proceeds of criminal conduct by making such proceeds appear to be derived from a legitimate source.Money laundering is an issue that traverses countless industries and sectors, which includes the financial services space. Though criminal money may be successfully laundered without the assistance of the financial sector, billions of dollars’ worth of criminally derived money are laundered through financial institutions each year.This is not entirely surprising given the structure of the financial services industry and the nature of products and services offered by its participants.An ecosystem that involves the management, control, and processing of finances is inherently vulnerable to abuse by money launderers.Money Laundering ExplainedThe act of laundering is committed in circumstances in which an individual or entity is engaged in an arrangement that involves the proceeds of crime. These arrangements include a wide range of business relationships, i.e. banking, fiduciary and investment management.However, the degree of knowledge or suspicion will depend upon the specific offense but will usually be present where the person providing the arrangement, service or product knows, suspects or has reasonable grounds to suspect that the property involved in the arrangement represents the proceeds of crime. In some cases, the offence may also be committed where a person knows or suspects that the person with whom he or she is dealing is engaged in or has benefited from criminal conduct.One of the primary criticisms against cryptocurrencies has been their propensity for money laundering. Their anonymous nature and unregulated network structure make them ideally suited for money launders.
Read this Term
, and other cybercrimes, like it could happen in any other digital environment.

Challenges Ahead

Experts who talked with Finance Magnates agreed that there are some regulatory challenges ahead with the bullish trend that is having the metaverse in terms of adoption.

Jamilia Grier, Founder and CEO at ByteBao

Jamilia Grier, Founder and CEO at ByteBao

Jamilia Grier, Founder and CEO at ByteBao, told Finance Magnates that it presents a range of challenges for governments and lawmakers. “One key question is how to deal with crime in the virtual world. There is really no easy answer, but as this space continues to grow in popularity, it’s inevitable that some users will take advantage of others and that crimes will be committed—and sadly, we can already see some of those happening now. Just as we have laws to address crimes in the physical world, it’s also important to have laws in place to deal with crimes committed in the metaverse,” she commented.

Grier believes that now is actually the ‘best time’ for governments to create new laws or apply existing laws to regulate transgressions in virtual spaces: “Assault, for example, should be addressed on a case-by-case basis by applying the laws of relevant jurisdictions. Some jurisdictions may remain silent, while others may actively pursue bad actors in order to ensure the safety of its current and future users, including our children.”

A Regulation is Needed

Margaret Paproski, Co-Founder of InvestDEFY

Margaret Paproski, Co-Founder of InvestDEFY

Also, Margaret Paproski, COO, General Counsel and Co-Founder of InvestDEFY, agrees that the metaverse needs some form of  regulation 
Regulation

Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (FCA), the US’ Securities and Exchange Commission (SEC), Australian Security and
Investment Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC) are the most widely dealt with authorities in the FX industry.In its most basic sense, regulators help ensure the filing of reports and transmission of data to help police and monitor activity by brokers. Regulators also serve as a countermeasure against market abuse and malpractice by brokers. Brokers adhering to a list of mandated rules are authorized to provide investment activities in a given jurisdiction. By extension, many unauthorized or unregulated entities will also seek to market their services illegally or function as a clone of a regulated operation.Regulators are essential in snuffing out these scam operations as they prevent significant risks for investors.In terms of reporting, brokers are also required to regularly file reports about their clients’ positions to the relevant regulatory authorities. The most-recent regulatory push in the aftermath of the Great Financial Crisis of 2008 has delivered a material shift in the regulatory reporting landscape.Brokers typically outsource the reporting to other companies which are connecting the trade repositories used by regulators to the broker’s systems and are handling this crucial element of compliance.Beyond FX, regulators help reconcile all matters of oversight and are watchdogs for each industry. With ever-changing information and protocols, regulators are always working to promote fairer and more transparent business practices from brokers or exchanges.

Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (FCA), the US’ Securities and Exchange Commission (SEC), Australian Security and Investment Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC) are the most widely dealt with authorities in the FX industry.In its most basic sense, regulators help ensure the filing of reports and transmission of data to help police and monitor activity by brokers. Regulators also serve as a countermeasure against market abuse and malpractice by brokers. Brokers adhering to a list of mandated rules are authorized to provide investment activities in a given jurisdiction. By extension, many unauthorized or unregulated entities will also seek to market their services illegally or function as a clone of a regulated operation.Regulators are essential in snuffing out these scam operations as they prevent significant risks for investors.In terms of reporting, brokers are also required to regularly file reports about their clients’ positions to the relevant regulatory authorities. The most-recent regulatory push in the aftermath of the Great Financial Crisis of 2008 has delivered a material shift in the regulatory reporting landscape.Brokers typically outsource the reporting to other companies which are connecting the trade repositories used by regulators to the broker’s systems and are handling this crucial element of compliance.Beyond FX, regulators help reconcile all matters of oversight and are watchdogs for each industry. With ever-changing information and protocols, regulators are always working to promote fairer and more transparent business practices from brokers or exchanges.
Read this Term
. “The challenge is establishing who should be setting those regulations, how they should be set and what they should be. In the real world, we rely on Governments to implement safeguards, including consumer protections, privacy regulations, and protection against fraud. However, these safeguards fluctuate from one country to another, which is not particularly conducive to the metaverse,” Paproski pointed out.

She said that one alternative is to create a separate metaverse government to establish appropriate rules and regulations, although she recognizes there are still challenges to address. “However, there would be challenges around enforcement that would need to be navigated. There are also countries that would not be onboard to allow its residents to be outside of its rules and regime (even virtually).”

Experts also agreed that whatever approach is taken, regulating the metaverse will be a complex and ‘daunting task’ for governments around the world, as Grier highlighted.

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