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Davos, Switzerland – Blockchain conversations on the third day of davos show metaverse architects are still trying to understand what it exactly is – and regulators hint central banks digital currencies (CBDC) could potentially hurt the global economy more than good.
The World Economic Forum (wef) has published Wednesday two reports about the metaverse. For the purpose of embracing the general – and sometimes vague – concept of the metaverse, reports have put it in place as "an immersion, a synchronized, interoperable digital world that will change the way we interact with one another, labour and gambling.
Despite the media hype surrounding the metavers, propelled by the transformation of Facebook into Meta Platforms in 2021, the world has seen nothing concrete yet.
It is a concept that is evolving. One which does not yet have a standard definition,' said Cathy li, head of media, entertainment and sport at wef, at a press conference on Wednesday.
Open-ended questions on how metaverse should be regulated also need to be thoroughly tested, aka huda al hashimi, US Deputy Minister of Cabinet Affairs, on the same occasion.
"We also see that regulatory bodies will behave more as arbitrators than as custodians. And it will take precedence over policy formulation," al hashimi said.
Later on Wednesday, a panel heard two very different perspectives of the metaverse.
One came from Meta, whose product manager Chris Cox says he thinks "someday this platform will become as important as the smartphone."
Cox compared the metaverse he builds to Meta's other social media asset, Instagram, which is "focused on providing tools to designers and constructors." It will consist of "spaces that are coherent, often offered by large companies," as well as startups and stores, he said.
He said, however, that it would be difficult to switch between ecosystems, with how easy it is for you to leave, say, Wikipedia to Internet Google Maps, with no loss of consistency or connectedness. "Part of what doesn't yet exist for metavers is the hypertext link," Cox said.
Read more: Davos 2023: Crypto Is Down but Not Out
For another panelist, influential science fiction writer Neal Stephenson, it is clear what type of model is required.
'This does not happen unless an open system similar to the Internet is created at the beginning, [where] everyone can cling to a common protocol," Stephenson said, who coined the term "metaverse" in his 1992 novel "accident de neige." “Right now the image one has about Facebook, it’s very much a centralized top-downish organization.”
(Keen to show no hard feelings, Cox invited his co-panelist to grab a coffee after the panel; Stephenson appeared to politely decline.)
Pros and cons of virtual fiat
Making different digital ecosystems interact was, in a different way, also a topic for central bankers, who joined with financial infrastructure bosses inside the Congress Centre to discuss central bank digital currencies.
Interoperability, as it is called in jargon, has many challenges, it was noted, especially because central banks do not always trust each other. The Governor of the Central Bank of South Africa lesetja kganyil told the expert group that the barriers faced by CDBs are often related to contradictory governance and legal systems rather than technology.
Panel feedback suggests that there is still a long way to go to take advantage of the virtual fiat – There are many ways to hurt the global economy.
"It's crucial when we innovate, they can evolve and they can protect themselves from the potential cost of having digital islands,' said javier perez tasso, swift general manager, the email service used for wire payments. Rather than unifying payment systems, central bank digital currencies could lead to additional fragmentation, Tasso said.
There have been some rare examples of success in the CBDC trial for interbank and retail settlements – but they have their limitations. Amir Yaron, an Israeli central bank governor, spoke glowingly of a trial he’s carrying out to enable cross-border retail payments with Sweden and Norway.
However, he admitted that he has not yet resolved the issue of anti-money laundering controls, A major reason why cross-border payments through correspondent banks can be so slow and costly in practice. There’s also a question about who will build any international hub – and whether it will be a grouping of central banks, the International Monetary Fund or some private-sector company that wins the prize.
Lieve Mostrey of clearinghouse Euroclear, which is also taking part in a trial to tokenize government bonds with the French central bank, warned there were costs to such experiments involving instantaneous payments such as potential liquidity losses that could end up delaying trades, especially if the transition to any new system isn’t smooth. 'The question is one of interoperability,' said Mostrey. "If we don't do this properly, I think migration is just not going to happen."
