By Patrick Bucquet, VP Capgemini Invent
In the new metaversal economy, blockchain enables many kinds of transactions with a single source of truth. At the same time, the digital nature of the metaverse means it can create and contain many more assets than the physical world. Banks can apply their asset and risk management expertise and experience to the ever-growing digital asset market – a market that’s expected to reach a value of $33 billion in 2035.
Surveying the metaverse asset landscape
Cryptocurrency and NFTs are the best-known examples of digital assets in the metaverse. These assets can be useful for transferring value and assigning ownership to digital items, but they can also be a challenge to value and are volatile compared to real-world assets. However, some financial services are experimenting with ways to manage money in the metaverse in a more useful, interoperable, and stable way.
For example, a popular payment app recently launched its own stablecoin cryptocurrency. The stability arises from the fact that, unlike traditional crypto currencies, stablecoin is backed by a fiat currency, in this case, the US dollar. This reduces volatility in value and gives the company’s customers an easy way to transfer value via cryptocurrency without taking on excessive risk.
Digital property is another asset class that requires new management solutions. For example, a parcel of land in a metaversal space can be represented by an NFT, with blockchain-verified ownership issued by the company that offers the land. Appraising that digital land accurately – for example, to write a mortgage or an equity loan – accurately requires a new approach to appraisal because traditional real-world tools like comparable parcel values and intrinsic value don’t apply in the metaverse.
Individual data ownership is a type of asset class emerging in the metaverse and contrasts sharply with how individuals’ data is used in the real world and non-metaverse digital spaces. For example, everything you do on a social media platform, including the content you create and the audiences you build, belongs to the platform. The platform can monetize that data, and they retain it within the platform.
In the metaverse, individuals own their data and can sell it to companies through microtransactions in exchange for highly targeted ads and other content. For example, an automaker who wants to connect with you in the metaverse could offer you a buyer’s guide to the class of car you’re interested in and perhaps a token with some digital value in exchange for some of your personal data for their marketing operations. Individual users are also free to take their data and their audiences with them as they move among platforms within the metaverse. These personal assets are represented by NFTs that live in the individual’s wallet, and the individual decides how to leverage them.
Metaversal asset management opportunities
These new assets need reliable management service providers. Banks have already established trust with their customers, and they can bring extensive asset management experience to the metaverse – if they are willing to work on the challenges in this new space.
For example, establishing asset custody is the first role of the bank in the physical world and the metaverse. Custody is perhaps more critical in the metaverse because it’s easier to lose there. Consider that if you own a home in the physical world, there will be bank records of the sale, tax records and local government records like deeds. In the metaverse, however, your digital home is represented only by an NFT stored in a crypto wallet, secured with a digital key. If you lose your digital key, you lose access to your wallet and all the assets held there. Banks have an opportunity to develop more durable and convenient ways to establish custody of these assets.
Custody is crucial for helping customers leverage the value of their metaversal assets through financing. Any tokenized assets can be financed to get a loan to buy property in the metaverse. Of course, there’s a need for service providers to evaluate, issue, and administer loans in the metaverse in a way that’s convenient for customers. As mentioned above, issuing loans in the metaverse requires a way to accurately value assets, which can be a challenge compared to real-world loan valuations.
Crypto wallet friction
Finally, one of the biggest roadblocks for consumers to engage with the metaverse is the crypto wallet’s complexity and cumbersome nature. As mentioned above, this wallet is secured with a digital key that cannot be recovered if lost. Not only does the wallet contain the owner’s metaversal assets, but it also serves as proof of identity. Lose the key, and you lose everything you have in the metaverse.
That’s a level of risk many people are not comfortable with. For those willing to use a crypto wallet, the experience is not friction-free. Each time users enter the metaverse, they must reconnect with their wallet using the key. Some cryptocurrency businesses offer services that let users bypass the wallet, but customers must trust these relatively new companies with their assets and identity to use the service. They would likely feel more comfortable using this kind of service if provided by the bank they have a longstanding relationship with.
Moving into metaversal asset management
Developing asset management offerings in the metaverse starts with gathering as much data as possible to understand volatility and risk. The recent plunge in some cryptocurrency and NFT values demonstrates the importance of good data for predictions and risk management in this space. The next step is to understand how your institution’s customers are using digital assets in the metaverse because that allows you to identify the best services to start with.
For example, you might offer tax reporting on metaversal transactions if some customers use cryptocurrency for property purchases. This isn’t direct cryptocurrency management, but it can help your bank gather more data on how your customers are using their cryptocurrency and allow you to establish a presence in the metaverse.
Finally, keep in mind that asset management in the metaverse doesn’t have to be consumer-facing. Increasingly, we see banks participating in institutional metaverse spaces. These are similar to company intranets but wholesale metaverse transaction settlements within a group. This kind of internal metaverse is only used by bank employees, not customers, and it allows banks to experiment with new functions and build internal experience before rolling out customer-facing asset management services.
Ultimately, the same issues banks handle for customers in the physical world – ownership, financing, and transactions – are core issues they can manage in the metaverse. Gathering data, carefully assessing risk, and finding secure ways to streamline crypto and blockchain transactions can allow banks to bring the value of their real-world experience to their customers in the metaverse.
About the Author
Tech-savvy and industry expert with more than 20 years of experience in banking, Patrick Bucquet, VP at Capgemini Invent, bridges the gap between business and technology to support the transformation of the financial sector. Embarking on his career at IBM Global Services, Patrick honed his telecom industry skills before returning to banking to leverage digital capabilities to launch customer-focused offerings. With first-hand experience transforming the financial sector landscape and emerging new services throughout Europe, Asia and North America, Patrick now leads the advisory practice in North America.
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