We’ve been told for some time now to be prepared. That the metaverse is coming.
We’ve seen Mark Zuckerberg excitedly show off his avatar as he presented Meta. And even as Facebook changed its name, seemingly attempting to lead the way in this world changing technology, “owning” the trend is simply impossible for any one entity. It goes against the very core of Web3.0.
Much different to the oligopoly of technology we’ve known, Web3.0 is viewed by some as an empowering reclamation of their own content and data, which has for so long been centralised in Big Tech.
In many ways, Web3.0 takes us back to the original World Wide Web, where anyone can post anything without having to go through intermediaries and without needing authorisation from a central body.
In its essence, Web3.0 is a decentralised, trustless and permissionless token-based economy on the blockchain.
The blockchain is a digital ledger used to record transactions. It’s the technology used by cryptocurrencies (digital currencies used as a medium of exchange through a computer network) and non-fungible tokens, or NFTs (a unique unit of data that uses technology to allow digital content like images, videos and songs to become logged and authenticated on blockchains).
And while crypto markets are growing and maturing and many small businesses are now accepting it as a form of payment, the thing to know about crypto is that it’s not reliant on a central authority — like a government or bank — to uphold or maintain it. We don’t even know who invented it. The founder/s of Bitcoin, the first cryptocurrency launched in 2009, use the pseudonym Satoshi Nakamoto.
It’s likely that soon, many of us will use a digital currency in a virtual world.
There will be many metaverses. Many computer generated, entirely virtual realities to log into and interact with other users in.
Of course it’s exciting to think about how this new technology will revolutionise work and play.
But are we giving enough consideration to the consequences?
For instance, if all you need is a Facebook account to join the metaverse, how will users be protected against fraud and identity theft? How will the user age limit be enforced? And how will younger users be protected from criminals who can easily manipulate them?
While the blockchain is visible and one can have copies of transactions, the identities of the persons behind those transactions are not visible. There’s no way to tell if the source of the currency is legitimate, meaning the metaverse is primed for criminal activity.
Back in the good old days — that is, prior to 2010 — money laundering was a highly manual process.
It’s just as we see it in Hollywood. Criminals move the money they make through illegal activity by buying gems, artwork, property, businesses, or boats before converting those assets into cash again.
But before they get to that stage, the money has to be physically moved into a cash-intensive business to combine the dirty and clean cash. It’s then split into smaller amounts and deposited into several accounts including offshore accounts. The rest of the physical cash had to be hidden.
Money laundering in the metaverse can be done in the same way. Only it’s a lot easier, because once criminals turn their cash into non traceable and easily hidden currencies, all it takes is the click of a button over and over again to buy and sell items in the metaverse, producing a long ledger of lightning fast transactions that are impossible for humans to trace.
The absence of the traditional intermediaries in Web3.0 means users don’t need to undergo any prior Know Your Customer (KYC) or anti money laundering (AML) checks or sanctions compliance. While this approach supports a considerably more inclusive kind of financial innovation, policymakers are right to be concerned about how easy it will be to make illicit transactions.
After all, how can you ever ‘Know Your Customer’ if the ‘customer’ is an avatar?