If there’s one industry buzzword this year that’s on almost everyone’s lips, it’s “metaverse.” Since social media giant Facebook changed its name to Meta, moving towards what the company sees as the future of the web, the concept has generated as much interest as it has puzzled.
For something so elusive, a number of financial institutions (FIs) have already jumped into the metaverse with aplomb. These companies believe they have spotted a golden opportunity to provide attendees and metaverse dwellers with the services they need to buy, sell, and hold goods and services, such as digital assets and concert tickets, tokens not fungible (NFT) and digital real estate.
FinTech future recently spoke with Glenn Friedman and Jerry Eitel, CEO and Metaverse Director (CMVO), respectively, of London-based accountancy and consultancy firm Prager Metis, to get down to business – how will people perform? transactions in the metaverse, how the real world and the metaverse connect and what are the opportunities for financial services?
Seeing is believing
“A lot of people think of the metaverse as a complex concept, which it can be, but once you’ve experienced the virtual world, it’s much easier to understand,” says Eitel.
“I like to compare the Metaverse to a TV show; however, you are actually in the show but from your physical location instead of watching it. It transforms the two-dimensional world of the Internet into a multi-dimensional reality.
In short, the Metaverse is a virtual world where people can go to school, work, play games, attend concerts or festivals, shop, and meet friends. Basically anything you can do in the “real world”.
“This is what I would describe as the Internet on steroids. I believe that’s the future,” says Friedman.
After Prager Metis set up a digital presence in the metaverse, the company initially thought it would only deal with mining clients and exchanges.
But soon partners began to call them. “I don’t think any company can ignore this in the future. My advice to all businesses is that the future is now,” says Friedman.
“You can’t interfere. You need someone in your organization who will champion it and has a passion for it. »
New world order
In 25 years, when the metaverse is potentially mundane and we are all transacting and doing business in online realities, what will the digital landscape look like?
Eitel believes that as the infrastructure behind the internet continues to evolve, so will the metaverse. Roads, streets, communities, neighborhoods, and stores are just the beginning, with the ever-evolving Metaverse as a community of decentralized virtual worlds.
“The more people create metaverses, the more it continues to evolve,” says Eitel. “The capabilities will be endless, and the future of this new, immersive virtual landscape will eventually become the basis for real-world operation and engagement.”
So people can expect to use the same services they use now. They will report to work in the metaverse, receive payment in cryptocurrency, make purchases, and attend social gatherings. Future financial service providers will need to know as much about the virtual world as the real world.
“I think the future holds a seamless mesh of two worlds that will require education, accessibility and community,” adds Eitel.
While Prager Metis clients are eager to learn and avoid major mistakes by seeking expert advice from the start, Eitel believes that using financial service providers who are unfamiliar with this new technology” can be like asking your family doctor to perform heart surgery”.
In this new reality of learning and listening to experts, “even a great accountant or tax preparer cannot be expected to be an expert,” says Eitel.
Companies need to think carefully about the scale and type of opportunities present in the metaverse. Friedman and Eitel outline three main opportunities: scaling a business and finding new customers, branding, and monetizing intellectual property.
Organizations could also leverage the metaverse to improve internal operations and processes. “For example, look at today’s workforce, which is mostly remote,” says Eitel.
Companies could use the metaverse to develop their employees, retain and acquire talent, train and integrate, for example.
Sensing this opportunity, many companies are already doing business in the metaverse. In January, Prager Metis opened the first-ever CPA firm headquarters on the Decentraland metaverse platform and is actively working with companies looking to enter the metaverse.
Aerospace giant Boeing has also announced plans to build the next plane in the metaverse, using virtual design and engineering tools. He plans to use the metaverse to access all aircraft information and certification documents to aid in precision aircraft development. “This could help solve potential supply chain issues,” Eitel said.
In terms of regulations, the Metaverse is still a kind of Wild West environment, “but operating as a business, we must apply the same business practices to businesses and transactions in the Metaverse as we do in the real world”, says Eitel.
Legal fees are “astronomical” and just buying and selling NFTs is not enough. Payments with any of these assets will result in gains or losses on the original basis relative to the fair market value at the time these assets are used to pay a seller. Appropriate forms such as 1099 forms must be issued. Taxpayer IDs must be obtained if you are in a metaverse business.
Additionally, many independent contractors around the world are paid in crypto. There are formalities to follow. Treaties may even need to be reviewed if royalties are paid.
Investing in metaverse assets is like buying and selling physical property and is treated like a fixed asset. Also, some NFTs could be taxed as collectibles and therefore at higher rates. There are some questions as to whether an NFT can be considered a security. The list continues.
“The metaverse is an extension of society. Even if people want to think the rules don’t apply, they do, and the authorities will deal with it in the future,” Friedman says.
Through interaction and interconnection, people and services will move seamlessly between the metaverse and the real world. For example, there are already real objects sold in the virtual world and vice versa.
“I prefer to see this as an expansion of the world. If you don’t see it that way, you have to. The metaverse is a geography and a demography. It’s just a new place to expand your market. Whether you call it Hawaii 2, it exists,” adds Friedman.
Eitel believes the metaverse offers a huge amount of growth opportunities for businesses as well as opportunities for the so-called real world to develop new business concepts. As technology evolves and more people enter virtual worlds, companies will need to rethink their business models and learn how to operate in the physical and digital worlds.
“In a few years, companies will see increased efficiency thanks to the metaverse. In-person processes that used to take time and money will be streamlined through the metaverse, improving speed to market for many industries,” says Eitel.
For the metaverse to gain traction, “the increase in accessibility is going to be significant,” says Eitel.
The more big brands that enter the metaverse, like Disney and Nike, the more consumers will follow. More consumers means more profitable opportunities. If authorities treat digital currencies, NFTs, and virtual earths the same way they treat all real-world assets, the metaverse will remain as accessible as our real-world economy.
As it stands, the Metaverse is currently regulated by different organizations. “The technology isn’t where it needs to be for the government to accurately predict what needs to be regulated, but I think applying the business practices of the physical world to the metaverse and keeping it open to anyone who wants it joining it will keep it profitable for businesses to use,” says Eitel.
Friedman says the metaverse, and the financial services it needs to function, have already expanded beyond wealth management, risk management and technology.
Smart contracts and blockchain offer immediate appeal, although where these technologies are today, they are not ready for commercial or prime time use.
“When you think about what it takes to do the accounting for a wallet that can hold various cryptos and contracts, there’s a lot to do to account for those gains and losses,” Friedman says.
“It’s kind of like when screen houses didn’t exist, and you had to go back and look to see why someone was buying something. It’s quite intensive. »
A land of opportunities
While still a very nascent concept, there are plenty of ways the Metaverse could go wrong. It could be stifled by too much centralization, become too anarchic with too little regulation, or be dominated by big players, stifling competition and innovation.
But Friedman thinks the biggest challenge facing the Metaverse is something more prosaic: people.
“Even though everyone thinks it’s avatars, it’s about finding knowledgeable, qualified people who understand the metaverse. Training our team also takes a lot of resources and time,” says Friedman.
Time is also a big challenge for the company. “Every day I get a phone call with someone and I learn something that I never thought of,” adds Friedman.
“We get so many requests and opportunities that it’s hard to keep up. You have to separate the ideas and decide what you think is the future and the profitability.