The virtual space network is the primary target of scammers and fraudsters, regulator warns.
The China Banking and Insurance Regulatory Commission warned on Friday about the associated risks the emerging metaverse technology could bring as the virtual space fever sweeps the world.
The watchdog said in a statement published on its website that some companies were engaging in illegal fund-raising, fraud, and virtual real estate speculation.
“Beware of being duped, and if you find clues of suspected illegal crimes, please actively report this to the relevant local departments,” it said.
The official warning highlighted four different ways in which fraudsters were illicitly making profits using the metaverse. The first and most common form of the scam includes projects promising high-tech integration, such as AI and virtual reality support. These projects often lure investors by promising high returns, then the fraudsters get away with the investor funds.
The second most common form of metaverse scams is blockchain play-to-earn (P2E) projects, where scammers promise high profits for investing in the native gaming token and often run away with the funds once they reach a set goal. Another scheme such projects use includes hyping up the metaverse real-estate to induce panic buying among users, the regulator said.
In China, the total addressable market for the metaverse could be worth around $8 trillion, according to Morgan Stanley.
Chinese tech giants including Tencent, Huawei, and Alibaba have all jumped in on the metaverse trend to expand their investment and influence. Despite a blanket ban on the use and mining of cryptocurrencies in the country, the Chinese authorities have shown more relaxation towards non-fungible token (NFT) projects and the metaverse. However, experts say China’s metaverse could look very different to the rest of the world due to the government’s strict rules on the technology sector and Beijing’s crypto crackdown.