It is slightly ironic that the bank whose CEO made so many derisory remarks about cryptocurrencies should be the first to stake its place in the Metaverse. I am of course talking about America’s largest bank, JP Morgan and its CEO Jamie Dimon. Yet here we are: JP Morgan has opened a lounge called Onyx in Decentraland, a virtual world based on blockchain technology. By the way, Onyx lounge refers to the bank’s suite of permissioned Ethereum-based services.
At the same time as making this announcement, it released a paper titled Opportunities in the Metaverse, which it claims will help businesses “navigate the hype vs. reality.” It is certainly worth a read, and makes clear for many the differences between Web 2.0 and Web 3.0. If you ever need to explain the difference, the table on page 4 is the equivalent of exam pass notes and will save you hours of trying to come up with your own answers.
Clients are interested
Christine Moy, JPMorgan’s head of crypto and the metaverse told Coindesk, “”There is a lot of client interest to learn more about the metaverse. We put together our white paper to help clients cut through the noise and highlight what the current reality is, and what needs to be built next in technology, commercial infrastructure, privacy/identity and workforce, in order to maximize the full potential of our lives in the metaverse.”
As the JP Morgan paper points out, Decentraland is attracting big brand names. Samsung opened a ‘metaverse’’ version of its New York store there, and Barbados set up a metaverse embassy as well. Much of this activity is thanks to the acceleration of interest in non-fungible tokens (NFTs), as well what is described as “a breathless advance into the metaverse, a catch-all for immersive gaming, world-building and entertainment, fueled by integrated commerce applications.”
Metanomics, or the economics of the Metaverse, are firmly in JP Morgan’s sights. Its paper points out that the average price of a parcel of virtual land doubled in the latter half of 2021, jumping from $6,000 in June to $12,000 by December across the four main Web 3 metaverse sites: Decentraland, The Sandbox, Somnium Space and Cryptovoxels. It added, “In time, the virtual real estate market could start seeing services much like in the physical world, including credit, mortgages and rental agreements.” Furthermore, JPM believes that DeFi collateral management could well come into play, and that this could be done by decentralized autonomous organizations (DAO), rather than traditional finance companies.
Money to be made
JPM sees the Metaverse as a money maker. There will be entertainment, virtual fashion designers (Nike has shoes covered for now) and there is going to be a massive amount of advertising spend, with the bank citing a prediction that in-game ad spending is set to reach $18.41 billion by 2027.
Of course, as the title of the paper suggests, JPM wants to avoid the hype and be clear about the reality. So, it does have criticisms of the Metaverse in its current form. For example, it says the overall user experience and performance of avatars, as well as commercial infrastructure need improvement.
And why is JP Morgan well placed to offer advice about the Metaverse? The report makes the case, saying, “We believe the existing virtual gaming landscape (each virtual world with its own population, GDP, in-game currency and digital assets) has elements that parallel the existing global economy. This is where our long-standing core competencies in cross-border payments, foreign exchange, financial assets creation, trading and safekeeping, in addition to our at-scale consumer foothold, can play a major role in the metaverse.”