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Banking in the Metaverse; JP Morgan Opens the Way for Meta-Banks



The whole world came to a standstill the day Facebook rebranded to Meta, courtesy of Mark Zuckerberg. If you have access to Google Trends, you’ll realize that the search for the word Metaverse was almost at zero before the announcement.

And since the announcement, it jumped dramatically and has not gone below the 50 mark of the graph. Why has this happened? What is there about the Metaverse that is causing this social, economic, and financial trigger?

What is Metaverse?

The Metaverse has been defined by so many individuals to mean what Facebook is building or what Microsoft wants to offer to the world. However, in simple terms, Metaverse is simply a combination of many virtual worlds.

From the etymology, Meta is beyond while Verse is linked to the universe. The combination will be a world that’s beyond the physical. Because we’ve associated it with digitals, then it has a bearing with virtual worlds.

This means that we will have various kinds of Metaverses created by different organizations to give us a Multiverse kind of. No one company can produce a Metaverse. It has to be a combination of several virtual experiences put together.

The Fun and Use Cases of the Metaverse

Everything we can do in the physical world can be replicated in the virtual world. From eating to weddings to playing to intimacy. There are concerns around the use of the virtual world for intimacy as that might bring about infringement of rights, especially for kids.

In the world of gamers, the Metaverse is the next show of brilliance from developers creating the desired world gamers and other users are looking for. Game like

JP Morgan, Blockchain, and the Metaverse

Here comes the icing of the cake. And this is one major reason JP Morgan has is creating a virtual experience for their supposed global community. This is not the first time the billion-dollar company is taking a step towards the adoption of blockchain technology and the Metaverse.

Although the CEO has shown negative support for bitcoin, deep passion and hope for Bitcoin, the blockchain that drives the ecosystem, the bank has taken steps towards adoption including its projection of $146k for bitcoin, advising investors to listen to bitcoin and the launch of JPM coin.

The first step taken into the Metaverse happened mid-last month when they opened a lounge in Decentraland. The name is Onyx lounge and it is planned to help “JPMorgan to operate as a bank in the virtual world just like it does in the real world,” according to a contributor on the Nasdaq website. It’s not out of place since the same institution spoke of the Metaverse, in a report released not too long ago, as a trillion-dollar opportunity.

Opportunities in the Metaverse

JP Morgan released a report on the Metaverse on 22 January 2022. In it was explained the dynamics of the Metaverse from definition to the development process to the uses cases and opportunities. Several questions were also added to help business leaders understand what to ask to be part of the profit sharers and value givers in these innovative times.

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Here are some of the opportunities discussed:

  • The Metaverse is giving a wide opportunity for the globe to transact businesses in billions of dollars. As stated, about $54b is spent yearly on the purchase of virtual goods. This same amount is more than what is spent buying music with a time two margin.
  •  Socialization is taking a new turn as well with this immersive virtual introduction so that people can connect better from anywhere around the world. Using Roblox as an example, messages worth $60b are exchanged daily on the platform. This is supermassive. It eclipses what our normal Web2 platforms are doing.
  • There’s also a sign that the GDP for Second Life is being boosted. It was $650m in 2021 where about $80m was earned by creators. This platform is an example of a Metaversal project.
  • For NFTs, it is shooting above the skies with a market cap of $41b. Remember, NFTs are built in a permissionless environment with access for anyone to come in, create, buy and sell at the same time. And the Metaverse needs a lot of NFTs.
  • The upsurge of virtual partnerships has never been seen before. From SandBox to Warner Music Group, there exist more than 200 strategic partnerships that are targeted at the Metaverse. And most of these deals are in hundreds of millions of dollars.

JP Morgan, Real Estate and Virtual Gaming

It’s no news that the multibillion-dollar bank believes that instead of replacing physical human interactions, the virtual world will augment what we have already. This augmentation is where it is aiming to invest heavily for now and the future. As explained above, the projected ROI is going to be massive or is showing massive results so far.

For real estate, what is the feeling when you hear that a fellow paid Snoop Dogg $450,000 to be his neighbor in SandBox? Are you aware that the price of virtual land has risen from $100 per land in January 2021 to $15,000 in December 2021?

Thanks to the release of SandBox Alpha. This is not a gamble JP Morgan wants to play by missing out on the massive wealth in virtual real estate.

In this aspect, the bank is akin to a situation where there will be a dual presence of human activities in the physical and virtual world. And where will that happen if not on a piece of real estate? This might sound confusing but it’s real. Anyone can pay mortgages on virtual properties. Renting is also available.

Another driving force if not one of the greatest is virtual games. Play-to-earn is now commonplace in the industry. And where does the bank come in? In the provision of utilities for GameFi like liquidity, cross-border payments, trading, foreign exchange amongst other functionalities. This gives a glimpse of the value of virtual banking in the Metaverse.

Investment Banking

Apart from the move by JP Morgan to have the first bank in the Metaverse, few companies like GrayScale, a crypto investment top tier organization, in a report on the Metaverse and Web3 innovation, indicated that the Metaverse is more than a trillion-dollar opportunity waiting to be tapped fully for the digital world. Goldman Sachs has also shared light into this market.

For Goldman, the prediction is around $8tn for the entire global market. And of course, this will transcend all sectors including education, health, and the construction industry. Cathie Wood, the CEO of Ark Invest has lent her voice to the discussion reiterating that the Metaverse is “a big idea that will probably infiltrate — just like technology is, anyway — every sector in ways that we cannot even imagine right now”. She believes it’s a multi-trillion dollar market as well.

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