As merchants and consumers prepare for the embracing of the metaverse as a new space for digital engagement and social interaction, Elliptic has highlighted the potential threat of financial fraud within the space.
Specifically, the report amplified the risks around money laundering, with the growth of the metaverse potentially leading to a deeper allure from launderers looking to exploit the market.
Furthermore, the report also maps out that criminals could eye the metaverse as an avenue to hide or launder assets that have been acquired from real world activities.
It comes as the growth of the metaverse has been exponential and also lucrative. In 2021, the accumulated sales of all crypto assets, including land, across Decentraland, Cryptovoxels, The Sandbox and Somnium Space, was more than $500 million – a number that is expected to double in the coming year.
Real estate within the metaverse continues to be one of the most lucrative assets within the space, as prices spike in spite of tough economic conditions in the real world.
The daily transaction value for the market also continues to grow, with wearables being cited as a key potential threat from launderers, should the price elevate.
Mapping out how firms can mitigate the risks of money laundering, whilst also embracing the metaverse – the report emphasised ‘secondary marketplaces, exchanges and others can perform compliance screening on the accounts sending/receiving funds to ascertain any money laundering risks’.
It added: “This will ensure that any attempt to use an obfuscation technique or service is flagged, and any other money laundering risks can be found.
“This is possible since the underlying assets are predominantly ERC20 and ERC721/ERC1155 (NFT) tokens on the Ethereum blockchain, so you can use blockchain analytics solutions to understand the source and destination of the funds.
“However, as illicit actors will often look to operate across many different assets – and interoperability across chains grows – it is also important to have a holistic view of the risks of a single metaverse, as well as across multiple metaverses.
“This can ensure that a nefarious actor is not trying to hide “dirty” money in one asset or metaverse and “clean” it through another. As such, when screening metaverse-related assets or transactions, being able to see the results across multiple blockchains and/or metaverses can help to build up this picture.”