JPMorgan Chase is the first major financial institution to enter the virtual world by constructing a lounge in the widely visited blockchain-based virtual world Decentraland. As a result, the banking behemoth has officially entered the metaverse in search of its financial rewards.
The metaverse is an online community where users can create digital representations of themselves and meet other users, participate in events, and discover new areas.
The Onyx lounge, so named to allude to the bank’s permission for Ethereum-based services, welcomes corporations and institutions into the metaverse.
In the Onyx Lounge of Metaiuku, the virtual equivalent of Tokyo’s Harajuku shopping district, a tiger prowls the first floor under the watchful eye of an image of bank CEO Jamie Dimon, while on the second story an avatar can listen in on a discussion amongst cryptocurrency market experts.
Metanomics – J.P. Morgan Sees Unlimited Opportunity
Along with the launch of the “Onyx Lounge,” the investing behemoth also distributed a white paper highlighting the “limitless” commercial potential of the virtual area to its clientele.
Metanomics, the study of the economics of the metaverse, has a market opportunity of US$1 trillion per year, according to a report by JP Morgan.
What kind of prospects does the bank perceive, then? In its report, JP Morgan states that the metaverse presents chances to:
Transact -Each year, consumers spend US$54 billion on e-commerce, which is more than twice as much as they spend on music.
Socialize- Roblox users send 60 billion messages per day.
Create- In 2021, Second Life’s economy generated over $650 million, with almost $80 million going to creators.
Own- The current market worth of NFTs is $41 billion.
Experience- To date, The Sandbox has established 200 strategic collaborations, one of which is with Warner Music Group to introduce a music-oriented virtual environment.
Virtual Property Ownership and Online Gaming
While JP Morgan is clear that it does not expect the metaverse to replace all human contacts, it is eager to investigate “the many fascinating potentials it holds for customers and brands alike,” and the danger of “being left behind is worth the incremental expenditure needed to get started.”
JP Morgan is interested in virtual real estate ownership because the average price of a virtual plot of land increased from US$6,000 in June 2021 to US$12,000 in December.
The bank anticipates the emergence of decentralized autonomous organizations as financial arms for the sake of a virtual real estate market that may one day start seeing services much like those in the physical world, such as credit, mortgages, and rental agreements.
An additional example is the world of virtual gaming, which functions similarly to the real-world economy in many respects (including having its own population, GDP, in-game currency, and digital assets). As a global leader in international banking services like payments, currency exchange, the formation of financial assets, trading, and safekeeping, JP Morgan sees this as a chance to expand its already substantial footprint.
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Investment Banks Forecasting Metaverse Market Values
In launching its new lounge, JP Morgan is the first large bank to stake a claim in the metaverse, but it is not the first to recognize the trillion-dollar potential of cyberspace.
In a report titled “The Metaverse, Web 3.0 Virtual Cloud Economies,” published in November of 2018, crypto investment behemoth Grayscale estimated that the metaverse would generate more than US$1trillion in annual revenue in the near future due to the potential infrastructure provided by blockchain technology.
While CEO of Ark Invest Cathie Wood told CNBC in December that the metaverse is a multi-trillion dollar opportunity, noting that she believes it will move well beyond the gaming and consumer goods business and enter every sector of the economy, this is a somewhat different take.
Competing investing firms share this opinion. While rival financial firm Goldman Sachs recently estimated the metaverse’s potential worldwide market size at US$8 trillion, Morgan Stanley believes it will only be a future possibility for China.
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According to a note sent to investors, the bank’s analysts estimate that the metaverse’s total addressable market in China will be around US$4 trillion as it replaces the mobile internet with a more ‘immersive experience,’ but that this figure could rise to US$8 trillion once the metaverse begins disrupting offline activity like test-drives, real-estate showings, and education.
Because of this possibility, more financial institutions, such as banks and investment businesses will enter the metaverse this year than ever before. Be on the lookout.
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