JPMorgan Is the First Bank Into the Metaverse, Looks at Business Opportunities

11 months, 2 weeks ago - February 16, 2022
Onyx Lounge in Decentraland. Screenshot from Decentraland
Onyx Lounge in Decentraland. Screenshot from Decentraland
JPMorgan opens a Decentraland lounge featuring a tiger as the bank seeks to capitalize on $1 trillion revenue opportunity from the metaverse

JPMorgan Chase has opened a lounge in Decentraland, as the biggest bank in the US looks to capitalize on what it says is "limitless" opportunity in the virtual world known as the metaverse.

In Decentraland, one of the most popular metaverses, the bank's Onyx lounge resides in Metajuku, a virtual version of Tokyo's Harajuku shopping district. A tiger wanders the first floor, and a picture of the bank's boss Jamie Dimon hangs on the wall. A winding staircase leads to the second floor, where a person's avatar can watch experts talk about the crypto market.

JPMorgan's new footprint in virtual real estate coincided with the bank's release of a white paper on opportunities in the metaverse — a market which it said could eventually generate $1 trillion in annual revenues.

While the definition of the metaverse is loose, it's generally considered to be a virtual world where people can interact, attend events, and explore, as digital avatars of themselves.

In a tweet, Christine Moy, the global head of Liink, Crypto & the Metaverse for JPMorgan, said the bank wrote the paper to "help clients cut through the noise and highlight what we would love to see built or scaled next in commercial infrastructure, tech, privacy & identity, workforce, and social governance," in the metaverse.

For example, the bank sees expanded virtual real estate ownership and decentralized autonomous organizations (DAOs) eventually being the financial arm for those purchases.

In just six months in 2021, the average price of a parcel of virtual land doubled to $12,000 from $6,000, the report noted. JPMorgan also sees a new workforce and more virtual concerts like Ariana Grande's.

"We are now at an inflection point, where it seems that not a day goes by without a company or celebrity announcing that they are building a presence in a virtual universe," the report said.

Hype around the metaverse jumped after the company formerly known as Facebook rebranded to Meta as a sign of its push into virtual worlds, JPMorgan said, noting the price of tokens backing metaverses like Decentraland, the Sandbox, and Somnium Space surged following the announcement. Other companies, such as Microsoft and Nike, have also sought to capitalize on metaverse potential.

As well as the unveiling of the Onyx lounge (the name refers to the bank’s suite of permissioned Ethereum-based services), JPMorgan also released a paper exploring how businesses can find opportunities in the metaverse.

With the mainstream acceptance of things like non-fungible tokens (NFT), the past year has seen a breathless advance into the metaverse, a catch-all for immersive gaming, world-building and entertainment, fueled by integrated commerce applications. In January, electronics giant Samsung opened a version of its New York store in Decentraland, and in November Barbados established a metaverse embassy, also in Decentraland.

JPMorgan begins its assessment of “metanomics” by pointing 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.

“In time, the virtual real estate market could start seeing services much like in the physical world, including credit, mortgages and rental agreements,” said the JPMorgan report. It added that decentralized finance (DeFi) collateral management could well come into play, and that rather than traditional finance companies this could be done by decentralized autonomous organizations (DAO).

Work in the metaverse will also be gainful, said the report, pointing to a range of entertainment providers, as well as apps like RTFKT, a virtual shoe designer recently acquired by Nike. Another big spend will likely be on advertising, the bank said, citing a prediction that in-game ad spending is set to reach $18.41 billion by 2027.

The JPMorgan paper attempted to illustrate the metaverse hype versus the reality, stating that many areas need to improve. These include the overall user experience and performance of avatars, as well as commercial infrastructure.

“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,” according to the bank report. “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.”

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