Investment banking giant Goldman Sachs attributes a vast market to the metaverse, which in addition to technology and platforms also includes vibrant global commerce and, they say, creates a new ecosystem. In addition to NFTs, cryptocurrencies are also part of their vision for the future.
Over the past six months, the Metaverse has gained traction across all industries. While the metaverse connects the physical and virtual worlds through hardware and software innovations, it also requires an economic system to thrive. This is where, according to Goldman Sachs, we will see NFTs and cryptocurrencies take center stage to unlock value. To underscore its enthusiasm for the region, the second-largest US investment bank promoted its reports on the subject on its homepage. After all, cryptocurrencies, Web3 and Metaversum are the three most important “digitalization mega-trends” that will change our economies.
Great Metaverse Potential
To truly understand the possibilities of the Metaverse for banking, Goldman Sachs first explains what constitutes the Metaverse and what are the building blocks that really underpin this digital twin of our current reality. They identify four different pieces of the puzzle: technology, platform, market and commerce. Each of these building blocks would be driven by a unique set of ecosystem players who have gone through their own maturation curve.
A number of companies have already estimated the potential size of the metaverse. Brand Essence Research estimates the market to be over $200 billion in 2021, with a potential of over $600 billion in 2027. Investment bank Morgan Stanley predicted in November last year that the Metaverse would represent a $8 billion market opportunity. Cathie Wood, managing director of Ark Investment Management, estimates the metaverse will be a multi-billion dollar market, while crypto asset manager Grayscale Investments and JPMorgan value the potential opportunity at just $1 billion.
Goldman Sachs Research
Goldman Sachs analyst Eric Sheridan explained the bank’s Metaverse forecast in a recent episode of Exchanges at Goldman Sachs titled “Understanding the Metaverse and Web 3.0.” The “metaverse” has captured the imagination of tech investors, but what is it and what does it mean for the next era of computing? In the January podcast, Sheridan explored how merging elements of the physical and digital worlds through virtual reality, augmented reality, games, and immersive online communities is helping to create a more decentralized Web 3.0.
Goldman Sachs Research, in its Framing the Future of Web 3.0 report, also reveals how the gaming/media landscape has already revealed some key elements for the development of the metaverse. Also, there are topics like decentralized web activities and virtual experiences, which could become a hallmark in the next wave of digitization. Both podcasts and the detailed research report were featured as a three-pack on the investment bank’s homepage, underscoring its commitment to this area.
The Role of Finance in the Metaverse
Although it may seem like the focus is on virtual reality, digital assets, blockchain, cryptocurrencies and especially video games, in reality, according to Goldman, the Metaverse will provide much broader opportunities for many industries. The bank expects the Metaverse to become a key digital platform for personal and professional interactions, including the world of finance.
Just like in the real world, anyone operating in the metaverse could perform financial transactions. Users could purchase avatars, virtual props, or entire environments and properties created by corporations or other individuals. Additionally, users would like to engage in peer-to-peer transactions that fall outside the traditional “consumer versus business” paradigm.
All of these transactions will require a new type of financial infrastructure. According to Goldman Sachs, most traditional banks are already thinking about how to exploit this space. There are financial players who are rapidly entering the metaworld to position themselves as pioneers of the future of digital finance. As Korea Times noted in August 2021, Korean brokerages and banks have already started creating active virtual environments for their customers. Surprisingly, however, the investment bank believed that traditional financial institutions might not be the main players in the emerging metaverse.
The big Swiss banks are holding back
The crypto commitment of various US banks has risen sharply. In addition to Goldman Sachs, financial giants JPMorgan, Bridgewater, Morgan Stanley and many more have also entered the space. They all have recognized potential in the rapidly growing industry and are expanding their offerings for customers. This despite the somewhat poor regulatory situation in the United States. In Switzerland, the so-called Crypto Valley, the general conditions would actually be ideal. Nevertheless, the major local banks remain cautious.
According to its own statements, Swiss banking giant UBS has repeatedly received customer inquiries regarding digital assets over the past year. In January 2021, for example, they published the article “Should I buy Bitcoin?”. In it, UBS took a mostly skeptical stance and advised its clients to stay away from cryptocurrencies. Just a few months later, the major bank again warned of the risks of the “crypto bubble”. Competitor Credit Suisse recognizes Bitcoin as a booming asset class, but is also reluctant to make initial offers to customers. According to CEO Thomas Gottstein, the topics of money laundering and sustainability as well as regulation are not yet advanced enough.