US-based banking giant Citibank has said in a recent report that Metaverse will be worth up to $13 trillion by 2030. The downside though is that this will also lead to a spike in the number of crimes.
An analysis of Elliptic’s data set also reveals that there is an illicit activity linked to Metaverse-related assets – MANA and SAND.
“Of this illicit activity, 99.5 per cent is linked to crypto asset thefts – highlighting the most common criminal activity at present. This mirrors wider criminal activity across non-fungible tokens (NFTs), where social engineering, fake giveaways, and MetaMask browser wallet attacks can create a dangerous environment for those buying, selling, and transferring NFTs,” Elliptic says in its report, The Future of Financial Crimes in Metaverse Report 2022.
The report has also observed illicit Metaverse native asset-related activity linked to scams, phishing and malware.
Crimes In Metaverse
As of 2021, the total sales of all crypto assets, which includes land across Decentraland, Cryptovoxels, The Sandbox and Somnium Space has surpassed $500 million, and this is expected to double in 2022.
The Elliptic report has predicted that Metaverse is looking like an increasingly attractive liquidity venue for criminals looking to launder assets.
That said, money laundering is not limited to just the Metaverse. Money laundering is one of the most prominent crimes in the crypto market, and it has spiked nearly 30 per cent between 2020 and 2021, according to a 2022 crypto crime report by Blockchain data firm, Chainalysis.
The report also mentions a list of other crimes, such as
Fake airdrops in Metaverse: There have already been examples of fake airdrops and giveaway scams for Metaverse-related assets. In March 2022, when the Yuga Labs team announced the launch of MetaRPG and the native crypto asset, ApeCoin (APE), a number of bad actors on social media platforms tried to trick users into clicking malicious links or sending funds for fraudulent giveaways. They even managed to raise around $900,000.
Phishing links: There have been attempts to mislead Decentraland users into clicking on phishing links instead of the official domain. The danger to this is that since the majority of users will connect via their MetaMask – since it gives an enhanced experience with a persistent avatar – using a nefarious link could allow an illicit actor to steal funds through this connection.
One promising step that Google has taken is to disable ads on Decentraland-based searches. However, other search engines might not do the same, and attackers will likely look to leverage fake ads on other platforms, such as social media and other crypto/investment-based websites.
In response to this, the company behind Decentraland has been working with a number of IP protection firms, and it has already taken down two websites, 24 domains, and five social media accounts.
Sex crime: The report has pointed out that while there may be many instances of legalised sex practices within the Metaverse as well as opportunities for sex-based businesses to open up within the Metaverse red-light districts, but there are also concerns about how the space could be used for more sinister content, such as child sexual abuse materials (CSAM), revenge porn and sexual harassment.
In fact, crimes related to child-related harassment has already been reported in the Metaverse world. For instance, South Korea’s Ministry of Gender Equality and Family said in September 2021 that a 14-year-old girl had been coerced into taking off her avatar’s clothes in Metaverse and then told to have her avatar perform sexual acts.
Ways Ahead To Counter Financial Crimes in Metaverse
The report highlighted the importance of any Metaverse-related transactions and wallets to be screened for illicit connections to allow for proper screening to protect against money laundering, wash trading and sanctions risks.
“This will help to identify any direct or indirect exposure, and ensure that any mitigating steps can be taken. These include conducting further investigations, blocking withdrawals, segregating funds, or alerting the relevant authorities,” the report says.
Also, before adding support for a Metaverse project and related assets, it is also important to ensure that one conducts due diligence on the project and the team behind it.
