The metaverse is rife with fraud and scams, China officials warn

• Authorities in China have shared a notice to the public, warning them of the fraud and scams present in the metaverse projects.
• The officials have urged the public to remain cautious of such projects and report any suspicious ones to the authorities.

Having instituted an absolute ban on cryptocurrencies, their trading, and mining, authorities in China have now shifted their focus to the metaverse. The Chinese Banking and Insurance Regulatory Commission has warned the public of cases of fraud and scams in the metaverse. The notice states that perpetrators of these illicit activities rob people of their hard-earned cash using the metaverse buzzword.

Additionally, the warning highlighted ways in which the metaverse has become a playground for fraudsters. The first is by projects promising high-end tech integrations, such as artificial intelligence (AI) and virtual reality (VR) to connect users with the metaverse. The Commission says such schemes entrap investors with promises of luxurious returns, only to make away with users’ funds.

Second, on the Commission’s list are the popular blockchain play-to-earn (P2E) games. Those running scams guarantee users high returns, only to disappear after attaining their monetary goals. Another common tactic of these fraudsters is hyping metaverse real-estate projects to trigger panic buying.

Metaverse projects can be “attractive and deceptive”

The Office of Inter-Ministerial Joint Conference on Disposal of Illegal Fund Raising has urged the public to be wary of such projects. It has also requested that people report to the authorities any suspicious metaverse projects. A translated version of the official warning reads:

The fraudulent activities under the banner of “Metaverse”, which is more attractive and deceptive, and participants are prone to property damage. The public is requested to enhance their awareness of risk prevention and identification capabilities, and beware of being deceived.

For a long time now, authorities in China have been in hot pursuit of cryptocurrencies and their related activities. They, however, seem to be laxer when it comes to the metaverse and non-fungible tokens (NFTs). Much of what has been done about them is the issuance of warnings. 

Related: China plans to legalize NFTs, prepares separate laws from cryptocurrencies

Despite warnings…

Other than the aforementioned notices, the People’s Bank of China (PBoC) warned of the metaverse and NFTs in November last year. The central bank said their lack of physical basis makes them prone to facilitating illicit activities. Illegal fundraising, pyramid schemes, fraud, money laundering, tax evasion, and extortion made the list. Newspaper firm, The People’s Daily concurred, saying property sales on the metaverse carry a high risk of volatility.

But even then, over 1,000 firms, including tech giants Tencent and Huawei, applied for metaverse trademarks in 2021. Shanghai even included blockchain and metaverse-related public services in its five-year development plan. It remains to be seen whether China officials will go tough on this new technological venture, or whether they will embrace it in a cautionary manner.