The dollar’s future to be decided in… a metaverse?

In September 2023, America’s gross national debt reached $32.9 trillion and continued to increase. The United States has hit its debt ceiling more than a hundred times since the mid-20th century. Inflation is also raging in the North American market, with prices hitting record highs over the past 40 years in 2022. The weakening dollar has to compete not only with other national currencies, including the euro and the yuan; the race now includes digital tools, which are also increasingly used outside the conventional economy, in metaverses – immersive virtual-reality spaces in which users can communicate, play games as well as do other things such as perform asset transactions. Artem Genkin, Doctor of Economics, Professor, President of the NPO Center for Protection of Bank Clients and Investors, shared his view on the prospects for the global reserve currency and crypto market trends, as well as his vision of the future of digital assets in virtual worlds. The presentation From Fort Knox Gold to Metaverses: What Is Power and Value? was held in the Virtonex metaverse.

Outlook for the US dollar

The US currency has been losing ground in the global market for more than a decade, Artem Genkin notes. While 50 years ago, the dollar accounted for as much as 85% of international payments, today its share shrank to about half as much. A similar trend is also seen in global foreign exchange reserves: in 2001, the US dollar accounted for 73% of the total, but in 2023, its share fell below 60%, as other fiat currencies are being increasingly used as alternatives, including the euro and the yuan.

The US currency’s role will continue to diminish, the expert believes. And although moving away from the dollar is still a long process, its pace is accelerating.

“The dollar iceberg will continue to be carefully dismantled over the next few years, and I am thinking two to five rather than 10 or 15 years,” Artem Genkin predicts.

A digital rival

The dollar’s primacy is also declining due to the rise of digital currencies. This crypto market’s capitalization is high enough already, exceeding a trillion dollars. In particular, digital currencies are compensating for the inflationary dollar “overhang” in the global market, Artem Genkin reminds.

This trend first emerged during the pandemic, when cryptocurrencies “sterilized” the liquidity surplus, and the crypto market capitalization showed rapid growth, approaching $3 tln in 2021. By the way, during peaks, it even exceeded the volume of cash dollars in circulation, which was $2.3 tln.

There are several submarkets — stablecoins, NFTs and collectible tokens, as well as metaverses and related assets — that may drive the crypto asset market growth in the future.

 “According to CoinMarketCap, these three categories of assets are already ensuring a fairly large share of the total crypto asset market capitalization, up to 15%,” Artem Genkin points out.

Non-dollar stablecoins will also gain momentum as interest to them grows.

 “We can expect new stablecoins to emerge that will be tied to alternative basic assets, from dirhams, dinars and rupees to kilowatt-hours of energy, metals and other resource assets or their baskets,” Artem Genkin elaborates.

Focus on metaverses

Metaverses promise to become an extra challenge for the US dollar just as for the fiat money in general – thanks to metaverses’ own virtual economy built on digital currencies and non-fungible tokens (NFT), as Gartner predicts. Eighty percent of metaverse users already use crypto currencies. In the United States alone, 37.6 mln people spend over $28 bln per year in metaverses. Digital world residents are growing in number and by 2026, one in every people on the planet is expected to spend an entire hour in a metaverse.

Metaverses generate ecosystems, every user becoming an independent economic actor with a universal payment tool.

Migrating to digital environments

Even today, asset owners are excited about the opportunity to invest in digital worlds, which goes beyond tokens that can be used inside a de-centralized environment such as video games. The blockchain technology allows tokenizing plots of land and infrastructure facilities. It also allows launching internal management systems, including voting.

Artem Genkin notes that, as concerns NFTs, they can be used to tokenize a range of entities, from clothing to artwork and copyright. Some transactions are impressively big: for example, in Sandbox, a three-deck yacht with two helipads and a spa bath was sold for $650,000. Over the first months of 2023, virtual land owners closed deals worth $311 mln in total.

Large corporations have to migrate to metaverses because it is where their target audience can be found.

Surprising world of the future

Will interest in virtual worlds and hence digital currencies grow? Despite several major projects involving conventional businesses being on hiatus (for example, Disney announced the closure of its metaverse department; Walmart shut down its Roblox-powered metaverse project), the potential of the digital world is estimated as quite high. The global metaverse market may reach $5.8 tln by 2030 while its mean annual growth rate will be close to 45%, according to the Institute for Statistical Studies and Economics of Knowledge under the Higher School of Economics.

While being extremely important, growing economic activity inside digital worlds is not even the key driver. Artem Genkin notes that the studies published this summer show surprising statistics. Twenty-six percent of investors buying real estate in metaverses are primarily attracted to the digital world aesthetic and possibilities of non-conventional self-identification and self-expression. Another 24.5 percent invest in metaverses to expand their social connections and become part of new communities. And, of course, there are tech geeks among active metaverse residents. In the meantime, only 16% of investors are driven by speculative gain.

“It is a different, unexpected world that attracts not only financial market speculators. In the first place, metaverses are about common interests shared by a person and community,” Artem Genkin concludes.

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