The United States Securities and Exchange Commission (SEC) has lodged a case against Binance, the world’s largest cryptocurrency exchange by trading volumes, pressing 13 charges, including one where they accuse the ramp of allegedly allowing the trading of investment contracts.
Supporters claim the metaverse is still nascent but could be transformative in the years ahead. However, following the SEC lawsuit against Binance, one of the top exchanges supporting trading of MANA and SAND, questions are beginning to emerge as to whether metaverse tokens are securities, as the SEC alleges.
The SEC claims that Binance has continued supporting crypto asset securities trading despite the regulator issuing enforcement actions against those projects. They cite the continued trading of TRX, the native currency of Tron, and REP, issued by Augur, as examples of Binance’s ignoring their action.
Their comments and citing tokens of popular metaverse platforms as examples could also adversely impact liquidity as other exchanges might be reluctant to list them.
The case filed by the SEC at the United States District Court for the District of Columbia is yet to be determined. Even so, that projects engaged in the metaverse find themselves in the crosshairs of regulators could be a blow, possibly slowing down the much-needed development as funds could be diverted to pay legal fees.
Challenges Slowing Metaverse Adoption
Presently, the metaverse is facing several challenges, slowing down adoption. For example, the effects of 2022’s crypto winter are still being felt. Metaverse tokens’ prices are still down over 80%, on average, from 2021 peaks.
Dropping metaverse token prices coincided with a rapid contraction in non-fungible token (NFT) activity. NFTs are critical for the metaverse as assets. They allow items to be represented as unique transferable tokens.
Beyond price contraction, dApps supporting the metaverse are mostly incompatible, meaning assets in different virtual worlds cannot be ported to other ecosystems.
Adopters have also noted that regulations have failed to catch up, meaning developers have no guidelines on releasing assets that might comply with laid down rules as utility tokens.
Moreover, hardware limitations are proving to be a challenge. Available hardware is not a perfect fit for existing metaverses. Virtual Reality (VR) glasses that expensive and bulky, while Augmented Reality (AR) glasses are being developed.