Chinese banking regulator warns against fraud risks in the metaverse

Chinese authorities called the metaverse “attractive and deceptive,” where users are prone to lose money if they are unaware of the risks.

After eradicating crypto trading and mining in the country, the Chinese government’s next concern lies with the growing scams around the metaverse projects.

The Chinese Banking and Insurance Regulatory Commission issued a risk warning for the common public against fraudulent metaverse projects. The notice highlighted how the buzz around metaverse had made it a primary target of scammers and fraudsters illegally raising money in the name of such projects and robbing people of their hard-earned money.

The official warning highlighted four different ways in which fraudsters are illicitly making profits using metaverse as the premise of their fraud. The first and most common form of the scam includes projects promising high-tech integration, such as artificial intelligence and virtual reality support. These projects often lure investors by promising high returns. Then the fraudsters get away with the investor funds.

The second most common form of metaverse scams is blockchain play-to-earn (P2E) projects, where scammers promise high profits for investing in the native gaming token and often run away with funds once they reach a set goal. Another prominent scheme such projects use includes hyping up the metaverse real-estate to induce panic buying among users.

The Office of Inter-Ministerial Joint Conference on Disposal of Illegal Fund Raising requested the common public to be more aware of such projects and report any suspicious activity to authorities. A Google translated version of the official warning read:

“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.”

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Despite a blanket ban on the use and mining of cryptocurrencies in the country, the Chinese government has shown more relaxation towards nonfungible token projects and metaverse. This is the reason why several tech giants including Tencent, Huwaei and Alibaba have rushed to file for metaverse trademarks. Shanghai even included the use of blockchain and metaverse for public services in its five-year development plan.