Virtual Currencies

New Jersey bill would make crypto sold to institutional investors a security

The bill complements one already on the governor’s desk that regulates digital assets owned by individuals.

The New Jersey General Assembly may consider a bill that would decide when a digital asset or “virtual currency’ is a security under state law. 

All virtual currencies issued and sold to institutional investors would be considered securities in the U.S. state of New Jersey under the bill introduced by Democratic Assemblymember Herb Conaway, Jr. on Nov. 29. According to the short text of the bill, the legislation would supplement the New Jersey Uniform Securities Law, which currently makes no mention of virtual or digital currency or cryptocurrency.

The bill pertains only to institutional investors, which are defined as “a company or organization that invests money on behalf of other people.” It also specifies that stablecoins could be determined to be virtual currencies by the state’s Bureau of Securities.

Read more

Snow Crash manuscript that coined the term ‘metaverse’ to be auctioned by Sotheby’s

The manuscript is part of a larger series of physical and digital items related to the famous book.

The original manuscript of Neil Stephenson’s Snow Crash, the book that coined the term “metaverse,” will be auctioned by Sotheby’s, according to a page on its official website. The auction is part of a Feb. 23 series called “Infocalypse” that includes six physical and six digital items related to the famous book.

The original manuscript is in Lot 2 of the series. It is “wrapped in original Xerox 4200 Paper,” secured with masking tape, and contains “corrections and notations throughout in Neal Stephenson’s hand in blue ink.” It also has the title of the book written on the spine with a sharpie by the author.

A “revised typesetting manuscript” is also up for auction in Lot 4. This is a later version filled with additional handwritten notations and revisions by the author.

Other physical objects being auctioned as part of the series include the original painting used as cover art for the 1993 mass-market paperback edition of the book, a leather jacket that was to be used in a video promotion for the graphic novel, slides used for the graphic novel concept, and a real sword inspired by the one the book’s protagonist wielded.

In addition to these physical items, the series will also contain digital art NFTs inspired by the graphic novel concept that preceded Snow Crash.

Related: ApeCoin leads in NFT and metaverse market share, but is it sustainable?

Published in 1992, Snow Crash is set in a dystopia where most human beings live in small storage facilities. It follows the exploits of protagonist Hiro, a pizza delivery man who has to fight off bandits to deliver his pizzas. Hiro spends all of his spare time in a virtual world called “the Metaverse,” where citizens go to escape the misery of everyday life. But a computer virus causes residents of the Metaverse to become “nothing more than a jittering cloud of bad digital karma.” The plot of the novel revolves around Hiro’s attempts to figure out how to stop the virus.

The book has sold over 1 million copies in North America alone, according to the Washington Post. Since the book’s release, virtual reality enthusiasts have increasingly used Stephenson’s “metaverse” term to describe the emerging virtual world being created by virtual reality technology, and in recent years, it has become a frequently searched buzzword.

The rise of the metaverse has led to new career opportunities for some and has helped to reshape Web3 gaming.

Update (Feb. 23 at 9:45 pm UTC): This article has been updated to correct the number of copies of Snow Crash that have been sold.

Hong Kong securities regulator adds crypto personnel for industry supervision

Regulators in Hong Kong plan for the addition of personnel to “better supervise” the activities of local virtual asset providers.

Regulators in Hong Kong are stepping up their game when it comes to monitoring the activities of the crypto industry. 

According to a Securities and Futures Commission report filed on Feb. 6, it plans to hire four additional staff to “better supervise” the activities of local virtual asset (VA) providers. Moreover, the extra oversight will help “better assess the compliance and risk” by allowing retail investors to trade virtual assets on regulated platforms.

The commission wrote:

“This is in response to an increasing number of operators who have expressed interest in carrying on VA activities such as trading platforms and the management of VA funds.”

This comes at the onset of the introduction of a new licensing regime to allow greater retail crypto investment.

Previously trading platforms licensed in Hong Kong were only permitted to serve professional investors, or investors with portfolios of at least $1 million (HK $8 million), according to regulators. 

Related: Hong Kong lawmaker wants to turn CBDC into stablecoin featuring DeFi

In December 2022, the new licensing regime was approved as an amendment to the Anti-Money Laundering and Counter-Terrorist Financing Bill. However, it takes effect in June 2023, which gives time for regulators and local businesses time to prepare for a new wave of participation in the industry.

Hong Kong has been active in its plan to revamp its crypto industry and become a hub for Web3 innovation. Part of this plan included an investment fund of $500 million to push for mass adoption in the local industry.

Most recently, the Hong Kong Monetary Authority recently released a statement saying that it will not tolerate algorithmic stablecoins in its newest regulation. However, the regulator said that it intends to develop a full-bodied regulatory framework for stablecoins, which will be based on the full backing of such assets. 

Bank of Thailand to allow first virtual banks by 2025

By allowing virtual banks, Thailand seeks to boost competition and economic growth.

Bank of Thailand has disclosed plans to allow virtual banks to operate in the country for the first time. Financial firms will be able to provide services by 2025, a Bloomberg report shows. 

The “Consultation Paper on Virtual Bank Licensing Framework” published by the central bank says that applications will be available later in 2023 allowing virtual banks to act as financial services providers. The move focuses on increasing competition and boosting Thailand’s economic growth.

The Bank of Thailand will issue three different licenses for interested companies by 2024. There are at least 10 parties interested in granting permissions, the report states.

Regulations and supervision for virtual banks will be the same as those for traditional commercial banks under the licensing framework. Moreover, qualified applicants will need to meet certain requirements. The central bank also noted:

“Virtual banks should not initiate a race to the bottom through irresponsible lending, give preferential treatment to related parties, nor abuse dominant market position which will pose risks to financial stability, depositors, and consumers as a whole.”

According to the central bank, virtual banks will be under a “restricted phase” during their first years of operation, which includes close monitoring to prevent financial systemic risks. Thailand’s Securities and Exchange Commission recently announced plans to tighten rules for crypto, aiming to expand investor protection. A strict set of guidelines for crypto ads is also being developed by the authority.

Thailand recently entered into a technology cooperation agreement with Hungary to support the adoption of blockchain technology, amid a fast growth of demand for mobile payments, e-commerce, and cryptocurrencies in the country, Cointelegraph reported.

The country has seen a number of crypto-related developments in 2022, including plans to pilot a central bank digital currency for roughly 10,000 users. Thailand is ranked eighth on the Global Crypto Adoption Index by analytics company Chainalysis.

Hong Kong to subject crypto exchanges to the same laws governing TradFi

The new legislation will bring a licensing regime for the virtual asset service providers requiring them to pass strict AML and money laundering guidelines.

Hong Kong’s legislative council has passed a new amendment to its anti-money laundering (AML) and terrorist financing system to include virtual asset service providers.

The latest legislation will establish a new licensing regime for virtual asset service providers, set to come into effect from June 1, 2023. The new amendment will subject crypto exchange service providers to the same legislation as followed by traditional financial institutions.

It means virtual exchanges looking to open a business in Hong Kong will have to go through rigorous AML guidelines and investor protection laws before being granted a license of operation. Unlike most other regulators around the globe, Hong Kong has used the FTX collapse as a way to mitigate regulatory risks associated with centralized exchanges.

In the aftermath of the FTX crypto exchange collapse, regulators from around the world have faced public ire for their failure to protect retail investors. There has been a growing demand to bring crypto exchanges and service providers under the purview of law and subject them to strict AML and investor protection requirements.

Related: Could Hong Kong really become China’s proxy in crypto?

In a recent conference, Hong Kong Monetary Authority chief executive Eddie Yue hinted at possible investor protection regulations coming soon to the nation. The recent legislation amendment has propelled the nation to become the first mover on the pressing issue of investor protection.

Hong Kong has been actively working towards establishing a well-thought regulatory groundwork for the nascent crypto market. A policy proposing a regulatory framework and risk-based regulatory direction was published by the Hong Kong government in October under the title ‘Policy Declaration on the Development of Virtual Assets”. The government has suggested a number of pilot projects to evaluate and improve the technologies underlying virtual assets.

The metaverse is a new frontier for earning passive income

Those looking to earn passive income in the metaverse have several available options, but how profitable and durable these are isn’t yet clear.

When new technologies and platforms are created, there are incredible discovery phases in which economic activity eventually picks up and starts taking shape. The metaverse is arguably in that discovery phase, with many entrepreneurs finding ways to earn passive income on it.

As economic activity in the metaverse rises, new passive income opportunities are seemingly being created on a regular basis, as are opportunities to actively earn income. While what works and what doesn’t is still up for debate, there are some in the vanguard of metaverse passive income.

What is the metaverse?

Before digging into passive income opportunities in the metaverse, it’s first important to analyze what is actually is. The term “metaverse” has been one of the most popular buzzwords in the Web3 space over the last few months, while millions are moved in digital economies focusing on it.

The word “metaverse” comes from Neal Stephenson’s 1992 cyberpunk sci-fi novel Snow Crash. In the Web3 space, the term is used to describe a digital world where people actually own the assets within it.

The metaverse differs from past digital worlds, like those created in video games, through the use of nonfungible tokens (NFTs). These unique blockchain-based tokens can be freely traded by users but cannot be duplicated or copied. What can be done in the metaverse is still being explored, but so far, real businesses have been created within these metaverses.

Another defining characteristic of the metaverse is interoperability. Virtual worlds like that of popular videogame Roblox could be thought of as metaverses, but unlike the new, blockchain-based iterations, players don’t exercise control or ownership over their assets.

Various companies have been moving into the metaverse, with Walmart seemingly gearing up to enter the space, while fashion brands like Ralph Lauren and Gucci have signaled that virtual clothes could be a major growth area for them. Companies are entering the space as it grows rapidly and is expected to become an $800 billion industry within two years.

Given the potential size, earning passive income in the space could be a great opportunity. Taking advantage of passive income opportunities can be easy for those already deep into the metaverse, but how long each opportunity will allow entrepreneurs to earn isn’t clear.

Renting out metaverse land

One of the most well-known ways of earning passive income in the metaverse is by owning property in it and renting it out. Metaverse platforms like Decentraland and The Sandbox let users rent land for a fee to others.

Recent: Canada crypto regulation: Bitcoin ETFs, strict licensing and a digital dollar

There currently isn’t a lot of data on what type of earnings metaverse landlords can expect, as that information isn’t being widely shared. Nevertheless, it’s known to be an attractive market as companies look to host events on the metaverse.

Pavel Sinelnikov, co-founder and CEO of Ethereum layer-2 scaling solution Metis DAO, told Cointelegraph that metaverses aim to achieve “digital land ownership and the ability to buy, sell, and rent land and other virtual items,” adding:

“Metaverses create an abstraction of real-life, where there is a living virtual economy in the game that is not locked and restricted to the digital domain, but instead extends outside of it; these are real and valued assets, holding value outside of the digital realm.”

According to Sinelnikov, the economies seen within metaverses like Decenraland and The Sandbox impact the “greater and real-world DeFi [decentralized finance] ecosystem,” while allowing for more interoperability opportunities.

Leasing assets

Another way to earn passive income in the metaverse involves leasing out assets, as some users may not want to directly purchase expensive NFTs.

One well-known example of NFTs being leased to other users to earn passive income comes from the popular game Axie Infinity. The game is based on NFTs called on Axies that were, at one point, rather expensive as the game’s popularity exploded during the bull market.

In the game, Axies were needed to compete and earn rewards in the form of Smooth Love Potion (SLP) tokens. Players who could not afford Axies would receive them from so-called team managers in exchange for some of the SLP tokens they managed to earn. The managers were, in essence, earning passive income from their Axies as other players — called scholars — used them to earn rewards. The practice was so popular that some “scholars” in Venezuela were making a living off of leased Axies.

Other metaverse assets can be leased, depending on the platform. Sinelnikov commented that lending, renting and asset fractionalization are interactions that have already been formed on the metaverse, with the best part about them being that “no single provider can restrict the usage or control the market, since the assets belong to you and not to an individual provider.”

Secondary market royalties

Some NFT artists have earned extensive royalties through the secondary market as their creations are traded among collectors. The same type of interaction is possible in the metaverse.

Prakash Somosundram, co-founder and CEO of blockchain game launchpad Enjinstarter, told Cointelegraph that “any wearable creator can earn royalties when the assets they create are sold on the secondary market.”

John Burris, chief of strategy at metaverse app IMVU, told Cointelegraph that the metaverse is “filled with opportunities to earn,” stating that while some metaverse worlds are play-to-earn and others “host gig-like economies,” almost all of them offer item creation and sales:

“With blockchain and NFTs we’ve finally unlocked a true ownership and royalty model where royalties can and will continue to flow back to the original creator, providing well-deserved passive income as those items change hands.”

Per Burris, the metaverse “serves as a great way for people to make money no matter who they are, or where they’re from, in the real world.” The ability to create, own and sell goods, he said, opens up opportunities to people that they would not get otherwise.

Virtual games

Gaming is one of the metaverse’s largest use cases, with most metaverse worlds either being completely focused on gaming or having a large portion of users focusing on it. Some involve gambling, while others generate their revenue in other ways.

Decentral Games’ ICE Poker virtual casino is one of the most popular metaverse gambling operations out there and since it’s based in the metaverse, a lot of the costs traditional casinos have aren’t present.

Other games, however, aren’t related to gambling at all. Some generate revenue through asset sales, secondary market royalties or donations. Roderik van der Graff, the founder of global investment firm Lemniscap, told Cointelegraph that one of the firm’s portfolio companies has launched a tower defense game to generate revenue through the metaverse.

The game is called Spark Defense and allows users to “monetize their land and complete quests to collect, earn and own NFTs which they can use across the game,” van der Graff said.

Advertising

Our final way to make passive income in the metaverse is through advertisements. Setting up large billboards in popular areas can draw in advertisers looking to get the crowd’s attention to sell their products or services, whether these are in the metaverse or outside of it.

Finding advertisers for these billboards may mean the income isn’t completely passive, as after a campaign ends, an advertiser may lose interest and the billboard owner may have to start looking for someone else to rent.

In fact, most of the options above are likely to require some involvement from the entrepreneur. Then again, true passive income doesn’t really exist, as even the most passive investments have to be monitored from time to time.

Is passive income in the metaverse worth chasing?

If generated income isn’t entirely passive, some may consider it not worth chasing, given the drawbacks. According to Burris, downsides include engaging in speculation and dealing with the volatility of the cryptocurrency space, as most transactions are conducted in either NFTs or crypto tokens:

“It’s important users and creators looking to create income in the metaverse examine the platforms and metaverses they use, and look at the product as a whole. Is the team experienced? Is the metaverse active? Can it sustain itself through economic downturns?”

Somosundram said that the sustainability of an income stream “depends on the success of the specific metaverse and/or game where you generate your passive income,” which may mean often moving on to another venture.

It’s also worth pointing out that entrepreneurs may end up betting on a metaverse world that is later on abandoned, making their investment worthless as every passive income opportunity in the metaverse relies on heavy traffic.

On the bright side, Somosundram said that passive income from the metaverse is a “great means of diversification along with traditional financial instruments,” and there can be a rapidly expanding number of opportunities out there as the metaverse industry grows.

As exact figures aren’t widely shared, it’s up to entrepreneurs whether they want to bet on the metaverse and start building their income streams on it or whether they prefer to focus their attention elsewhere. Those who risk making it in the metaverse may have to innovate to stand out, however.

Making it in the digital world

While renting property or a digital billboard won’t require significant innovation, some of the more prolific earners are taking different approaches. Somosundram told Cointelegraph the story of a Singapore-based entrepreneur that created a GameFi guild that built up a pool of assets to lease for a fee.

In another potential example, he pointed to tattoo artists using a service to “mint wearable tattoo art that generates passive income from the secondary market royalties.”

Recent: After FTX: Defi can go mainstream if it overcomes its flaws

Burris noted that on the platform he represents, there are “over 200,000 active creators, making over 350,000 new items for sale every month.” He stated:

 “As more and more people spend their time in virtual worlds, and begin looking toward it as a way to earn a living, it’s important to have both passive and active income opportunities — just like in the real world.”

Whether entrepreneurs want to move forward with passive income ideas for the metaverse, it’s worth pointing out that there are no guarantees that the time or money invested will generate returns, as the space is constantly evolving.

Economic activity in the metaverse is still at an embryonic stage, as many are still figuring things out. As the metaverse evolves, new opportunities will likely present themselves the same way they’re presenting themselves in the broader cryptocurrency space.