Cybercrime and the Metaverse


“Cybercrime is a present and real threat. It is a growing threat and one that is damaging not only commerce but also the social utility of the internet.”[1]  Through the internet age, cybercrime has evolved alongside the internet.[2] The metaverse is cybercrime’s latest frontier.[3] The metaverse represents the latest hybrid of social and transactional interaction.[4] The metaverse “is a world created by humans on computers, held on a server on the internet, where users can access the world and interact with others[.]”[5] Much like The Sims, users in the metaverse engage with the virtual world through avatars of themselves.[6] But unlike how it is in The Sims, the money exchanged in the metaverse is real, enabled by digital currencies known as “crypto.”[7]

At present, it is unknown how cybercrime will be policed in the metaverse.[8] Independently, crypto is credited with significantly increasing the incidence of internet fraud.[9] The Federal Trade Commission reported that between January 2021 and March 2022, crypto scams affected more than 46,000 individuals, resulting in losses exceeding $1 billion.[10]  Metaverse platforms’ typically have rules governing their users’ conduct.[11] For example, some forms of user misconduct are moderated through technological means, which block certain inputs by users.[12] However some critics have expressed that “it may be impossible to monitor [users’] rule breaking behavior through technological means.”[13] As a result, the metaverse is primarily policed by users who report other users for violating the rules of the respective platform.[14] Developers are then expected to investigate each reported case, which is a “very expensive” process.[15] As a result, misconduct goes largely unenforced in the metaverse.[16] Because bad actors can interact with the metaverse anonymously and from across jurisdictions, it is difficult for developers to block access, restrict use, and recover misappropriated assets.[17]

Despite significant cybercrime risks, rapid financial growth opportunities drive further development of the metaverse.[18] Major financial institutions have begun to recognize the immense potential of the metaverse.[19] A report by Citi concluded that “the [m]etaverse has the potential to become a $13 trillion opportunity by 2030[.]”[20] Further, a JP Morgan white paper stated, “opportunities in the metaverse seem limitless.” JP Morgan predicts the virtual world will “infiltrate every sector[.]”[21] Even the White House has recognized the lucrative financial opportunities the metaverse offers.[22] A recent press release from the White House stated that digital assets could help “reinforce U.S. leadership in the global financial system and remain at the technological frontier.”[23]

In response to recent developments in the digital space, the Biden administration released a framework to aid lawmakers in regulating the digital assets industry.[24] Currently, digital assets present “a huge regulatory challenge for lawmakers[.]”[25] Lawmakers’ best attempt at regulation has been to fit the laws of the physical world into a virtual one.[26] The result is “a messy web of cross-jurisdictional dichotomies.”[27] While the administration encourages federal agencies to continue efforts to disrupt bad actors who are engaged in cybercrime, the administration has indicated that Congress is likely best-suited to address cybercrime.[28] The framework essentially highlights areas of the law that the Biden administration suggests may require Congressional intervention.[29] The administration says it will continue to monitor the development of the digital assets sector, to identify any gaps in our legal, regulatory, and supervisory regimes.[30] Further, the framework encourages agencies to engage in private-sector research and development, and incite the creation of efficiency standards for cryptocurrency mining.[31]

If the Biden administration and Congress can work together to accomplish these goals, it would represent a significant step by the U.S. government to crack down on cybercrime and embrace the next generation of the internet, the metaverse.

[1] Clare Chambers-Jones, Virtual World Financial Crime: Legally Flawed, 7 Law & Fin. Mkt. Rev. 48 (2013).

[2] Id. at 48-49.

[3] Id. at 49.

[4]  See Robert G. Howard et al., Investing in Metaverse Real Estate: Mind the Gap Between Recognized and Realized Potential, 39 Comput. & Internet Law. 1, 3 (2022).

[5] Id.

[6] See id. In The Sims, players create virtual people called “Sims,” which the players use to engage with a “virtual world”. Elec. Arts, (last visited Sept. 30, 2022).

[7] See id. (“[A]n umbrella term used to refer to technologies that have blockchains as a foundational layer, such as digital currencies, non-fungible tokens (‘NFTs’) and decentralized finance (‘DeFi’).”).

[8] Howard, supra note 4, at 4.

[9] Id.

[10] Allyson Versprille, Senators Ask How Meta Is Combating Crypto Scams on Platforms, Bloomberg L. (Sept. 9, 2022, 2:09 PM),

[11] Simon Scarle et al., E-commerce Transactions in a Virtual Environment: Virtual Transactions, 12 Elec. Com. Rsch. 379, 399 (2012).

[12] Id. (“For example, in a child oriented VE “bad language” can be moderated with profanity dictionaries blocking certain inputs . . . .”).

[13] Id.

[14] See id. This type of policing is referred to as “peer monitoring.” Id.

[15] Id.

[16] Howard, supra note 4, at 4.

[17] Id.

[18] See id. at 3.

[19] See Howard, supra note 4 at 3.

[20] Id.

[21] Id.

[22] See FACT SHEET: White House Releases First-Ever Comprehensive Framework for Responsible Development of Digital Assets, White House: Briefing Room (Sept. 16, 2022), [hereinafter Framework].

[23] See id.

[24] See Framework, supra note 22.

[25] Chamber-Jones, supra note 1, at 50.

[26] Id.

[27] Id.

[28] See generally Framework, supra note 22.

[29] See id. Specifically, the administration is evaluating whether certain federal laws should be amended by Congress to explicitly include digital asset service providers. The administration is also considering other changes to existing laws, such as whether laws should be amended to allow the Department of Justice prosecute digital asset crimes in any jurisdiction where a victim of such crimes exists. To deter criminals from committing these crimes, the administration has expressed it will consider urging Congress to increase the penalties associated with digital asset crimes. See id.

[30] See id.

[31] See id.


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Fordham Journal of Corporate & Financial Law