Citi’s Magical MetaFi Tour Predicts a $13T Metaverse Financial System, Infinite Payment Rails by 2030

By 2030, 5 billion people — more than half the world’s population — will be trading in daily drudgery for the metaverse’s 3D immersive virtual reality.

By that standard, the resulting metaverse economy of $13 trillion predicted by Citi’s new  “Metaverse and Money: Decrypting the Future” report seems kind of on the low side.

Mind you, that $13 trillion was the high end. The range started at $8 trillion, which is a generous amount of wiggle room. And that 5 billion user number? It counts everyone going into the metaverse in two dimensions on mobiles, game consoles and laptops, with just 1 billion getting the truly immersive metaverse experience with virtual- and augmented-reality goggles. (Alas, gaming PC maker Razer’s full-body haptic suit was an April Fool’s joke.)

There are fair number of “ifs” in the report. Such as, if an internet infrastructure capable of meeting the “improvement of over 1,000x today’s levels” of streaming efficiency can be met.

And if the metaverse can become an “open metaverse” that is free from the control of big tech — we’re looking at you, Meta — or at least interoperable with walled garden versions created by the likes of Facebook. (Although the report does predict China will have its own separate metaverse.)

If you can do all that, the metaverse could well be “the next generation of the internet” rolling up “gaming, commerce, art, media, advertising, smart manufacturing, health care, virtual communities and social collaboration (including for enterprise and education).”

Of course, that will require money, and Citi foresees a pretty expansive range of currencies, encompassing both digitally native tokens like stablecoins, cryptocurrencies and central bank digital currencies (CBDCs) — like the digital dollar — all coexisting with “traditional forms of money” like credit cards and Apple Pay/Google Pay wallets. Decentralized finance, or DeFi, will coexist with traditional financial systems.

One thing the report does not do is buy fully into the Web3 hype of a decentralized, privacy-focused next-generation internet built on blockchain technology. That is, Citi says, “one conceptual third iteration of the internet.”

And the report notes most users want an internet with better user experience and content more than a decentralized and democratic one, asking “do users want Web3 or do investors want it?”

Money in the Metaverse

The report goes in great depth into the uses of noncurrency digital assets like nonfungible tokens (NFTs), noting that they go far beyond the “cute” and overpriced collectables used for “social media bragging rights.”  These unique cryptocurrency tokens, which can embed anything from art, video and music to traceable property titles and self-executing smart contracts, will “enable a form of sovereign ownership for the users/owners.”

That said, Citi points out that one important piece of a successful metaverse economy is inexpensive, real-time, frictionless micropayments that current rails can’t support, particularly in a cross-border setting. However, it notes that predictable fees will be key — something that is still a work in progress in crypto, particularly on the dominant Bitcoin and Ethereum blockchains.

While noting that India’s Unified Payment Interface (UPI) provides an effective in-country solution, the report points to stablecoins as the best solution for micropayments. While CBDCs can provide those benefits, they are limited by being single-market national currencies.

“Decentralized crypto is a better fit for the Open Metaverse,” Citi predicted.

“For the Metaverse to truly function as an alternate economy that is not controlled by a central entity, it requires formats of money that are truly decentralized, trustless, and verifiable,” Citi said. “These properties are critical given the entire premise of an Open Metaverse is built on not having centralized intermediaries and arbitrators.”

One Finance to Rule Them All

Blockchain-based centralized finance (CeFi) and decentralized finance (DeFi) are still in their infancy, with their actual viability as alternatives to traditional finance (TradFi) still largely theoretical, but Citi foresees a new financial system encompassing them all — metaverse finance, or MetaFi.

MetaFi will likely be a combination of all three, along with “new products specifically designed to meet the unique needs of the new ecosystem,” Citi said.

That said, Citi also sees financial institutions playing an important role in payments, notably on-ramp and off-ramp capabilities, as well as providing much-needed liquidity and “supporting a myriad of business and consumer use cases.”

It’s a vision that sees an incredibly diverse and of necessity complex financial system in which “the sheer number of assets available for exchange will grow exponentially.”

This economic infrastructure will require “a seamless and high-transaction throughput financial infrastructure working across fragmented implementations between centralized platforms and decentralized instances alike” to power the “24×7, always-on, instant micropayments” that will be the metaverse’s “main mode of payment.”

Which really does make MetaFi seem a little pie in the sky. After all, chaos and payment systems don’t exactly go hand in hand.