China issues alert against rising metaverse-related scams

The Chinese government on Friday issued a notice pertaining to the rising scams and frauds in the metaverse space. The alert, issued by China Banking and Insurance Regulatory Commission, sought to warn against illegal fundraising schemes, scams, and other criminal activities fabricated as metaverse projects.

While the government has banned cryptocurrency trading and mining within the country, it is acceptable for metaverse projects to operate given they do not use any form of digital currency. It has resulted in metaverse projects becoming increasingly popular amongst Chinese developers, tech companies, and investors.

Various enterprises are entering the space one after the another. Chinese tech giants Alibaba and Tencent recently filed trademark applications related to the metaverse sector, and China Mobile, a Chinese state-owned company, established the Metaverse Industry Committee in October 2021.

Meanwhile, the official notice highlighted four common ways used by metaverse scammers for stealing funds. ‘Fabricating false metaverse investment projects’ comes first, where fraudsters offer false investment opportunities claiming to provide high returns.

The second way fraudsters make illicit profits is by promoting play-to-earn (P2E) games and encouraging users into purchasing cryptocurrencies and gaming equipment. Listing the third most common way, the CBIRC noted an increase in fraudsters maliciously hyping Metaverse real estate to make money.

“Some lawbreakers use the concept of metaverse hotspots to exaggerate the expectation of virtual real estate prices rising, artificially create the illusion of panic buying, and induce hoarding and trading,” the authority noted in a translated statement. Lastly, some fraudsters entice investors into purchasing future “currencies used in the metaverse,” but which have no real-world value.

“The fraudulent activities under the banner of “Metaverse,” which is more attractive and deceptive, and participants are prone to property damage,” the CBIRC warned in the notice. “The public is requested to enhance their awareness of risk prevention and identification capabilities, and beware of being deceived.”

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