Amidst all the hype about the metaverse, observers are attempting to describe what it means for the banking industry. EuroMoney wrote:

“Incumbent banks are already being disrupted by blockchain technology, crypto assets, decentralized finance protocols, and distributed autonomous organizations. Now comes a new challenge. Goldman Sachs technology analyst Eric Sheridan estimates that with roughly 33% of the digital economy shifting to the metaverse and 25% market expansion, we arrive at a $12.5 trillion opportunity.”

TechBullion commented:

“[Metaverse] Transactions require some type of financial infrastructure. But traditional financial institutions may not be primary players in the Metaverse. Most are still hovering on the periphery of decentralized finance. When the Metaverse launches, digital banks will be in the perfect position to facilitate transactions. DeFi protocols will also quickly adapt and position themselves as major players.”

There are some big—and perhaps misleading—assumptions built into these comments.

A third of the digital economy may very well shift to the metaverse—but how long will that take?

With the help of the pandemic, eCommerce sales accounted for 20% of global retail sales in 2021. If it’s taken 20+ years for eCommerce to reach 20% market share, it’s hard to believe that the metaverse will capture a third of that in a short period of time.

Regarding the role of traditional financial institutions in decentralized finance, TechBullion is being generous—most aren’t anywhere close to “hovering on the periphery” of DeFi.

But the idea that “digital banks will be in the perfect position to facilitate transactions” in the metaverse is ludicrous. Most of today’s “digital” banks are little more than traditional banks sans branches. If “DeFi will rule the metaverse”—which is not a foregone conclusion—then digital banks are hardly in a “perfect position.”