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China proposes to bring its social credit system to the metaverse: Report

Proposals to a United Nations group reportedly show China wants digital IDs and real-world punishments for actions that occur in the Metaverse.

China is reportedly looking to implement a system akin to its social credit system, but in the Metaverse and other online virtual worlds.

Proposals viewed by POLITICO and reported on Aug. 20 show the state-owned telco China Mobile proposed a digital ID for all metaverse and online virtual world users that work with “natural characteristics" and "social characteristics."

The proposals say “to keep the order and safety of the virtual world” the ID would harbor a slew of personal information and identifiable signs including a person’s job and suggested such data be permanently stored and shared with authorities.

An example of the benefits of the system was provided with a problem user that “spreads rumors and makes chaos in the metaverse” — with the digital ID allowing police to quickly find and punish the person.

The proposal mirrors China’s social credit system — an in-development infrastructure designed to improve behavior that scores and ranks citizens across various metrics which has also been an enforcement tool.

In 2019, the Associated Press reported that authorities blocked social offenders from purchasing plane tickets 17.5 million times in 2018. Other social offenders were punished by being barred from purchasing train tickets 5.5 million times.

On July 5, China Mobile put forward the proposals as part of discussions with a focus group on the Metaverse put together by the United Nations’ communications technology agency the International Telecommunication Union (ITU).

The Metaverse focus group meets again in October where the proposals could be voted on.

If passed they could majorly influence telcos and tech firms as the ITU’s Metaverse group is aiming to develop new standards for metaverse services.

Chinese firms taking part in the focus group are purportedly firing off many more metaverse proposals compared to those from the United States and Europe according to one group contributor that spoke to POLITICO.

Related: Chinese man sentenced to 9 months in prison for buying $13K in USDT

They said China is “trying to play the long game” so that its proposals are the standard for the metaverse if its use becomes widespread.

"Imagine a metaverse where your identity protocols are set and monitored by Chinese authorities. Every government must ask themselves: ‘Is that the kind of immersive world we want to live in?’” the person said.

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$45,000 Bitcoin looks cheap when compared to gold’s marketcap

BTC’s market cap is much smaller than gold, but Bitcoin’s daily volume and the amount held under management by funds suggests that the cryptocurrency is trading at a heavy discount.

Bitcoin (BTC) pulled off an impressive double-digit rally this year, but the digital asset has been struggling to break the $45,000 resistance lately. This level does not hold any historical importance because it has been easily breached multiple times. The same can be said for Bitcoin's $850 billion capitalization, which isn't anywhere close to silver's $1.4 trillion, or the Amazon and Google's $1.7 trillion market value.

Bitcoin's market cap is often compared to gold, which has a $12.3 trillion total value and is currently the leading global store of value solution. Therefore, the answer to the $45,000 resistance might lay in institutional investors' comparison of BTC versus gold. By looking at institutional investor funds assets under management and daily trading volume, it is possible to infer that Bitcoin's 93% market capitalization discount is justified.

The "digital gold" thesis is being proven right

Gold has always been viewed as a proxy for Bitcoin and Cointelegraph previously covered Bitcoin's multiple use cases, but the narrative that it is a digital store of value has always been its flagship feature.

Governments around the globe have implemented tighter financial controls for many reasons, which could reinforce the self-sovereign and decentralized advantages of cryptocurrency. For example, China's social credit system places offenders on a social credit blocklist, which will stop them from securing loans or even using the transportation system.

Most recently, Canada's short-lived Emergencies Act gave financial institutions the discretionary power to freeze protesters' bank accounts with no civil liabilities on Feb. 15. Another example is this week Russians have been sanctioned from payment services like Apple Pay and Google Pay.

These events could make an analysis of the gold to Bitcoin market capitalization even more relevant.

Most valuable tradable global assets. Source: 8marketcap.com

According to the above data, BTC's current $837 million market capitalization translates to roughly 7% of gold. To assess how those markets are valued, one should compare their daily traded volume and institutional holdings.

Cryptocurrencies are known for inflated exchange-traded numbers, but some providers, including Nomics, have their own adjusted volume calculations.

Accumulated 30-day volume on March 2, USD. Source: Nomics

The above data shows a $404 billion 30-day exchange volume for Bitcoin, which is equivalent to $13.5 billion per day. Exchange-traded products such as the Grayscale Bitcoin Fund (GBTC) added another $0.4 billion daily liquidity, according to CryptoCompare's February 2022 report. Therefore, Bitcoin currently presents an aggregate $13.9 billion average daily volume.

Average daily trading volumes, USD billion. Source: gold.org

Meanwhile, according to GoldHub, there is $170 billion in daily liquidity for gold, including registered over-the-counter transactions. This is in addition to regulated futures markets and gold exchange-traded products. Thus, Bitcoin volume currently presents roughly 8% of gold's.

The gold ETF versus Bitcoin exchange-traded products

Bitcoin's multiple exchange-traded products such as Grayscale GBTC and exchange-traded notes have grown considerably. As a result, there are $37.8 billion in assets under management locked in Bitcoin exchange-traded products. That is equivalent to 4.5% of the cryptocurrency market's current $840 million market capitalization.

Total Bitcoin listed investment vehicles, USD. Source: Funds, Bloomberg, ETF.com

Gold-backed ETF products total $221.2 billion, according to GoldHub data on Feb. 25. Excluding the aggregate 61% non-financial gold use (jewelry, industrial, others), the remaining market capitalization stands at $6.0 trillion. Therefore, the fund's exchange-traded investment vehicles correspond to 3.7% of the adjusted gold's market value.

At $45,000, Bitcoin's average volume traded and institutional investors' holdings roughly match gold's markets. While the $850 million market cap level might be a short-term concern for investors, the cryptocurrency has other emerging use cases, such as El Salvador's micropayment channels that use Lightning Network technology.

As "digital gold" becomes only a part of Bitcoin's valuation model, traders are likely to price in higher upside, and consequently, the $45,000 level should become a distant memory.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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