Regulatory considerations

Introduction

The Metaverse may face the most significant challenges and barriers to realization from regulatory considerations. As a digital mirror of the physical world, it would be difficult to imagine that sovereign governments and governing bodies would voluntarily relinquish control of the digital domain. Each governing body protects certain concerns, ranging from the collective welfare of people, to the welfare of individuals, to revenue, to security. Governing bodies can enact laws on multiple levels: local, national, and international. Regulatory considerations may create more of a “Splinterverse” (see Appendix for more) or Multiverse where users are able to navigate between virtual universes, each with their own laws and regulations.

Current Regulatory Concerns

• Privacy of Data: GDPR and UK Data Protection Act govern the use of European Citizen data, even for foreign organizations doing business with their citizens, HIPPA governs the privacy of healthcare data in the United States, among others.
• Taxation and Currency Control: Though touted as secure, unfreezable currency (and envisioned as a way to skirt national laws or international sanctions), cryptocurrency is not immune from seizure or complying with sanctions in most countries.
• Criminal Activity: Who enforces violations by avatars, such as rape, murder, burglary, or tresspassing? “Is a legal persona necessary to make avatars responsible for their actions in the metaverse? And what kind of standards and criteria need to be in place to distinguish between a “legal” avatar and the true legal person who operates that avatar? These issues should all be addressed before the metaverse becomes mainstream.”
• Freedom of Speech: Different countries have different regulations in terms of which types of speech are protected or prohibited. Who will determine which laws apply to the Metaverse?

Future Outlook

• Mainstream adoption of the metaverse will “take a long time, given major technological and regulatory hurdles.”
• Though touted as “decentralized” the current reality is that the internet is in some ways becoming more centralized or “balkanized” as different users have different experiences based on geographic location.
• “It would be ideal to have a global regulatory authority overseeing the metaverse, although this would be difficult to implement”.
• Technologies must balance the needs of usability and user privacy. Infrastructure, hardware, and software will have to deal with regulatory issues making forward progress slower and less straightforward.
• Investors will need to keep these potential regulatory issues in mind when investing in a company or product, to make sure these contingencies are considered.

Further Reading and Sources

• Christine Moy and Adit Gadgil, February 2022. ‘Opportunities in the Metaverse.’ Available at: https://www.jpmorgan.com/content/dam/jpm/treasury-services/documents/opportunities-in-the-metaverse.pdf?fbclid=IwAR0vRve80UmnjOvHuTQgoggOGk-Def22KxdVjwWlllqbVnMfsxLVf8CUpLI.  Accessed March 2022.
• Lik-Hang Lee, September 2021. ‘All One Needs to Know about Metaverse: A Complete Survey on Technological Singularity, Virtual Ecosystem, and Research Agenda.’  PDF. Accessed March 2022.
• Pin Lau, February 2022. ‘The Metaverse: Three Legal Issues we Need to Address.’ Available at: https://theconversation.com/the-metaverse-three-legal-issues-we-need-to-address-175891. Accessed March 2022.
• Eran Orr, January 2022. ‘The Metaverse can Create a Boundless Healthcare Experience.’ Available at: https://www.forbes.com/sites/forbestechcouncil/2022/01/26/the-metaverse-can-create-a-boundless-healthcare-experience/?sh=6f8ecef42340. Accessed March 2022.
• Alex Gladstein, December 2018. ‘Why Bitcoin Matters for Freedom.’ Available at: https://time.com/5486673/bitcoin-venezuela-authoritarian/. Accessed March 2022.
• MacKenzie Sigalos, August 2021. ‘The IRS has Seized $1.2 Billion Worth of Cryptocurrency this Fiscal Year.’ Available at: https://www.cnbc.com/2021/08/04/irs-has-seized-1point2-billion-worth-of-cryptocurrency-this-year-.html. Accessed March 2022.
• Al Jazeera. March 12, 2022. Russians liquidating crypto in UAE in hunt for safe havens. Available at: https://www.aljazeera.com/news/2022/3/12/russians-liquidating-crypto-in-the-uae-as-they-seek-safe-havens . Accessed March 2022.
• Roger Cheng. March 15, 2022. How Crypto and NFTs Are Funding Ukraine’s Resistance Against Russia. Available at: https://www.cnet.com/news/how-crypto-nfts-are-funding-ukraines-resistance-against-russia/. Accessed March 2022.
• CNN. March 15, 2022. Japan orders crypto exchanges to comply with sanctions against Russia. Available at: https://www.cnn.com/2022/03/15/investing/japan-crypto-exchanges-russia-sanctions-intl-hnk/index.html. Accessed March 2022
• Richard Wike and Katie Simmons. November 18. 2015. Global Support for Principle of Free Expression, but Opposition to Some Forms of Speech. Available at: https://www.pewresearch.org/global/2015/11/18/global-support-for-principle-of-free-expression-but-opposition-to-some-forms-of-speech/. Accessed March 2022.
• Morgan Chittum, February 2022. ‘Morgan Stanley sees $8 Trillion Metaverse Market – In China Alone.’ Available at: https://blockworks.co/morgan-stanley-sees-8-trillion-metaverse-market-eventually/. Accessed March 2022.
• Mark Lemley, 2021. ‘The Splinternet.’ Available at: https://www-cdn.law.stanford.edu/wp-content/uploads/2020/09/The-Splinternet.pdf. Accessed March 2022.
• GotQuestions, 2022. “What is a Metaverse?’ Available at: https://www.gotquestions.org/what-is-the-metaverse.html. Accessed March 2022.
• Amrita Das, Feb., 2022. Woman recalls ‘gang rape’ in metaverse; concerns grow over making VR platforms safe from sexual predators. Available at https://www.cnbctv18.com/technology/woman-recalls-gang-rape-in-metaverse-concerns-grow-over-making-vr-platforms-safe-from-sexual-predators-12396992.htm. Accessed March 2022.