Metaverse allows users to traverse a virtual world that may represent aspects of the physical world using technologies such as virtual reality (VR), augmented reality (AR), AI and social media. In reality though, the metaverse has now seeped into many different sectors including art, real estate, digital currencies and gaming. With the advent of metaverse in various sectors, it is essential to ensure that both the metaverse commissioners and users are in compliance with the regulations. While the law globally is still evolving to include metaverse specific regulations, there are many aspects of law which must be borne in mind when dealing in the metaverse.
Intellectual property rights
Determining the identity of the creators of a given work in the metaverse may be difficult when the work results from a decentralised collaborative process performed by users anonymised behind avatars. Similarly, allocation of rights to the users to access the intellectual property in the metaverse may also pose some risks in terms of breach of royalty and enjoyment of IP rights.
Breach of data protection regulations
Data in the metaverse may breach many forms of data protection requirements. The dynamics of express consent may also vary.
Use of digital currency in the metaverse may still remain subject to the financial and payments regulations of various jurisdictions and may attract a lot more legal scrutiny on the metaverse platform.
NFTs and digital currencies
While the launch of NFTs itself faces many regulatory challenges, use of NFTs for rights in the metaverse may face more challenges than usual, specifically from the perspective of legal enforceability of such rights. Furthermore, use of digital currency in the metaverse may still remain subject to the financial and payments regulations of various jurisdictions and may attract a lot more legal scrutiny on the metaverse platform.
Metaverse as a investment and trading platform
If the metaverse platform facilitates exchange of rights and liabilities which may otherwise be deemed to be financial activities, then the metaverse is likely to attract financial regulations.
Penal and criminal offences
Metaverse is likely to attract regulations surrounding various penal offences like sexual harassment, hate crimes etc. While the relevant laws for the same still remain to be explored, many jurisdictions are considering to include such offences in the metaverse under the relevant existing laws.
As a major breakthrough, metaverse has allowed a lot of games to offer virtual reality-based experiences which in turn has made the industry thrive in the recent quarters. However, the likelihood of the metaverse attracting relevant regulations for gambling is pretty high, since most jurisdictions either completely ban or strictly regulate gambling.
It’ll be interesting to see the growth and regulation of this sector. At KARM Legal Consultants, we are trying to push boundaries by ensuring to recommend self-regulation to most of our client. At any given time, KYC, AML and CFT checks must be of primary importance to any entities in the virtual reality and metaverse space.
— The writer is Founder and Managing Partner, KARM Legal Consultants