REGULATION OF METAVERSE: IDENTIFYING THE LEGAL CONTOURS OF EXTENDED REALITY

As an undertaking aimed at bringing together representatives of significant stakeholders and policy- makers, the World Economic Forum is working on guiding states through its initiative “Building the Metaverse”, which aims to “accelerate the development of metaverse governance” and serves to formulate a uniform metaverse governance mechanism.

Ease of interaction, accessibility, networking, and connectivity form the foundation of the contemporary data-driven era. Metaverse, the most expansive virtual space facilitating human interactions through extended reality, aptly reflects the technological headway of the 21st century.

Metaverse functionalizes itself as an advanced version of real-life simulation capturing interactions and exchanges concerning business, education, entertainment, healthcare, and even financial transactions. Users generally interact in the metaverse through “avatars” that operate as characters customized by users to personalize their interactions in the metaverse.

More simply, metaverse offers a platform for convergence of real and virtual worlds¹ through a multiplicity of interfaces hosting and exchanging massive volumes of data (including personal data) every second, giving rise to a holistic real-life simulation. From an industrial standpoint, it offers a promising commercial future as the global metaverse market is projected to reach US Dollars 996 billion by 2030².

Amidst such technological advancement and the complex cobweb of data hosting structures surrounding metaverse, there exists considerable threat to users’ rights including privacy and security.

Understanding the regulatory complexities surrounding metaverse

With the promise of extended reality and the fundamental structure of hosting innumerable virtual worlds converged with the real world, data privacy is heavily compromised. While metaverse owners and hosts can ensure a few data protection standards such as privacy policy disclosures, singular notice and consent, and an overall firewall blocking unauthorised access, the foundational data protection standards such as right to explanation, right to erasure, data portability, and most importantly- the right to notice and consent for every instance of data accumulation, storage and transfer are compromised to facilitate the immersive metaverse experience. This is primarily due to the unviability of displaying popups prior to every interface through the metaverse, and the overall uncertainty concerning the jurisdiction of data protection laws governing metaverse in cases of the metaverse owners, users and hosts belonging to jurisdictions having varied data-protection standards. Further, as metaverse thrives on unregulated user-interactions and unmonitored information exchanges internationally, data localisation norms are rendered ineffective throughout the metaverse.

As metaverse not only simulates the real world but also accommodates it, criminal and civil wrongs including intellectual property infringements within the metaverse space are not uncommon. Despitecases of alarming legal breaches including exploitation and harassment of metaverse characters³ and trademark violations within metaverse⁴, the space remains unregulated. Further, there is absence of an authoritative forum to facilitate the resolution of disputes concerning metaverse and its characters as metaverse operationalizes itself in an apparatus devoid of national boundaries.

Metaverse also unravels the possibility of legal breaches unique within the metaverse space, such as issues concerning virtual asset ownership verification. Brands operate through the metaverse either by providing real products and services through a metaverse-sourced input, or by providing virtual simulations of their products and services within the metaverse in exchange of crypto-currency or digital assets. In the case of brands operating through the latter, their products serve as virtual assets which retain, appreciate, or depreciate in terms of their value, analogous to the value of digital asset. In such cases, regulatory flaws concerning standardization of ownership of virtual assets within the metaverse and resolution of asset ownership-related disputes, particularly amidst uncertainty surrounding fintech remain issues unique to the metaverse, requiring a nuanced regulatory regime.

Evolution of metaverse regulation

While metaverse is majorly devoid of effective regulations, jurisdictions such as the European Union are on their way to undertake the necessary policy-decisions concerning digital rights and an overall secure environment to users within the metaverse. However, the proposed metaverse regulation initiative⁵ is restricted to European Union’s jurisdiction. Further, while it aims to address issues including technological ecosystem and digital rights, it does not appear to address the cardinal concerns of metaverse being threats to users’ digital privacy, breaches of conventional laws and regulatory void concerning issues unique to the metaverse. Consequently, it appears less comprehensive.

As an undertaking aimed at bringing together representatives of significant stakeholders and policy- makers, the World Economic Forum is working on guiding states through its initiative “Building the Metaverse”⁶, which aims to “accelerate the development of metaverse governance” and serves to formulate a uniform metaverse governance mechanism. While it is a policy document of non-binding character, it has struck substantial deliberations surrounding the uncertainty concerning metaverse regulation.

Deliberations also suggest the extension of conventional legal order within the metaverse space.However, there has not been much global implementation of any metaverse-related policy .

The way forward

Metaverse regulation is at its nascent stage of evolution globally. While the European Union has initiated its regulation of metaverse, it’s restricted to digital rights and enabling the technological infrastructure supporting metaverse and is limited to securing legal rights within its own jurisdiction.

The viability of extending conventional laws within metaverse coupled with principles of private international law including renvoi (sub-set of private international law to determine the forum and applicable law depending on the jurisdiction of cause of action and nationality of parties, in cases of international disputes) to resolve inter-jurisdictional disputes concerning metaverse can be considered as a remedy for the limited purpose of resolving disputes.

However, ensuring compliance of law would still be a challenge in such cases. Further, issues unique to the metaverse such as asset-ownership verification would remain unresolved even if conventional laws are extended within the metaverse.

Such unique issues call for a meticulously planned regulatory design aimed at not only resolving the conventional legal breaches and privacy infringements, but also catering to the niceties peculiar to metaverse.

While the initiative of the World Economic Forum is a step-forth in the direction of striking deliberations concerning metaverse regulation, it remains a guiding policy yet to take concrete shape and lacks a legally binding force.

Therefore, a globally uniform legal order harmonizing the interests of all the states and stakeholders, and addressing data-security, privacy and conventional law breaches is needed, which would not only resolve the jurisdictional uncertainty, but would also address the regulatory void concerning issues unique to the metaverse, thereby ensuring the privacy and security of users as they engage themselves in the seamless metaverse experience.

Disclaimer – The views expressed in the article are personal views of the authors.