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Some legal issues in the metaverse
Jul 18, 2022

The metaverse, an evolution of the Internet that incorporates a virtual and sensory reality, presents, or rather intuits, given that it is in full growth, numerous applications and opportunities, being, today, an unregulated space.

Certainly, Neal Stephenson could not have dreamed in 1992 that science fiction would become a reality when he imagined the metaverse in his literary work Snow Crash a collective virtual space compatible and convergent with reality. Nor could I imagine all the problems that are embryonically beginning to emerge.

But what is the metaverse, or rather a metaverse? Literally, behind the universe, it is a space that can be accessed by means of a App and in which one navigates through avatars - digital identities that do not necessarily coincide with a natural or legal person in the real world (person) - with one person often having and using different digital identities, very different from the digital signature. The metaverse must be distinguished from other realities. False metaverses, used in marketing, are augmented reality and lead to the real world, where real interaction and negotiation take place.

In the metaverses, web-3, through developing technology based on the use of blockchain and distributed logging in general; IoT and AI, 5G as well as augmented reality - at its current stage - is generating a virtual reality, increasingly real as its applications and accessories evolve to enable a parallel sensory universe, where experiences are lived, goods are owned, bought and sold, and personal relationships are maintained.

This reality can be playful, today its main application, which generates problems of addiction and dependence typical of an advanced virtual reality, but it is also, and above all, an economic reality beyond the gaming industry. The metaverse is clearly developing an activity that in turn generates a powerful industry around it. In this context, some legal problems can be pointed out.

The first is correspondence with the real world. That is, how a transaction is located in the metaverse, for jurisdiction and applicable law purposes. Also for taxation and money laundering control purposes, among other elements included in compliance o regulatory compliance.

It is normal, for example, that means of payment, when they do not consist of personal data, have no duplication in the real world and are limited in the metaverse in the form of cryptocurrencies. By means of these, hosted in walletThe following are acquired or sold NFTs, non-tangible assets, especially cultural or crypto assetsThe avatar or avatars may be used as localised areas or condominium plots of the metaverse for use or rental, such as events. What happens in the metaverse in order to have legal effect in the real world must be assumed by the holder of the avatar or avatars. And it is up to the jurisdiction of the actual holder to recognise the events that occur there. There are reports, for example, of marriages contracted in the metaverse being accepted in some US states. But the real identity must consent to what happens in the metaverse.

Should consent, i.e. the responsibility of the real person for the creation of an avatar in a metaverse, be presumed? Should this be regulated? Is the real person in any case responsible for what his avatar or avatars do? How can data be protected if it is not possible to determine which regulations apply? This new reality does not recognise geolocation, nor is the concept of place relevant, neither for the fulfilment of obligations nor as a relevant element of a transaction. The commercial and criminal infringement of industrial and intellectual property is particularly relevant, without the regulations being directly applicable to them. The notoriety of trademarks in a metaverse involves counterfeiting and flagrant infringements.

Still on the web-2 the European Union is moving forward with a package of important regulations (laws) aimed at the data market: Digital Services Act (DSA); Digital Market Act, (DMA) Artificial Intelligence Act (AIA); Data Act (DA). In consumer law, it also seeks to regulate the economic aspects of social networks, such as the activity of social network operators. influencers. Similarly, Uncitral's Group IV, generically dedicated to e-commerce, is making progress on Artificial Intelligence. These initiatives are generally based on providing legal certainty for consumers and non-dominant entrepreneurs in the platform universe. But they are not applicable in the metaverse. Like web-3, it is governed by other rules. All legal measures are or will be based on Soft Law. Codes created either by the marketing company, such as Meta, or by the decentralised governing communities (DAOs), such as Decentraland or Sandbox, to which I have had the opportunity to devote some reflections from the perspective of corporate governance of commercial companies.

The DAOs, hierarchical and based on blockchain generate Smart contract to which the avatar, i.e. the real person behind it, adheres. The relevant legal elements are therefore based on digital law, but the impossibility of establishing jurisdictions at present means that self-imposed rules are the only ones possible.

This requires analysing the consent of the real person creating the avatar, bearing in mind that a large number of users are minors, born digital third generation. Metaverses are a growing reality, with no limit, which is expected to move billions of dollars in a very short time, if not already The risk of regulatory breakdown or simply deregulation in essential areas (fraud, crime, unconsented data transfers, minors and vulnerable people; compliancein general good faith - in a quick mix-) requires legal coordination activity at the global level. Otherwise the metaverse will be the centre of the digital economy, and it will be parallel, but lawless.