Global Perspectives in the Metaverse

Neal Stephenson's 1992 novel, “Snow Crash,” introduced the term “metaverse” to describe a virtual reality space that is a collective virtual shared space, created by the convergence of virtually enhanced physical reality and physically persistent virtual reality. In the novel, the metaverse is a sprawling virtual environment where people interact as avatars in a 3D computer-generated space. It became a pivotal concept that inspired discussions and predictions about the potential of a fully immersive virtual world.

The Metaverse is expected to be the next iteration of the Internet while at the same time going well beyond the Internet as experienced currently. And just as the Internet has led to societal change, so too the Metaverse will challenge many present conceptions. This chapter considers one aspect of this, namely online harms. The Metaverse will raise issues that are likely to test existing laws and regulations that seek to manage serious antisocial conduct.

Metaverse is becoming mainstream and is used by more and more individuals and businesses. With a strong focus on doing business and investing in the virtual world, it isn’t easy to implement similar regulations applicable in the physical world. Although the metaverse might give the feel of the real world, it isn’t real. Protecting digital identity is the biggest concern. The lack of regulation in the metaverse raises serious concerns about ownership in digital spaces. This chapter will explore the risks faced by the users of metaverse and what regulators can do to make metaverse a safe place to do business.

The concept of the metaverse was first introduced in Neal Stephenson’s 1992 science fiction novel Snow Crash. The novel describes a virtual reality shared by millions of users, where people can interact with each other and computer-generated characters in a three-dimensional space. This concept has gained significant attention in recent years, as advancements in technology have made the idea of a fully immersive and interconnected virtual world closer to reality.

When the Metaverse began becoming trendy in October 2021, with the renaming of Facebook to Meta, it did not take long for the downsides of such a technology to make themselves obvious. Bad online behaviour is practically synonymous with the internet, and the Metaverse, being an extension of the internet, is no exception. This chapter looks at how criminal law might currently be applied to bad behaviour in the Metaverse, and goes on to discuss we should think about the use of criminal law to regulate harms in digital spaces.

How could an immersive computer-generated environment (“the metaverse”) impact services in the digital economy? Investment in virtual worlds has grown rapidly. Yet the technology still falls short of achieving fully immersive experiences. And despite hyperbolic predictions, various indicators show interest has fallen in the last two years. While some use cases show promise (e.g. gaming, education, healthcare), others seem distinctly gimmicky (e.g. virtual bank branches, land speculation). If the metaverse does succeed, it could mean: (i) a blurring of lines between the tradeable and non-tradeable sectors, (ii) greater cross-border economic integration and (iii) new demands on payment services. In principle, retail fast payment systems, retail central bank digital currencies or tokenised deposits could be designed to support services in the metaverse. To prevent virtual environments and money from becoming fragmented and dominated by powerful private firms, public policy would need to support efficient, interoperable payments and provide clear standards on data privacy, digital ownership and consumer protection.

In the internet's transmutation, augmented reality presents a domain where the dichotomy between the tangible and the virtual collapses, reconfiguring the fabric of human interaction and socio-financial frameworks. This era, molded by the intangible forces of spatial computing, challenges the established and familiar binaries of user-platform interaction. The inception of the internet, or "Web 1.0," was characterized by a static, one-way flow of information, consigning users to the role of mere spectators on bulletin boards. The transition to "Web 2.0" shifted towards social interactivity and the financialization of attention, making consumers into simultaneous creators. The next step in the genesis of the metaverse is contingent upon the convergence of hardware, software, social platforms, online gaming, and payment systems, orchestrated by corporate incumbents wielding overflowing balance sheets. The metaverse ultimately becomes a domain where the hyperreal blurs with the real and the unreal, challenging the parameters of human engagement in the digital age. A ship in a virtual ocean, high upon the sea of information but shipwrecked in a desert of meaning.

This chapter explores the investment appeal of the metaverse, viewing the concept through the prism of ‘genesis trends’. A genesis trend occurs when the growth of a market or technology becomes sufficient to trigger a transformative shift—as witnessed, for example, during the emergence and spread of the internet and smartphones. The following analysis considers the lessons of previous genesis trends—including the multiplicity of architects, enablers and impacts, the perils of inadequate regulation and the threat of an oligopoly—and explains the role of investors and other stakeholders in ensuring an outcome that shapes the future both dramatically and positively.

Before we dive into the context of Money and the Metaverse, it may be helpful to remind ourselves on the fundamental nature of Money. Money typically needs to satisfy 3 key criteria. It must be able to act as: (1) A unit of account; (2) A store of value; and (3) A medium of exchange. The successfulness of the monetary system is evaluated by its ability to support the effectiveness of the money affiliated with the system.

In the ever-evolving landscape of technology and finance, the concept of property rights is undergoing a profound transformation, driven by the emergence of the metaverse and the tokenization of assets. This seismic shift is reshaping the way we think about ownership and value in the digital realm. As we navigate this uncharted territory, it becomes imperative to explore the intricate relationship between property rights and crypto assets, as they form the bedrock of this new paradigm.

Decentralized Finance, known as DeFi (Decentralized Finance), refers to the use of blockchain and digital assets or crypto-assets for the provision of financial services. Through DeFi applications, services such as loans, insurance, crypto-asset exchanges, among others, are offered, and are structured based on crypto-assets and technologically decentralized applications. This paper will discuss the concept of DeFi and how it challenges the traditional market infrastructures of the financial sector, demystifying the idea of absolute decentralization, generally mentioned in the crypto-asset arena. Subsequently, the paper will analyze the opportunities and challenges of DeFi for consumers, financial institutions, new competitors and financial regulators. Among the opportunities, it will present how DeFi could contribute to financial inclusion, to the automation of certain financial products, and how it is a key factor for the development of metaverses. As part of the challenges, the paper will analyze the problems of money laundering and terrorist financing in these markets, financial consumer protection, corporate governance issues, the lack of transparency of these products, cybersecurity risks and systemic risk. Finally, the paper will address some early regulatory responses that policymakers have proposed in response to some of these challenges in different jurisdictions.