The metaverse, NFTs and IP rights: to regulate or not to regulate?

• Author: Andy Ramos
• Position: Partner at Pérez-Llorca, Madrid, Spain

Since the rise of the Internet over two decades ago, we have enjoyed an online network based on information, data and telecommunication, with a range of standalone virtual worlds emerging, mainly on social media and video games like Second Life, Instagram, Fortnite, TikTok and Roblox. The metaverse promises interconnected virtual environments controlled by electromyography (EMG) movements and neural interfaces. In the metaverse, companies will have the unprecedented ability to exploit the full potential of the data they collect.

The technology sector and the video game industry are preparing for the advent of the metaverse: a network of 3D virtual worlds, where humans can interact with each other socially and economically, mainly through avatars. Despite great media attention, the metaverse does not yet exist, and is still far from being a reality, at least as currently described by some reporters. This is largely because of the demanding computing requirements and standardized protocols needed for it to take off.

In contrast, NFTs are already with us. Based on existing blockchain technology, NFTs are cryptographic units of data, with unique metadata. As such, NFTs can be distinguished from one another and can hold other kinds of information, like the identities or artwork of different individuals. Their uniqueness makes them capable of being sold or traded, with a digital ledger registering all transactions. NFTs harness the capabilities of blockchain technology to create non-fungible digital files with ─ most importantly for the entertainment industry ̶ an image, graphic or video embedded in the token, which determine its value in the market.

As noted above, many voices are now demanding new regulations for the metaverse. Why? To protect users when they interact in this virtual world, and to close an apparent gap between reality and the law.

The technology sector and the video game industry are preparing for the advent of the metaverse: a network of 3D virtual worlds, where humans can interact with each other socially and economically, mainly through avatars. (Photo: naratrip wboonroung / iStock / Getty Images Plus)

Assertions that the current regulations do not apply in the metaverse, that existing laws are not adapted to that environment, or that technology travels faster than the law, are common but, in my view, they are generally incorrect.

Over the last 30 years, countries with a strong Internet presence have established new rules to address e-commerce, criminal activities involving technology, consumer rights on digital content and the liability regime for Internet service providers, to name a few.

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