New Metaverse regulation proposal to be discussed by EU Commission

The question 

How does the European Commission (EC) intend to regulate the Metaverse?

The key takeaway

As part of the EC’s ongoing strategy to make Europe “fit for the digital age”, the EC will address Metaverse policy later this year. The form of any such Metaverse initiative is as yet unknown but, in any event, changes will likely focus on data, technology, and infrastructure. The impact will be far reaching and will likely target large tech companies. 

The background

EC President Ursula von der Leyen’s 2022 Letter of Intent identified the Metaverse as a key new initiative for 2023. Commissioner for the Internal Market Thierry Breton, in his September 2022 statement, identified the Metaverse as a “pressing challenge” and that the EC intends to shape from the outset the development of a truly safe and thriving Metaverse. 

The development 

The latest version of the EC’s upcoming agenda was published on 6 February 2023 and indicated that the EC will be presenting its initiative on virtual worlds such as the Metaverse in the first half of 2023. There are no further details included in this agenda. However, the EC’s target areas for policy have been set out in its 2022 briefing on the Metaverse:

• Competition: Regulators have warned about self-preferencing and dark patterns within the Metaverse, or the possibility of “killer acquisitions” (large companies acquiring smaller companies to halt future competition). 
• Data protection: The GDPR set a new benchmark on data handling, however the scale of the Metaverse causes concerns about data handling, marketing and intrusive profiling.
• Liabilities: Metaverse content is distributed and replicated across decentralised networks, making liabilities difficult to control. 
• Financial transactions: Non-fungible tokens (NFTs) are a key foundation of the Metaverse, but there is no clear regulation on NFT ownership.
• Cybersecurity: Phishing, malware and hacking will remain, and the anonymity behind NFTs may make it difficult to identify perpetrators.
• Health: There will be a widespread impact on children, mental and physical health.
• Accessibility and inclusiveness: There are concerns of how accessible the Metaverse will be for disabled people, or the affordability of becoming part of the Metaverse.

Why is this important?

Uncertainty of what the Metaverse will look like makes it difficult for regulators to decide how to govern this emerging virtual world. However, one certainty is that the EC is determined to do so. On 4 March 2023, the EC announced that it will shortly set out its policy on Metaverse regulation and will begin with a public consultation. Therefore, change in some form is likely over the next few years, whether it be through new initiatives, or through existing legislation being interpreted, or indeed extended, to cover the Metaverse. For example, a “Digital Euro Bill” is set to be published in May, which could mean a new central bank digital currency for the Metaverse.

Any practical tips?

For businesses with a keen interest in how the Metaverse develops, now is the time to influence the EC’s approach to its regulation. For example, the EC has launched the Virtual and Augmented Reality Industrial Coalition, bringing together stakeholders from key Metaverse technologies to help shape the future of VR and AR in Europe. Particular attention should be given to the issues highlighted in the EC’s 2022 briefing, namely: competition, data protection, liabilities, financial transactions, cybersecurity, health, accessibility and inclusiveness. 

Spring 2023