Metaverse Legal Compliance Report (1)

Standing at a new starting point in 2022, the fiery momentum of the Metaverse will remain unabated. As blockchain and other technologies continue to make new progress and new results, it is necessary for us to conduct more nuanced research and inspections on the current Metaverse industry. Sister Sa’s legal team strives to combine academic and practical practices, and share with you the legal issues related to the Metaverse industry from the most unique and professional legal perspective .

Metaverse Legal Compliance Report (1)

1. The legal nature of Metaverse✦

Kaizong Mingyi, the Metaverse studied in this report refers to the next-generation Internet form Web3.0 established based on network protocols, blockchain technology, algorithms, human consensus, etc., which reflects the mapping between human imagination and the real human physical society Trust the interactive system.

Based on the fact that law is an applied subject, the purpose of academic research is to better externalize legal theory into practice, and reflect it through legislation, judicial, and law enforcement activities. In view of this, when looking at Metaverse from the perspective of legal compliance, we must clarify a premise. What should Metaverse look like in the legal field of vision?

We believe that the definition of the legal nature of the current Metaverse should first start from its specific social practice and application. And the Metaverse we are currently looking at exists as a practical application of the next-generation Internet . This is by far the most common, best understood and more maneuverable Metaverse concept.

Of course, we should also make it clear that the concept of metaverse is dynamic rather than static . As time goes by and the blockchain technology matures, the actual application of metaverse in the real world will also change. This leads to our definition of its legal nature should also be advancing with the times and dynamically adjusted. According to Professor Qi Yanping, Professor of Law School of Beijing Institute of Technology, in the article “Legal Regulation of a Digitally Intelligent Society”, we believe that as a form of a digitally intelligent society, what the metaverse unfolds should be A new form of super-large-scale and super-complex economic and social relations.

According to it, the existing knowledge and concepts, experience and culture, wealth and power in the past and present time and space, as well as the production, distribution, exchange, and consumption links of society, are being accelerated to “integrate”, the overall structure of society and even human The entire spiritual world is evolving rapidly towards the direction of digital intelligence. Therefore, the world that the law faces and faces is being swallowed up, reorganized and rebuilt by this mechanism. In the face of this development trend, legal professionals must ask from the perspective of legal philosophy: how to deal with the challenge of this new social form based on a simple social relationship, focusing on post-disposal, and rights relief as the core strategy of legal regulation. 

Second, the basic functional elements of the universe

(1) Carrying the user’s identity

Whether as a natural person or a social organization, any effective legal relationship between living, operating, or exhibiting in modern society or with other social entities depends on the existence of an effective identity recognized by the law . The effective identity is also called the “eligible subject” in law. Can a natural person or social group (subject) perform this behavior? Does the act have legal effect? What kind of legal effect does it produce? What are the legal consequences? It all depends on whether the natural person or social group is a qualified subject recognized by the law under the legal rules of modern society.

In other words, identity is a qualification, and an effective identity is a qualification to live in modern society . All legal relationships determined and guaranteed by the law, such as the ownership of property, the assumption of debts, the birth and maintenance of kinship It’s all because of this. As the next generation of the Internet, the Metaverse should first have the function of carrying the effective identity of users.

So, how is this function realized? At present, the user’s identity in the metaverse is constructed based on the identity of the real world, and exists in the form of a “digital avatar”. Different from the mobile Internet era, the user’s “digital avatar” in the metaverse presents a different mapping relationship from the real world user identity, which can be roughly divided into three types:

(1) One-to-one mapping type. That is, the user identity in the real world is strictly linked to the user of Metaverse.

(2) Mutual independent type. That is, the identity of real-world users is completely decoupled from their identity in the Metaverse.

(3) Integrated identity type. That is, in addition to a series of identities in the real world (such as ID cards, biological characteristics, and social relations, etc.), each person will also have his own “digital avatar” in the Metaverse, and the two types of identities will influence each other .

Judging from the current practice, the specific carrying methods of Metaverse for user identities are mostly realized by integrated identities.

(2) Carrying of user property

The bearing function of user property refers to Metaverse’s recognition of user property ownership. How to judge that someone has ownership of something? Own a movable or immovable property? The traditional legal view in the real world believes that it depends on whether someone has a convincing appearance of rights to something.

Refer to Article 209 of the “Civil Code”, which stipulates the validity of the registration of real estate rights. As well as the provisions of Article 224 of the Civil Code on the effectiveness of the delivery of movable property and the “Principle of Publicity and Public Trust” inherent in the Civil Code . For movable property, the key to a person’s claim of ownership lies in “actual possession”, that is, to actually obtain the movable property and to openly and legally occupy the movable property; for real property, the key to claiming ownership is whether to obtain the recognition of the public authority And register in the real estate register.

With the appearance of the above rights, we can preliminarily judge from the law that someone has ownership of a movable or immovable property. Based on the establishment of ownership, the owner has the power to oppose the possession, use, disposal, and profit of others’ possessions under the provisions of the law.

Therefore, although the legal attributes of many virtual assets are still controversial, from the traditional legal perspective, whether Metaverse has the function of carrying user property, the primary key lies in whether it can give users a similar “right appearance”. Only with such a “right appearance”, in a virtual world like Metaverse, can it be estimated or evaluated whether a virtual property belongs to the user’s “ownership”. In fact, through virtual currency and NFT, this function can be realized in the Metaverse.

According to the “Preventing the Risk of Bitcoin Hype” issued in 2013, my country’s definition of Bitcoin and other virtual currencies is “a special kind of virtual commodity.” Then, because the “Civil Code” also clearly stipulates in Article 127: If the law has provisions on the protection of data and network virtual property, follow those provisions. It can be seen that virtual currency itself is recognized and protected by our laws as a special virtual commodity with value. From this point of view, even if the virtual currency that exists in the metaverse itself is not and cannot serve as a general equivalent, as long as the virtual currency is held and used legally and compliantly, it can still be the property held by the user in the metaverse, and the user can Claim corresponding rights to it.

Of course, since the key to holding virtual currency lies in holding the secret key, its possession, use, disposal, and gains need to be realized through the secret key. Therefore, we can basically think that the key has played a role of publicity of rights to a certain extent. In other words, as long as the key is held, it can be proved to the outside that the corresponding virtual currency belongs to the user, which basically possesses the “power appearance” required for the formation of traditional property ownership.

If virtual currency is a kind of thing, then NFT is a specific thing in the Metaverse. Based on the characteristics of the NFT itself, various tangible, intangible, physical and intangible “things” such as videos, music, artistic works, and literary works can be manufactured as NFTs and can be sold on major sales and auction platforms. It can be said that when virtual currencies are under strong supervision, it is easier for NFTs to realize the intercommunication and value conversion between the virtual economy and the real economy. Similar to virtual currency, the key to possessing, using, disposing of, and obtaining income is also to hold the key of NFT. To sum up, generally speaking, only holding the key of the NFT can effectively carry the user’s property.

(3) Metaverse economy

As the form of the next-generation Internet, the Metaverse has the ability to create a complete set of economic systems internally. In other words, effective identities and clear property rights make commodity exchange and value flow possible.In fact, Metaverse assumes a new type of media function, which can guarantee the flow of value in the virtual world and the real world.

The Metaverse based on the concept of web3.0 allows us to produce valuable virtual products that condense labor in a different way. Through the on-chain tokenization, the virtual products born in Metaverse can be confirmed and protected. With the help of blockchain, virtual assets can be priced and circulated. As long as the sharing agreement is written into the smart contract, the producer can use the virtual asset Enjoy the benefits in the flow of The rights and interests of producers are protected, and production is objectively promoted. At the same time, Metaverse has also promoted the growth of consumer demand and promoted the flow of value.

There will be born production and consumption market, and the key Metaverse different from the current Internet technology is that the integrity and the relative independence of its internal economic system. It is conceivable that perhaps in the not-too-distant future, the interoperability will promote the birth of a huge economic system in the Metaverse that is in coexistence with the existing material world.

Of course, it should be clear that there is a big difference between such an economic system born in the virtual world and the real economy in real life, which is determined by the unique operational logic and technical means in the virtual economy. Some studies have pointed out that this difference may be so large that it may even make the traditional economic theories used to analyze the laws of economic operation ineffective in the economic system. Therefore, how to use new theories and methods to solve the problems caused by these differences? It is also the focus of research and discussion in the Metaverse economy.

At the same time, it should be clear that such an economic system is never built directly from the top down. In the future,the Metaverse as the next-generation Internet form should be bottom-up, integrated from different Metaverse platforms, and the realization of interoperability is the key. Therefore, the current Metaverse is still in a state of development on different platforms.

Third, the current universe yuan bottom line

At a time when interoperability has not yet been universally realized, legality, ethics and morality are the basis and prerequisites of many Metaverse platforms established from the bottom up.

(1) Legal as the bottom line of the Metaverse

The legality we are referring to here emphasizes the legality in a relatively narrow sense, that is, it specifically refers to compliance with the requirements of the criminal law. As we all know, the law is the bottom line of morality, and the criminal law is the bottom line of the law. As the most severe sanction, the criminal law often results in the direct deprivation of the perpetrator’s property, certain qualifications, freedom, and even life. From the perspective of utilitarianism and justice, “criminal law is a great pain that restrains freedom. It is not an ideal in itself, but a last resort method of governance.” Therefore, the consequences of penalties in violation of the criminal law are extremely serious.

The modest nature of criminal law also highlights its status as the “last resort” in society. Drawing on the views of Japanese criminal law scholar Professor Hirano Ryuichi, the modest connotation of criminal law should include the complementarity, tolerance, and incompleteness of criminal law. Specifically, legislators should strive to minimize expenditure-use less or even no penalty (And use other methods to replace penal measures), to obtain the greatest social benefits-effectively prevent and prevent crime.

Therefore, if the Metaverse platform, as the next generation Internet, wants to operate in compliance, it must first comply with the requirements of the criminal law, operate and develop on the basis of compliance with the criminal law, and then seek a development path that abides by the law and complies with the law.

(2) The ethics of science and technology as the bottom line of the Metaverse

Science and technology ethics refers to the thought and code of conduct concerning the relationship between people and society, between people and nature, and between people and people in scientific and technological innovation activities. It stipulates the values, social responsibilities and behavior norms that scientific and technological workers and their communities should abide by. Our scrutiny of scientific and technological ethics and reflection on scientific ethics determine where we will go in the future.

I still remember the ethical crisis and humanitarian discussions triggered by the human gene editing incident around November 2018. After learning from the past, we should be more cautious about the application and popularization of new technologies. At present, there are also vicious events that break through the moral bottom line in the Metaverse platform. For example, the recent incident of selling contraband on a famous overseas Metaverse platform, and the common occurrence in our country, under the banner of Metaverse, to identify the ability , Fraud by vulnerable people with poor self-protection ability.

There is no doubt that science and technology should be used to benefit mankind rather than harm mankind , but any science and technology has both advantages and disadvantages. The scrutiny of science and technology ethics is like adding a sword to a sword hilt to ensure that emerging science and technology can be used as the protection of all mankind. Wealth is used for what is most beneficial to all mankind.

Regarding the content of Metaverse’s legal compliance, let’s talk about it first, and then we will elaborate on the qualifications, licenses or compliance requirements of the domestic market entities preparing to enter the Metaverse economy under the current legal environment. Regards Please look forward to. 

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