In recent months, the development of the new digital age (dubbed “Web 3.0”) has taken a steep slope, with many industries pushing their boundaries to enable the next evolution of technology and the World Wide Web. Complementing this rapid development and advancement, a huge interest in Web 3.0 has taken over, with everyone jumping into the “Meta-pool”. In April 2022, Wasel & Wasel Arbitrator Services hosted one of the first online discussions on the legal issues of the Metaverse, NFTs and Web 3.0 as a whole. The webinar generated significant engagement and led to follow-up articles and people asking for more. But important questions have arisen regarding certain aspects of Web 3.0, most important of all, what exactly is the metaverse in charge of Web 3.0? In its simplest form, think of Ready Player One.
Leveraging the core concept of first-mover advantage, companies across a wide range of industries and sectors have begun to plunge into the metaverse. Epic Games, the company behind the popular immersive video game “Fortnite”, has launched a billion-dollar funding round to fuel growth opportunities in the metaverse, Microsoft is developing its own digital environment, within the metaverse, called Mesh, and Apple is currently working tirelessly on advanced virtual reality gear that would revolutionize the Metaverse experience. The latter should be for sale in four different variants by 2024.
As of May 3, 2022, the Dubai Virtual Assets Regulatory Authority (“VARA”) became the world’s first regulatory body to enter Metaverse with the establishment of its Metaverse headquarters in the dynamic virtual world, aptly named “The Sandbox”. VARA was created to provide a secure and progressive operational framework for the growth of the virtual asset industry, while protecting the market and investors. This decision reflects, among other things, the UAE’s commitment to the new economy and confidence in the security and sustainability of Web 3.0 ecosystems. With VARA’s historic beginnings in the metaverse, it will strive to ensure that the regulator is accessible to its industry in its environment and facilitate collaboration between global virtual asset service providers, industry thought leaders and international regulators.
VARA’s debut in the metaverse comes just after the Emirate of Dubai passed the Virtual Assets Regulation Act No. 4 of 2022, which also established the VARA itself. The law, called “VAL”, creates a legal framework for companies and individuals regarding virtual assets, such as NFTs and cryptocurrency. Articles 4 to 14 of the VAL lay down the framework and operation of the VARA in detail. Articles relating to the regulation of virtual assets begin with Article 15, with Article 15(a) immediately stating that:
“No one can carry out the activity in the emirate [Dubai] without a license from the VARA. †
“Activity” means any of the activities listed in Article 16 of the VAL that are under the supervision of the VARA, including:
- Provision of services for the operation and management of virtual asset platforms (Article 16(a)(1))
- Providing exchange services between virtual assets and national or foreign currencies (Article 16(a)(2))
- Provision of services related to virtual asset wallets (Article 16(a)(6))
- The provision of services in connection with the provision and trading of virtual tokens (Article 16(a)(7))
Section 20 of the VAL describes the violations and administrative sanctions that the VARA may impose, including suspension of the license for a period not exceeding six (6) months (Article 20(b)(1)) or withdrawal of the license in its entirety and even the withdrawal of marketing authorizations (section 20(b)(2)). Article 22 of the VAL deals with grievances as follows:
Any party concerned may, within thirty (30) days of the date of notification of the dispute, submit a written complaint to the Director General against any decision, action or measure taken against it under this Act or under resolutions. decision, action or measure. The complaint will be determined within fifteen (15) days from the date of referral to the committee formed for this purpose by the Director General. The decision of the committee on the complaint is final.
Across the street in the UK, prominent blockchain diversity leader and founder of Women in Blockchain Talks, Lavinia Osbourne, won a major early victory at the Supreme Court of England and Wales, which is the first of its kind to recognize NFTs. as legal property subject to freezing until the matter is resolved. While courts have previously recognized cryptocurrencies as legal assets subject to court orders, this is the first time NFTs have received the same treatment.
The case, which resembles the synopsis of a Netflix show, involved two “Boss Beauties” NFTs, who were removed from Osbourne’s digital wallet without his knowledge or consent. Osbourne, working with a security and intelligence firm, was able to locate the NFTs in two separate digital wallets. Osbourne has appealed to the High Court of England and Wales to obtain an urgent injunction to freeze the NFTs to prevent their sale. The ban was granted on March 10 and then extended until the end of the proceedings on March 31.
Hacking and theft are an increasingly common problem for NFT holders. Since space is still a “wild west” when it comes to legal means or regulation, this could mean that those who stole their NFTs are not guaranteed to get them back. These legal rulings recognize for the first time that NFTs, such as cryptocurrency, are proprietary, giving NFT holders legal means to push for the return of stolen assets.
Today, with the creation of VARA and VAL, the rapid growth of the metaverse, and the growing need for a legal framework for digital assets such as cryptocurrency and NFTs, disputes worldwide will undoubtedly arise and dispute resolution practices will follow. Who knows, maybe a virtual asset arbitrage center is on the horizon. But the Web 3.0 boom is unprecedented and insurmountable, and only time will tell how far virtual reality will be pushed until it becomes our reality.