EU Metaverse Strategy Set to Examine Privacy, Competition and Rights

The European Commission’s metaverse strategy due next week is delayed and won’t have real teeth – but there are real policy concerns about how virtual worlds will cope with policy issues like property rights, technological standards and privacy.

First announced by Commission President Ursula von der Leyen as part of an annual address made back in September, a policy paper on virtual worlds has been put off as long as it could be. EU commissioners are due to agree to it next Tuesday; any later and they’d be running into preparations for the next edition of the State of the EU speech.

The commission has previously suggested the proposal won’t be legislative, discussing the policy issues rather than proposing a formal bill – but it might point the way towards stronger action in future.

The metaverse strategy is “the start of something, it sets the agenda,” said Patrick Grady, editor of Brussels-based website and research initiative Metaverse EU. “Once the machine gets moving it doesn’t really stop.”

Grady, who also leads the technology practice at consultancy Fourtold, points to the commission’s 2018 strategy on Artificial Intelligence – which, though it did little more than promise a stakeholder alliance and reinterpreted liability rules, proved the portent of more to come, and an AI bill followed in 2021.

That brings risks as well as opportunities. A clear regulatory framework is often welcomed by the industry, but EU rules in areas such as AI have proved controversial. The example of the bloc’s recent Data Act – nominally concerned with governing information gathered by connected objects like cars or fridges, but which some Web3 proponents worry could effectively make smart contracts illegal – shows there’s always the chance of unintended consequences.

The commission has said the metaverse will need to embed “European values” – with officials specifying topics like discrimination, safety and data controls. A blog by Commissioner Thierry Breton, and a subsequent consultation from the commission, hinted at a more immediate EU fear – that Web3, like its predecessor, could be dominated by big players that squash competition.

That may include some familiar faces. Facebook has rebranded itself Meta (META) as it pivots towards a more immersive experience, and Apple’s (AAPL) move into the space could prove transformative.

At an April hearing, Meta’s EU Public Policy Director Aleksandra Kozik was cross-questioned by lawmakers interested in topics ranging from the impact of the technology on jobs, discrimination, and abuse by organized crime.

“The metaverse is not one single product that will be built by one company,” Kozik told members of the European Parliament’s Legal Affairs Committee. “It is a constellation of platforms, technologies and products that will be built by many different stakeholders, by companies big and small.”

The commission may be skeptical of such analogies, given that it has often taken Meta to task for trying to be the brightest, if not the only, star in its firmament. Grammar might offer a clue as to the EU executive’s real thinking, Grady points out.

As with the internet, the whole point of the metaverse is that it’s a single unfragmented space – “siloed metaverses is almost the situation the EU’s trying to avoid,” Grady said.

Yet the commission’s own paper is about virtual worlds, plural – suggesting Meta’s might be one of several separate walled gardens – while Breton talks about both the metaverse, and about different metaverses.

One solution is to ensure that developers like Meta work within common international standards. But, as Grady points out, the EU’s own antitrust rules can sometimes stand in the way, since any grouping of supposed competitors is liable to be treated as a cartel.

Some in the digital sector see an opportunity in whatever the commission might announce.

“Virtual worlds are increasingly part of a modern, digital industry and this is where Europe excels, so we’d like to see a strategy that aims to support this,” a spokesperson for lobby group DigitalEurope told CoinDesk in an emailed statement, citing possibilities like cheaper online job training, and virtual factories and power grids.

But there’s plenty more legal quandaries raised by the metaverse – including basic rights.

“Personal property interests in virtual worlds are radically undermined” by the fine print in online terms and conditions, Joshua Fairfield, a law professor at Washington and Lee University, told lawmakers back in April. “The metaverse end-user license agreement beats the United States Constitution, because it acts under this concept of consent to replace many of the social rules that we take for granted.”

How to deal with those fundamental problems remains hotly debated – and, in particular, whether the metaverse is really so new that it needs its own rulebook.

“The metaverse is not being built in a regulatory vacuum,” Meta said in its response to the EU’s consultation, citing existing online laws that continue to apply. “To the extent that any novel or unique issues arise over time as the metaverse continues to evolve, we call upon the Commission to address any emerging legislative gaps on a case-by-case basis, using evidence-based policy development.”

For others, virtual worlds are a step change, given how much they rely on potentially invasive technology such as headsets and glasses.

Extended reality tech “poses substantial risks to human rights” and “could continue the march towards ever-more-invasive sensitive data collection and ubiquitous surveillance” by governments and corporations, even going into people’s thoughts and emotions, said a consultation response by online rights activists the Electronic Frontier Foundation.

Does any of this matter for your average crypto fan? It likely will do, if the predictions of the commission’s own Joint Research Centre come true.

“Blockchain and cryptocurrencies are likely to be the technological building blocks of a decentralized infrastructure” that underpins the metaverse, a JRC report published Monday said.

That will be music to the ears of those who believe online virtual worlds require a radically different way of thinking than the centralized structures that came to dominate Web2. It also means metaverse regulation carries a risk for the crypto sphere.