Member Article

Although admittedly still in its early phase, the metaverse, a virtual world where users can interact with each other and digital objects in a 3D environment, provides exciting new opportunities with a multitude of implications for rights management and the Fintech sector. Facebook’s head-first charge into this new landscape attests to the importance of the metaverse. Last year, the tech giant rebranded its corporate identity to Meta to signal its commitment to the metaverse. The possibilities within the metaverse are seemingly endless, with business opportunities in virtual real estate transactions, markets for trading and exchanging goods and services, both digital and physical, and much more.

There is currently an ongoing discussion about whether there is one metaverse or several metaverses. This article will not delve into this question, but rather just note that metaverse providers such as NVIDIA’s Omniverse and Microsoft’s AltspaceVR are not interoperable with Meta in the sense that users in one ecosystem effortlessly can migrate to other ecosystems.

In each metaverse the users may create assets, that is, virtual assets. As in the real world, digital content creators in the metaverse have intellectual property rights that need to be protected. Thus, when virtual assets are created, developed, used or transacted within the metaverse, a number of rights issues arise that also have Fintech implications.

Under traditional copyright law, the primary rule is that the creator receives all copyright to his or her creations. This is, however, not necessarily the case when creating assets within the metaverse. The ownership would depend on the applicable ecosystem’s contractual terms. Such terms might assign ownership of user creations to the provider, who in turn might only license a limited set of rights to the asset back to the creator. Such contract terms can be worded to enable or suppress use or transferability (or merchantability) of virtual assets.

Time will tell how the metaverse providers and users will monetize creations in the metaverse and how ownership to virtual assets will be contractually regulated. Even though the basic infrastructure of any ecosystem will be regulated by traditional service, licensing, and other types of contracts, the question how ownership to assets will be tracked and secured remains unresolved. It is, of course, possible to use traditional databases, but the more interesting and admittedly secure option is non-fungible tokens (NFTs). NFTs are generally considered a secure digital asset type and is based on the same blockchain technology that is used by cryptocurrencies such as Ethereum. NFTs give its holder a digital proof of ownership, that is indeed is tradeable both from within and from the outside of the metaverse.  However, third party rights management providers will likely still be needed to ensure that the owners of virtual assets are properly identified and compensated for the use of their assets, while Fintech companies may provide the platforms for trading of such virtual assets and collecting royalties and licensing fees.

Payment tokens used in transactions in the metaverse raise additional questions with respect to securities law and banking law. Are they securities? Are they money or e-money? If so, traditional financial regulation would apply, which would subject the metaverse and its actors to regular license and capital requirements.

Fintech companies can provide financial services to users in the metaverse, such as virtual banking and insurance. These services can be integrated with rights management systems to ensure that users are properly compensated for the use of their digital assets and that their intellectual property rights are protected.

Our advice is to always consider the contractual framework of the applicable ecosystem thoroughly before establishing a business presence in the metaverse. This is particularly important before making any notable investment, whether in time, effort, or money, in any such ecosystem.

We are looking forward to continuing watching the metaverse grow and evolve, and we are curious to see how the various providers of services and products in this respect will seek to incentivize use of their ecosystems. In this context, the intersection between Fintech and rights management is a particularly interesting area to follow.

 

 

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