Regulatory trends in the European metaverse industry

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The digital asset space is growing rapidly, especially the metaverse. Brands are consistently increasing their investment in the space to build the future of the internet, while consumers are also showing interest in the digital world. While still in its early stage of development, the metaverse is termed as the next big innovation globally. Amid the rising metaverse popularity, European regulators are also zeroing in on the sector. For instance,

• Regulators in the United Kingdom are ramping up their efforts to develop a regulatory framework that aims to protect consumers from the harmful content that is being widely shared on the internet. In October 2022, the British regulators warned tech giants like Meta Platforms and Microsoft that they will be subjected to the incoming rules. Notably, the Online Safety Bill is expected to introduce a set of regulations that will seek to curb harmful content from being widely shared on the internet. The regulations are expected to impose a duty of care on the firms, thereby requiring them to implement robust measures for dealing with harmful materials.
• The Online Safety Bill is largely concerned with the protection of children. These regulations were developed in response to the death of a child, who was exposed to suicide-related content on Instagram. A coroner investigating the death, in September 2022, concluded that the negative impact of social media was the major factor contributing to the death. Notably, violation of the introduced regulations, once approved, will lead to fines of up to 10% of the global annual revenues. Furthermore, senior executives of the firm will also face criminal liabilities for extreme breaches.

While the proposed Online Safety Bill is not explicitly developed for the metaverse sector, regulators are keen on implementing the same set of legislations for metaverse-related websites in the United Kingdom. Other websites which will be impacted by the new regulations include social media platforms, messaging apps, and sites with forums. Furthermore, online games, search engines, and cloud storage providers will also be liable to follow the regulations.

Currently, the Online Safety Bill is in progress, due to the recent shakeup in the Prime Minister's office. However, regulators are hopeful that the Bill will soon receive approval now that Prime Minister Rishi Sunak has taken the office. Regulatory activities related to the metaverse sector are also gaining momentum in France. For instance,

• In October 2022, a team of researchers commissioned by the French government stated that the regulators must start regulating the metaverse market in the country. The French researchers called on the regulators to extend frameworks such as the General Data Protection Regulation and the Digital Services Act for covering data collection and user protection in the metaverse. Furthermore, the team also stated that the regulators must avoid the mistakes they made while regulating cryptocurrency.

Earlier in 2022, the European Commission and the Swedish Financial regulators discussed the possibility of banning the proof-of-work method which underpins bitcoin due to its impact on the environment. Notably, regulators in the European Parliament came close to passing the restrictions which would have effectively banned bitcoin.

As the metaverse sector continues to gain increasing prominence among brands and consumers, TechInsight360 expects regulators to jump on the bandwagon for regulating the sector. Globally, many countries are seeking to regulate the sector, with many regulators offering a favorable environment to accelerate industry growth. In South Korea, the government has not only announced a favorable regulatory environment but has also invested in the sector to support the metaverse industry growth.

With consumer protection in the metaverse remains a pertinent issue at hand for regulators around the world, TechInsight360 believes a collaborative approach between the regulators and the firms operating in the metaverse sector will lead to more sustainable market growth over the next three to four years.