A Metacode of Conduct for the Metaverse

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The ethos of Web3 — the technology behind the next-gen 3D internet — stands at odds with the world’s current legal and regulatory structures. Advocates see a chance to create a new (virtual and virtuous) world in stark contrast to the state apparatus that has warped and accentuated the divisions of wealth.

Instead, using organizational structures like DAOs, self-governance giving stakeholders and equal voice, will be baked in. Money (crypto) will be tracked on the blockchain ensuring every player always receives just reward and financial misconduct is eliminated from the board.

However, there are those who view the current lack of supervision in the growing metaverse with alarm.

Folk like fintech expert Martin Boyd call for the largest players in the metaverse (e.g., Epic, Meta and Microsoft) to take proactive steps to create their own “metacode of conduct” to protect users from abuse, fraud and loss.

“Crucially, I’d also highlight the significant risks to our mental health,” he writes at Forbes. “If the metaverse looks and feels like the real world but that is unencumbered by criminal law, and with experiences that are more extreme, there are major risks around trauma and negative mental health impacts.”

It’s easy to depict the internet’s new frontier as a wild west of unbounded freedom and lawlessness and there’s something romantic about that characterization. But there are real-world consequences, which risks the whole project spiraling out of control.

There are already reports of “toxic” behavior by users on other users in online 3D worlds. The perpetrators are shielded in anonymity by avatars and the victims feel they have no protection from the builder of the world. The corporate governance and statutory laws that regulate our interactions on social media, weak as they are, are fast falling behind the sophistication and complexity of the metaverse and Web3.

Arguably, some of the technologies that underpin the metaverse inherently reduce transaction risks and the need for financial regulation. Transactions through blockchain or distributed ledger technologies cannot be falsified.

Boyd, who is president of $6.4 billion banking business segment of FIS, disagrees. There may be accounts or wallets to store your crypto assets in, but there is no government-backed protection from loss or fraud.

“The whole ethos of the metaverse appears to be at odds with this kind of traceability,” he says. “If you can be anyone you want to be in a virtual world, you might not have to prove your identity, which is not necessarily compatible with regulation.”

Nor is he convinced that regulation is inevitable or feasible for every metaverse. There are already more than 160 companies operating in the metaverse, with many more likely to follow.

“In theory, any of these individual operators could exist indefinitely outside of a regulatory framework. Unless regulation of the metaverse is global in its reach, there may be little to stop an offshore-based investment vehicle running its own corner of the metaverse and people accessing it from other virtual worlds.”

Rather than idly kicking a tire, Boyd has come with a framework for self-regulation which he hopes will improve transparency, credibility and accountability, supported by best-practice processes.

1. Set standards. The most reputable players in the metaverse could join forces to form an independent industry body and draw up their own robust codes of conduct.

This code would have four must-haves: Know Your Customer requirements that make metaverse users verify their real-world identity, including a robust process for registering minors to minimize abusive actors; safe spaces for mental wellbeing and AI tools to monitor addiction and PTSD; the ability to opt into — and frequently confirm you’re comfortable with — levels of content; and maintaining a cross industry database of bad actors and their real-world identities.

 

 

2. Drive financial best practice. There should be well-defined processes to manage the financial risks of the metaverse. To make any financial regulation viable in the metaverse, there need to be strong links between virtual and real-life personas, and adherence to many of the same principles that make the real financial world safe. For example, it would make sense to outsource ID verification processes to a reputable third party and provide insurance against personal loss or even third-party injury.

3. Give consumers a clear choice. The industry body could come up with a ‘quality stamp’ that shows the virtual worlds that are self-regulating, adhere to the prescribed standards and are therefore safe places to visit. Then it would be up to metaverse users to decide whether to stick to approved areas or take their chances in clearly unregulated environments.

Essentially, the more real the metaverse becomes, the more need it will have for regulation — but what’s the incentive for metaverse developers to apply these checks and balances?

The obvious one is trust. You can’t populate the metaverse on a massive scale or make any kind of serious money from it unless you bring people — and advertisers — with you. Boyd points out that in purely commercial terms, this would attract advertisers and investors by providing a transparent risk framework with strong Environmental, Social, and (Corporate) Governance alignment and less reputational risk.

It would seem that his instincts are shared. He quotes research that 41% of metaverse users worldwide are concerned about privacy issues and 55% of US internet users worry about the tracking and misuse of personal data in the metaverse.