The Metaverse and NFT market needs regulation to take off

The Metaverse and NFT market needs regulation to take off

Eversheds Sutherland has brought together a group of experts to analyze new payment models
Eversheds Sutherland has brought together a group of experts to analyze new payment models

In an increasingly digital world, society is ready to make the leap towards virtual currency and the new business models that will be developed in the Metaverse. However, the lack of Spanish regulations that regulate crypto assets, with the consequent risks for the user or investor in the face of possible scams or in terms of data protection, are some of the main risks faced by the sector, according to derives from the event “ Fintech: new payment models and new assets”, organized and held by the law firm Eversheds Sutherland. Javier Molina, spokesperson for eToro, and Ángela Moñita, an expert in Fintech and means of payment, have participated in it, together with the firm’s partners specialized in the matter.

Regarding the future of Metaverse, as a new business model, it was pointed out that current technology does not yet allow a fully immersive experience. During the meeting, Javier Molina, eToro spokesperson for Spain and expert in crypto assets, assured that “the world is becoming more digital and there is a mixed reality -analog and digital- being the natural step the evolution of 2D, the Internet of data, to 3D, the Internet of experiences”. For this reason, he maintained that “when we talk about the Metaverse we are facing new business models.”

He explained that “although this is still in an experimental phase, economies are generated in the virtual world, so anyone who wants to reach the consumer will have to go to the Metaverse” and from there, “the interest and the great risks that The big commercial brands are taking over.” And it is that, he added, in the Metaverse there is already an economy (cryptocurrency) and digital private property (Non-fungible tokens -NFT-, certificates of ownership of the acquisition of a digital object such as art, music or even fashion items to be used in the Metaverse). Now, in the opinion of the expert, for the Metaverse to work “an immersive virtual reality is necessary, that the different metaverses be interoperable, as well as that there is a digital identity of the users”. To this he added that, in his opinion,

Precisely the firm’s Technology, Media and Entertainment partner, Vicente Arias, addressed the issue of NFTs in his speech. The lawyer wondered if we are facing “a pyramid scheme or the blue ocean for the content industries” because we are still “facing a very young market.” Therefore, he assured, “NFTs can be a great opportunity for some and a bubble for others.”

user protection

Arias warned that the blockchain technology – on which the tokens are based – is not regulated so that, in the event that the file becomes corrupted, or in the event of a risk of loss or fraud, there are no guarantees or protections provided for in the regulations on banking or investment products such as the Deposit Guarantee Fund (FGD) or the Investment Guarantee Fund (Fogain).

In this regard, he listed some legal problems that arise, such as the processing of personal data (difficulty in determining responsibility over a distributed network, impossibility of controlling international transfers or the technical difficulty of applying the rights of the subjects, such as the right to forget or cancel data); or the issue of consumer/investor protection. Thus, the consumer must know if the NFT that he is buying is really a limited edition or unique copy; what proprietary rights he has granted to use, display, communicate to the public, or disseminate the NFT; or the authenticity of the authorship “given the inexistence of a market regulator that prevents abusive behavior and grants guarantees to small investors.”

digital money

Along the same lines, the partners Manuel López (Financial Regulation) and Teresa Villarroya (Banking and Finance) agreed that one of the main problems is the lack of regulation on the matter. López explained that, at the moment, crypto assets are an unregulated activity -provided that financial instruments are not used- “because Spain is waiting for a harmonized regulation that will come with the European MiCA Regulation -currently in the negotiation phase in the European Commission and the Council-, which will not be launched until the end of 2024 or the beginning of 2025”. However, he explained how the CNMV, through its Circular 1/2022,influencer ”. Likewise, Villarroya lamented that “there are no clear legal definitions that are regulated worldwide or accepted worldwide” so, he added, “you have to be careful when issuing tokens .”

For her part, Ángela Moñita, an expert in Fintech and means of payment, assured that “money and the way we buy is changing.” In this regard, he recalled that “the United States, China or the European Central Bank already work with digital currency” and although, in his opinion, “it will surely not completely replace cash -less and less used and very expensive to maintain-, the Banco de España is going to have to join the flow of digital money”. The problem, she stated, “is the anonymization of the digital,” even more so at a time when there is a “great appetite for data.” And she added that, in any case, “whatever the Fintech trends are, it will be the user who will have the final decision.”

Finally, José Pascual, managing partner of Eversheds Sutherland Luxembourg, spoke at the session, explaining the situation in that country, “a pioneering place in new technologies and Fintech”. He explained that the issuance of tokens in Luxembourg is allowed and that there are several exchanges that allow token transactions and that they are quite developed.” And it is that, he concluded, “there is more and more demand from funds to invest in crypto assets.”

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