TALKING

There is little visibility on what cybercriminals are doing to exploit the metaverse .

Australia ’ s eSafety Commissioner has already claimed a seat at the World Economic Forum ’ s new initiative , Defining and Building the Metaverse , to support ethical outcomes within the metaverse .

Unless regulation of the metaverse is global in its reach , the more likely outcome is that some virtual worlds will be regulated , subjected to key rules or the transferability of assets and others not . In the latter , the chances of both fraud and profit could be equally high . In these situations , regulation is key for protecting the interests of everyone .

When it comes to making financial regulations viable , more emphasis must be made by implementing strong links between virtual and real-life personas . This can include know your customer ( KYC ) requirements , risk management methodologies , tax laws and so on as Virtual Reality evolves .

Simply put , the more real the metaverse becomes , the more we need regulation . Assets developed in the metaverse could potentially attract value in the same way as the physical world , therefore requiring similar methods of supervision and governance frameworks .

Three steps to a metacode of conduct

Responsible and practical regulation takes time to develop and while that is underway , a set of principles should be implemented for businesses engaging in the metaverse . Driving that change from the inside could not only give the freedom that users want , but also provide a sense of security that they aren ’ t at risk of fraud or loss of profits .

In purely commercial terms , this would attract advertisers and investors by providing a transparent risk framework with strong ESG alignment and less reputational risk .

Developing these principles will take co-operation and likely trial and error , but could include :

1 . Set standards . Major reputable players in the metaverse could join forces to form an independent industry body and set the code of conduct . Overseen within firms by a ‘ Metarules

Compliance Officer ’, the metaverse needs four basic components : i ) KYC requirements for users to verify their realworld identity , with a focus on registering minors to minimize abusive actors . ii ) AI tools to monitor potential mental health issues including addictions , bullying and PTSD and creating safe spaces for mental wellbeing . iii ) The ability to choose the types of content that users would be comfortable with . iv ) Maintaining a cross-industry database of bad actors and their real-world identities .

2 . Drive financial best practice . Processes should be well-defined to manage the financial risks of the metaverse . Exchange fees , for example , should be published when independent stablecoins are transferred in or out of digital wallets . ID verification processes should also be in place to provide some insurance against personal loss or even third-party injury . Using the same technologies that underpin the real finance world is key to supporting these processes in the metaverse , as well as allowing for embedded finance , securitization , wealth generation and taxation . To offer these capabilities , regulated environments will therefore need the right plugins , APIs and user experience flows .

3 . Give consumers a clear choice . The industry body could develop a quality stamp that shows if virtual worlds are self-regulating and whether they are marked as safe to visit . This would allow metaverse users to make an informed decision on whether they should visit these worlds or take the risk by stepping into unregulated environments . Virtual worlds with no real-world corporate presence would also make any regulatory standards difficult to apply . Most importantly , everyone should be aware of which safeguards exist and what could happen if they are absent .

As with external controls , the key to self-regulation will be to improve transparency , credibility and accountability , through best-practice processes . There is a high chance that crises will occur , however , we will all learn from them . The shape of the metaverse will ultimately come down to how we respond collectively , across governments , businesses and consumers , creating a place that is complementary to and an extension of our real lives .

The metaverse will continue to become a focal point in conversations in the years to come and we will see more interest from the general public as more companies jump on the metaverse ship . It is in the interest of netizens that companies seek to set boundaries within the realm and create a safe experience for all . p

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