Governance of virtual worlds

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BRIEFING NOTE

Regulating Virtual Worlds

 

Source:

di Porta, F., Foa, D., and Ennis, S. (2024) "Emerging Virtual Worlds: Implications for Policy and Regulation", with, report for Centre on Regulation in Europe (CERRE), March. https://cerre.eu/wp-content/uploads/2024/02/CERRE_Virtual_Worlds_Report.pdf

 

 

Executive Summary:

This report examines the regulatory and policy challenges related to the emergence of virtual worlds , proposing a key definition focused on immersive, synchronous, persistent, and unified 3D experience with mass content creation . It identifies key concerns such as behavioral moderation , child and data protection , and interoperability. The document emphasizes that the future evolution of these worlds is uncertain, advocating a cautious and proportionate approach to regulation, favoring incentives and modular standardization over rigid overarching regulation.

 

Key words:

Virtual worlds

Regulation and policy

Interoperability

Data protection

Content creation

 

Definitions and Evolution of Virtual Worlds

The report begins with an analysis of definitions of virtual worlds, both in official policy documents and in academic literature. It notes an evolution in the perception and conceptualization of these environments.

 

Proposed Definition: The authors propose their own definition of virtual worlds as: "An immersive, synchronous, persistent, and unified 3D user experience that enables mass content creation." The key concepts in this definition are explained:

 

Immersiveness: Feeling your presence in a virtual environment.

 

Synchrony: Real-time interactions.

 

Persistence: The world continues to evolve even when users are offline.

 

Unity: Interconnection and interoperability between a plurality of virtual worlds (future condition).

 

Mass Content Creation: Ability for a large number of users to create content.

 

Development Phases: The report describes the development phases of virtual worlds:

 

• Birth (NOWADAYS): Partitioned (non-interconnected) virtual worlds.

 

• Childhood (MID RUN): Interconnection/interoperability of virtual worlds.

 

• Maturity (LONG RUN): Interconnected/interoperable virtual worlds (called Metaverse by the European Commission).

 

Comparison of Definitions: Academic literature places more emphasis on mass content creation than official policy documents. "Compared to official policy documents, the literature emphasizes the characteristic of mass content creation..."

 

Political Issues and Regulatory Gaps

The report identifies several areas where virtual worlds raise policy and regulatory issues, highlighting potential gaps in existing frameworks.

 

Behavior Moderation, Liability, and Enforcement: A major concern is how to manage illegal or harmful behavior in virtual worlds. Existing liability rules should apply, but enforcement is complex, especially in decentralized environments.

 

"Although the rules of tort liability that exist in the real world for illegal or harmful acts online should apply fully to virtual worlds."

 

The legal status of Decentralized Autonomous Organizations (DAOs) is a challenge: "Where the DAO is not recognized as a legal entity, members may face personal liability..."

 

The question of how bans apply across platforms is raised. "A practical aspect of how virtual worlds operate may involve banning individuals. If this happens, the appropriate mechanisms for sharing such information across platforms and determining whether a ban should be extended to another platform raise further questions that need to be considered."

 

The Digital Services Act (DSA) is considered a relevant tool but further reflection is needed on the nature of "personal penalties" and financial liability schemes.

 

Child Protection: Virtual worlds pose specific risks to children, requiring increased levels of protection. Creating dedicated spaces for children and adjusting communication and privacy settings are options. The legal threshold for consent for minors to process data should be reviewed. "Virtual worlds may require higher levels of protection targeting specific users."

 

Consent and Data Protection: The use of avatars and the transfer of data across different virtual worlds pose challenges to the GDPR-based consent model.

 

"Since the GDPR is primarily based on consent as the legal basis for data processing, several issues may arise that are not necessarily covered by the regulation."

 

The issue of access to data (such as health information) associated with an avatar when it moves from one virtual world to another raises concerns about compliance with the purpose limitation principle. "To what extent can the insurance operator access such health information? If in full (because the avatar metadata is transparently displayed as a condition of access to the insurance virtual world), then there may be a violation of the purpose limitation principle established in the GDPR."

 

Mass Content Creation and Intellectual Property: Mass content creation raises questions, particularly regarding the use of third-party intellectual property rights (IPR) (such as for NFTs). Specific anti-counterfeiting tools are deemed necessary. Protecting works created by generative AI is also a challenge. "The use of third-party IPR to create NFTs without authorization (i.e., a license) is prohibited by the DSA."

 

Interoperability and Standardization: Interoperability is considered crucial for the evolution of virtual worlds, but its regulatory imposition presents risks of over-regulation and limiting innovation.

 

"Requiring universal interoperability for all activities contains many risks of overregulation, especially since private actors already have an incentive to make their worlds widely used and compatible with access hardware, but sufficiently differentiated that the worlds themselves compete for users."

 

The report distinguishes between vertical and horizontal interoperability and examines the relevance of the DMA and the Data Act. The Data Act appears more relevant to the interoperability of data processing services that make up virtual worlds.

 

Certain areas are considered particularly suitable for standardization, such as "exchangeable forms of value for transactions (equivalent to money)" and "verification of personal identity."

 

Enforcing full interoperability might limit the desired differentiation between worlds (e.g., historical worlds, game worlds, medical worlds). "Game worlds and historical worlds. Part of the goal of future worlds may be game worlds or historical worlds. One can imagine and expect that specialized worlds might contain token products tailored primarily to that world (or type of world) and not to all worlds."

 

Skepticism and Sustainability: Despite massive investments, skepticism surrounding virtual worlds persists, partly due to a lack of widespread digital literacy. The economic sustainability of business models is also an issue.

 

Environmental sustainability is a major concern. "The digitalization effort may not only be energy unsustainable, but also undermine the ecological transition objectives pursued by the European Green Deal and Next Generation EU." The energy consumption of decentralized technologies and the environmental impact of outdated devices are highlighted.

 

Recommendations

The report concludes with a series of recommendations focused on a cautious and incentive-based approach to regulation.

 

Incentives: Encourage the development of virtual worlds as a whole, including through incentives for collaboration, projects and infrastructure, and sustainable technologies.

 

Policy Instruments: Consider a variety of policy tools, beyond simple harmonized rules and standards, to address the issues. Technological tools developed by industry and incentives (monetary, community) could be prioritized.

 

Interoperability and Standards:

 

Promote (cooperatively) forms of harmonized standardization on minimum enabling elements, including through the definition of open standards. This could facilitate the transition to more interconnected worlds.

 

Avoid universal interoperability requirements to respect differentiation and innovation.

 

Modular (element-based) standardization is preferred, but should not be required if it interferes with the consistency of an experience or reduces incentives for innovation. Examples of areas suitable for standardization include "user verification and payment methods."

 

Enforcement: Consider introducing enforcement-specific rules that account for the transferability of avatars and assets between worlds. The possibility of using neutral decision-makers is important.

 

Minimum Scale: Any regulatory oversight should take into account the need for virtual worlds to achieve a minimum scale to be effective and cover their costs.

 

Key Points and Important Ideas

 

Virtual worlds are constantly evolving, making regulation difficult and requiring a flexible approach.

 

A clear and shared definition of virtual worlds is essential for policy development.

 

Regulatory challenges span many areas, from user experience to governance and sustainability.

 

Interoperability is a key factor for future development, but its regulatory imposition must be carefully considered so as not to hinder innovation.

 

The protection of children and personal data are priority concerns in these new environments.

 

The environmental and economic sustainability of virtual worlds is a long-term issue.

 

The report advocates for a combination of incentives, technological tools and targeted regulation rather than a blanket, prescriptive regulatory approach at this early stage of development.

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Paper Summary Initial Draft By NotebookLM