Doing business in metaverse: Legal risks and opportunities
By Omoruyi Edoigiawerie, Esq
Introduction:
Technology is advancing through several innovations to better deliver cost-effective goods and services to their respective customers and many businesses are getting ready for a big change.
This article is therefore tailored for businesses that are dynamic enough to move with the rapid growth in technology. There’s no gainsaying that technology has the potential to affect businesses both positively and negatively, depending on the model a business has in place, the products they chose to use, and how well the founders and their employees adapt to new systems.
Today there is so much talk about Web3; a new kind of internet built using decentralized blockchains, it is the “executable” phase of the internet where the power over data, digital property, and even finance are put in the hands of its users.
Now, imagine a world where the physical and virtual merge seamlessly into one experience; a world where there is the possibility to digitally enter your favorite malls to shop and to take ownership of your virtual shopping cart. This mental picture is no longer merely a figment of your imagination. Today it is a reality, where the virtual world becomes the real world – Welcome to the era of the Metaverse.
•What is the metaverse?
You may be curious to know what the Metaverse is all about. The Metaverse is the next evolution in the digital space through which many organizations and businesses interact to evolve their commerce, services, and trade. The “metaverse” is a virtual world where people work, play, and socialize; it has been defined as a “virtual-reality space in which users can interact with a computer-generated environment and other users”. In simpler terms, the metaverse refers to a virtual world in which you can interact with other people and places using avatars – as well as create, buy, and sell goods.
Indisputably, trade, services, and commerce have always been at the heart of any society. Several technology companies are mapping out various types of metaverse platforms. One such platform is based on blockchain technology, which allows users to purchase land and build environments using non-fungible tokens and cryptocurrencies. Another fast-growing platform is Decentraland, which has seen more than $50 million in total sales of land, avatars, usernames, and virtual outfits. A Decentraland plot was sold for $900,000 to Republic Realm, a digital real estate fund. The Nigerian music grandmaster Don Jazzy recently revealed he owns land in Decentraland.
Tech giants such as Amazon, Microsoft, and Samsung, among others have been developing software and hardware in the rebirth and revolutionization of business models. Recently, Samsung announced that it would be opening its first store in the metaverse. It described the store as an immersive world that would be modelled after its flagship store in New York City. According to Nike, the company’s metaverse store, Nikeland has attracted 6.7 million customers around the globe since its launch in November 2021. Within the virtual store, consumers can try on shoes and other products.
•What should you know as a business owner?
As a business owner, the first thing the metaverse can do for your business is to increase your client/customer base, this is because, not only does it drive sales in the metaverse, but it also drives physical sales because of the unprecedented level of data and artificial intelligence integration available. Businesses globally are pitching in to make the Metaverse a reality. As a result, businesses must adapt to compete in this whole new field, and brands need to adapt if they want to survive.
It should be noted, that metaverse is not just for multi-billion brands. Every business needs to learn how to make the metaverse work within its operations. For smaller businesses, operating within the metaverse can mean being able to engage with customers who could never make it to your store, sell virtual goods to a subset of customers who cannot afford your physical ones, and have your goods or products exhibited at trade shows around the globe even without leaving your current location. With the metaverse, every business will have the opportunity to become a truly global brand.
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•Business opportunities within the metaverse space
The metaverse has made it much easier for people to buy, sell and even exchange goods and services without physical contact. According to the United Nations Conference on Trade and Development (UNCTAD), the global e-commerce market reached $25.6 trillion in valuation in 2020. In the world and especially in Africa, venturing into the real estate business is a good investment. It is a booming industry and has become one of the most prosperous so far. Of recent, Africa’s largest telecom company, MTN bought about 144 plots of digital land sized 12x12m in Africarare, the first African metaverse, which makes the telecommunication giant the first African company in the metaverse. African artists are already putting Africa’s story on the metaverse through NFTs. About a month ago, a smart Nigerian photographer, Adisa Olashile turned creative photos of an old man into an NFT, uploaded the pictures on OpenSea, and sold them for 0.6Ethereum at the price of $2,098.32.
Performing artistes, event planners, or musicians can also generate income through virtual reality, a component of a metaverse where attendees participate in events and concerts as though they were physically present. Top foreign celebrities such as Ariana Grande and Travis Scott have held concerts inside Fortnite, an online platform. Interestingly, Travis Scott acknowledged that his virtual event on Fortnite was more profitable than any of his physical concerts so far.
According to Bloomberg Intelligence, the metaverse would be worth $800 billion by 2024 as opposed to the $478.7 billion valuations in 2020. The interaction of the metaverse and the abundance of business opportunities becomes evident in the fact that the metaverse features an independent virtual economy. The metaverse economy runs on the power of non-fungible tokens and digital currencies. Therefore, businesses can have the ideal foundation to explore new business ideas with the metaverse.
•Legal implications of the metaverse
The new era of the metaverse will certainly have implications on all aspects of society including legal implications. The data protection law seems to be the most hit at the forefront of the laws. With the rapid pace at which the Metaverse is being developed, the contemporary data protection laws in Nigeria are currently inconsistent with the metaverse technology because of the divergence in economic strategies and societal considerations.
Metaverse providers will have access to the personal information of users including biometric responses, physical location, financial records, and other information for the immersive experience of its technology. According to experts, the metaverse is likely to give rise to entirely new cybercrimes due to its unique infrastructure.
In light of this, regulators must intervene directly to prevent any kind of dispersal of incorrect data among Metaverse users to influence their mindset and behavior to serve a specific agenda. The metaverse could also pose issues for content owners, as it will be difficult to police copyright infringement in the metaverse. Content licensees will need to carefully review their license agreements to ensure that they have the right to use the licensed content in the metaverse, because many license agreements may not have considered the use of licensed content in such forums. The Nigerian Data Protection Bill 2020 as well as other extant relevant data and privacy regulations must align and provide adequate protection for data subjects in line with the new reality of the metaverse.
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It is however interesting to know that the Nigerian Startup Bill proposes the establishment of the National Council for Digital Innovation and Entrepreneurship with one of its primary functions being the formulation of policies relating to innovation and technology and the creation of a platform where issues relating to them are addressed decisively. This will create the ease and comforts Startups and entrepreneurs need to thrive in the new normal.
Another important issue to consider is what the government may need to do to properly monitor and regulate the sale and ownership of virtual real estate in the metaverse. In Nigeria, Sections 1 and 2 of the Land Use Act 1978 vests the ownership, administration, and control of all lands in a state to the governor. Unsurprisingly, the Nigerian legal system makes no provision for virtual lands because this reality had not been contemplated at the time of the drafting of the extant law. There is an urgent need for regulators to be abreast with the reality of virtual real estate and enact relevant laws to govern the administration of the same.
While it is inevitable to wonder about the feasibility and practicability of the metaverse, one cannot deny the fact that from inception to date, the metaverse has offered an alternative reality that businesses can explore in the new virtual space. Businesses that make early moves into the metaverse will have a big advantage over those that don’t. Consequently, this is a wake-up call for businesses to launch into the space and ensure that they get the proper legal protection they need to operate within the Metaverse.
Omoruyi Edoigiawerie is the Founder and Lead Partner at Edoigiawerie & Company LP, a full-service law firm offering bespoke legal services with a focus on start-ups, established businesses, and upscale private clients in Nigeria. The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. The firm can be reached by email: [email protected].