As technology develops, along with non-fungible tokens (‘NFTs’), the digital universe ‘Metaverse‘ has been one of the most explored new technology trends for more than a year.
The Metaverse will mimic the real world and we will be able to do anything that we can already do in real life and much more. While we don’t yet know if the Metaverse will be as successful as hoped, the development of the Metaverse, NFTs, or the crypto economy poses a lot of new legal problems for every legislator in the world, including Vietnam. As it is a huge concept virtual universe Metaverse also contains many complex legal issues that are superior to other technology concepts. This is understandable because essential elements that form the Metaverse, like NFTs or cryptocurrency, have contained many legal problems and challenges for both legislators and legal consulting firms.
The legal challenges for Vietnam about the Metaverse will be discussed in this article.
1. Introduction
Although now exploding in popularity, the concept of the Metaverse is not new. The word was originally coined in 1992 by author Neal Stephenson, by joining the words ‘meta’ and ‘universe’ in his science fiction novel ‘Snow Crash’, which is about dystopian science avatars who interact with each other and software-based agents.
In addition, according to the Oxford Languages Dictionary, a Metaverse is a virtual-reality space in which users can interact with a computer-generated environment and other users. However, there is no universally accepted definition for the term ‘Metaverse’ and, for many, it is simply an amorphous term used to refer to an as-yet-undeveloped future of the Internet.
Mark Zuckerberg in his October 2021 letter to Meta Platforms shareholders provided a helpful description of the Metaverse as an ‘embodied internet where you’re in the experience, not just looking at it’. The Metaverse aims to be a physical representation of the Internet, where users can experience digital worlds immersively. Almost all conceptualisations of the Metaverse include the use of virtual reality (‘VR’), augmented reality (‘AR’) and avatars, connected by a massive network.
The Metaverse can be divided into two distinct platform groups. The first group revolves around building a virtual world based on blockchain, through NFTs and cryptocurrency to use features inside the game. Games like Decentraland and The Sandbox let users buy virtual parcels of land and build their own spaces.
The second group uses the Metaverse to refer to the virtual world more generally, where users can meet for work or entertainment. The term also became popular when Facebook CEO Mark Zuckerberg mentioned turning the company’s social networking platform into a separate virtual universe. He thinks that the Metaverse will be the successor of the mobile internet.
2. What is the World’s and Vietnam’s interest in the Metaverse?
Due to the potential of the Metaverse, Western technology giants in various fields, such as Microsoft (specializing in computer support software and services), Facebook (the new social networking company renamed Meta), Nvidia (specializing in graphics and chipsets), Epic Games, and Roblox (specializing in game studios), Match Group (specializing in online dating service), and many other companies are pouring their research into realizing the Metaverse.
Microsoft is also starting to enter the Metaverse but is still tied mainly to its traditional business customers. In November 2021, Microsoft announced a platform called Mesh as an integration inside the Teams online work application. Mesh launched in the first half of this year in limited free preview with the ability to create avatars, create virtual meeting rooms for employees, and share text files using Microsoft Office. Dynamics 365 Connected Spaces is another Metaverse product that has also been introduced, allowing users to move and interact within retail and factory spaces.
Names of game companies that have been successful in this field that can be mentioned include: GTA V Online developed by Rockstar North, Fortnite developed by Epic Games, or the blockchain game Decentraland. Also ‘big’ in games is China’s Tencent, which in September 2021 registered the copyright for two trademarks, Timi Metaverse, and Kings Metaverse. Although it has not announced specific plans, this shows that Tencent wants to integrate the Metaverse into its vast ecosystem of games, virtual offices, and mobile payments.
Not being left out of this trend, many technology companies in Vietnam have conducted research and development of Metaverse applications, mainly in the field of NFT game development. Axie Infinity, a game developed by a group of Vietnamese people, currently has a total market capitalization of over US$8 billion. In addition, it is impossible to miss the outstanding development plan of Viettel Group—the largest telecommunications group in Vietnam. It has taken its initial steps, through its affiliate, towards developing a Metaverse platform by analyzing the available 5G platform, business models, and technology trends. VinFast, the global electric vehicle brand owned by Vingroup and Vietnam’s largest private conglomerate, launched a collection of NFTs (VinFirst NFTs) as part of the EV reservation.
On 15 June 2022, an outstanding event took place in Da Nang City of Vietnam, namely, the launch event of Metaverse Village, the first village in Vietnam built to research and develop virtual reality technology, with the desire to connect Vietnam’s technology with the world and access to the latest technology platforms, catch up with global technology trends and create new values in the field of virtual reality technology in Vietnam.
It can be acknowledged that exploiting and developing a new Metaverse application is in its infancy, focusing heavily on the entertainment sector. The research and development of Metaverse applications in other fields have not been deepened. The interest in developing the Metaverse in particular and blockchain applications in general in Vietnam also raises questions about solving problems arising in online electronic transactions, ensuring safety and conformity through international standards, and effectively promoting the digital transformation process in Vietnam.
3. Legal Challenges for the Metaverse in Vietnam
As with the Internet, Metaverse platforms cross country boundaries in their operations.
3.1 Overview
Currently, the Metaverse is being diffused and developed in Vietnam and it initially gave users interesting experiences. The first and most recognisable is the spread of the Metaverse in shopping centres where devices are located to allow users to experience sensations as well as perform activities in the virtual world. It is undeniable that these activities attract quite a lot of attention from users and some enterprises have used the Metaverse to collect the information of users for the purpose of understanding and capturing people’s tastes and preferences to develop the product.
Besides games, applications are created in the world of the Metaverse and users participate in games and have interactive activities right in the virtual world, but with real information. This poses many challenges for regulators in creating a legal framework for the Metaverse because when the Metaverse was developed in Vietnam, a series of legal issues were raised that the legislators, legal consulting firms or the government themselves are also confused about handling.
Indeed, there are no legal documents to regulate the Metaverse field, which implies many potential risks. Some of these can be highlighted as follows:
3.2 Whose Laws Apply?
As with the Internet, Metaverse platforms cross country boundaries in their operations. Developers of Metaverse applications and platforms have their own policies, procedures regulation and conduct from inappropriate speech to how data can be accessed, which will be based on the laws of the countries in which they operate. Laws in the Metaverse will initially draw upon the laws of the countries in which the relevant platforms operate, in a similar way to social media platforms or search engines today.
In fully immersive digital worlds, Metaverse platforms will need to implement internal compliance policies and procedures (effectively private laws) to regulate all aspects of behaviour that are regulated by laws in nation states. Besides this, the internal regulations of these platforms will interact and overlap with nation-state laws in a much broader array of areas than currently is the case for internet platforms. When there is a dispute between a user and a service/product provider on the Metaverse, the biggest problem may be that of cross-border transactions and how to choose the applicable law to handle the disputes.
For example: In the case that rights of users in Vietnam are violated by United States companies or by users based in the United States, how do our authorities protect people? When will there be a coordination mechanism between countries? The above questions show that it is very urgent to establish an official mechanism as to the Metaverse, so that users can really feel secure when participating in this virtual space.
3.3 Data Security and Privacy
To provide users with a rich interactive experience, aiming to accurately simulate real people in the virtual world, the technology used in the Metaverse can collect information about eye movements, user’s brain waves, facial muscles, behavior, gestures, attitudes, fingerprints, voice, etc. Artificial intelligence applications will rely on this information to store, track, and analyze data to gain a deeper and more accurate understanding of users. However, if this information is not strictly managed and controlled, then Metaverse users will not simply be exposed to the disclosure of their identities, but also the use of their extremely sensitive and personal information in real life, that is likely to lead to dire consequences.
Therefore, digital security and privacy will be among the most significant legal issues facing platform owners. These concerns are not new to tech companies, which face increasing scrutiny from regulators and users. This developing technology will stress-test existing laws and put even greater pressure on lawmakers to match the sophistication of the technology.
In Vietnam, legal regulations on personal data protection have been generally developed. Accordingly, Article 21 of the Constitution of Vietnam stipulates that everyone’s information about private life, personal and family secrets is inviolable and is guaranteed by law. However, this provision only recognizes it in general and does not limit where the information is stored in the actual world or the virtual world on the Internet. So, it can still be understood that this provision will also be applied to protect personal data in the virtual world.
In addition, the Law on Cyber Information Security 2015 can be mentioned, but these regulations only generally recognize the responsibility of users themselves to protect their information online and the responsibility of agencies, organizations, and individuals for processing personal information to ensure network information security for the information they process. However, Vietnam’s regulations and law on personal information security have thus far only skimmed on the surface.
More precisely, they have not fully secured the rights of individuals with personal information as there is no regulation on violations of user data in the Metaverse and any relevant sanction. In addition, Vietnam’s case law system has not recorded any judgments related to disputes in the Metaverse. Because the definition of the Metaverse and related regulations has not been recognized in any laws of Vietnam, it leads to confusion for individuals and organizations when approaching this concept. Many questions are raised, such as: what data of users are third parties allowed to collect; what rights and obligations do users have with respect to their own data in the Metaverse?
3.4 Intellectual Property
Questions of intellectual property are also highly relevant in the context of the Metaverse. For example, determining the identity of the creators of a given work in the Metaverse may be more difficult when the work results from a decentralized collaborative process performed by users anonymized behind avatars. According to the fundamental legal principle of intellectual property law, the author is the person who created the original and first version of the work and this person owns the copyright, unless they agree to transfer the rights to someone else. The author has the exclusive right to copy, distribute, modify, publish, or assign the relevant property rights of the work.
However, it is not clear whether the use and exploitation of previously licensed or acquired intellectual property rights cover the extent of use in the Metaverse. The Metaverse may pose a risk to copyright holders as it is not practical to control piracy of works in the Metaverse. In addition, content creators face risks; for instance, if they are relying on existing licenses in the underlying works to create digital content for the Metaverse, they must ensure that such existing licenses include the use of copyrighted work in the Metaverse.
Courts in the United States can invalidate patents related to ‘abstract’ software and which are not eligible for patents under 35 United States Code 101 and a case law of the Supreme Court (Alice Corp v CLS Bank International, 573 U.S. 208 (2014)). In 2020, the eligibility of 27 software patents went up for review before the US Court of Appeals for Patents. Of the 27 patents, the court found that only four were partially or fully eligible under section 101. This poses a risk of cancellation for patented AR/VR inventions.
Despite being a developed country, the US law related to this issue has not been complete to match the development trend of the Metaverse. Other developing countries with relatively ‘simple’ legal systems like Vietnam may take a lot of time to research and adjust to harmonize and catch up with this trend.
3.5 Fintech
Legal issues related to fintech will increasingly arise in the Metaverse, particularly as more companies offer digital assets and services for sale. Sales of virtual goods are already being made using cryptocurrencies and other digital assets, which may ultimately be supported by the same blockchain technologies that allow for the Metaverse’s essential interoperability functions. Legal questions will undoubtedly arise regarding the proper verification of ownership, potential infringement, or conversion of authentic and verified purchases.
If cryptocurrency is treated like a financial instrument or security, which seems increasingly likely in certain jurisdictions, then consumers will encounter hurdles using cryptocurrency as a currency for the purchase of digital goods. Cryptocurrency is not currently recognized by Vietnamese law, so there is no basis to guarantee the interests of the parties when performing transactions in the virtual world.
Currently, the State Bank of Vietnam is still studying the issue of cryptocurrencies, developing a roadmap as well as piloting the use of cryptocurrencies on blockchain technology from 2021 to 2023. Thus, according to the results of the State Bank, the Government of Vietnam will consider whether and to what extent cryptocurrencies will be involved in transactions on the Metaverse’s platform.
3.6 Protecting the Interests of Consumers
The Metaverse creates an ecosystem that exists in parallel to the real market. Indeed, in the Metaverse, there exist fundamental parties such as Metaverse ecosystem providers, companies that provide services/sell products, and consumers. However, the problem is that the law governing the relationship of the parties such as the Commercial Law and the Civil Code have not recorded transactions arising in the Metaverse. Similarly, following the Law on Protection of Consumer Rights, owners have not recorded any mechanism to protect the interests of users as consumers when participating in the Metaverse. When the parties have begun to gradually participate in transactions in the Metaverse, but the regulatory framework has not been formed, including national laws and international treaties, this leads to a lack of legal grounds for the settlement of issues. When the parties have a dispute, the interests of consumers are not guaranteed.
Moreover, even if relevant legal documents are developed, which country’s laws or treaties will be applied to solve it is also an issue that makes the Government of Vietnam and other countries ponder, because most are cross-border transactions. Thus, if the rights of a user located in Vietnam are infringed by a French company when participating in the Metaverse platform provided by a party based in the United States, the question arises as to which country’s laws are applied to protect the consumers’ rights and which legal documents prevail under the coordination mechanism between countries for such disputes that arise.
4. Legal Framework for the Metaverse
The Metaverse is bringing many changes in modern people’s lives, facilitating the connection between people in different geographical distances, which brings people together to interact in the virtual world in different ways. For example, people can shop or do business. Legislators of many countries around the world are trying to build and complete the legal system so that they can create a favourable, safe and protective environment for individuals and organisations when engaging in the Metaverse.
In the United States, in 2013 the US Department of the Treasury defined Bitcoin (cryptocurrency) as a convertible currency with an equivalent value for real money or as a functional alternative to real money. Any entity that conducts the management or transaction of Bitcoin is identified as a money services business, is subject to the Bank Secrecy Act and is required to register with the US Department of the Treasury and must file reports on transactions over US$10,000 purchased with cryptocurrency. In the European Union (‘EU’), Bitcoin and other cryptocurrencies are recognised as cryptoassets. In 2020, the European Commission completed a proposal on cryptoassets regulation with the aim of keeping financial regulatory frameworks undivided and ensuring a fair financial playing field across the EU. In Canada and Australia, cryptocurrency transactions are considered money services businesses and are governed by the laws of these countries.
Notably, Dubai’s Virtual Assets Regulatory Authority (‘VARA’) has become the world’s first regulator, aiming to provide a framework for financial entities to operate in the Metaverse, including, among other things, banking and state services. The fact that Dubai’s state regulator is the first to come up with such an initiative is notable, as the Emirate is currently one of the world’s largest IT entrepreneur hubs.
Many countries in Asia are experiencing strong incentives for the initial exploitation of the Metaverse. For example, investments in Thailand relating to the Metaverse are seen both in the public and private sectors. These investments involve many traditional companies, such as the telecom giant Advanced Infor Services or Thailand’s leading shoemaker Nanyang and governmental policies such as the recently announced plan in Phuket by the Minister of Tourism and Sports and Minister of Digital Economy and Society.
Thus, not keeping out of this trend, Vietnam is also pushing for developments in policy changes and businesses. Notably, in recent years the Vietnamese Government has been hard at work pushing for comprehensive digital transformation for the country. Strong initiatives have laid out key milestones, such as Decision No 411/QD-TTg, dated 31 March 2022, on the Approval for the national strategy for the development of the digital economy and digital society by 2025 and orientation towards 2030.
Especially in May 2022, the Vietnam Blockchain Association, the country’s first entity in the crypto space, launched in Hanoi to allow blockchain experts to collaborate in promoting the development of Vietnam’s digital economy. Not long after its inception, the Association announced cooperation with Binance—the world’s leading corporation in blockchain development technology—on blockchain research or its application in Vietnam.
Several legal instruments have been amended and supplemented to align with the development of virtual technology. On 4 May 2022, the Ministry of Information and Communications (MIC) released the Draft Law on E-Transactions (‘Draft Law’) for public comment, garnering significant attention from tech businesses. The Draft Law proposes new regulations and requirements for digital signatures, digital identities, and other related topics. Given that transactions in the Metaverse, like online purchases, involve cryptocurrency or the connection of a digital wallet to a bank account, advanced digital payment confirmation methods such as digital signatures, digital identities, and e-contracts are deemed necessary.
Furthermore, several pieces of legislation pertaining to technology and various aspects of the Metaverse’s digital and virtual worlds are also in progress. These upcoming regulations include the Draft Law amending the Law on Telecommunication; the Draft Law on Digital Technology Industry; and the Draft Revised Law on Radio Frequency. All of these are expected to be considered and approved in 2023. Additionally, there are drafts for the Decree detailing the Law on Cybersecurity; the Decree on Personal Data Protection; the Decree amending Decree No 72/2013/ND-CP on the Management, Provision, and Use of Internet Services and Online Information; and the Amendment of Law on Consumers’ Rights Protection.
5. Conclusion
The Metaverse presents an incredible array of possibilities and poses a variety of novel legal issues that will need to be addressed. Metaverse platforms remain in their infancy and the legal issues that will eventually need to be addressed have thus far only been skimmed on the surface. It is expected that as these platforms mature and user adoption increases, these issues will become more relevant. With multiple legislation underway, lawmakers, businesses, and lawyers will be remarkably busy catching up with such a tight legislative agenda. Such prompt and comprehensive developments would bring a promising future for the Metaverse in Vietnam.
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