Possibilities and Regulations of the Metaverse
Attempts to create a virtual space on a computer that began around the 1980s have incorporated elements such as SNS, online games, and e-commerce, and in recent years have come to be called the “Metaverse.” On the Metaverse platform, unique economic spheres are expanding, such as interacting with others by operating avatars and conducting consumption behavior such as purchasing products in the virtual space.
The spread of NFTs (Non-Fungible Tokens) is also boosting the market, and the market is expanding further. In addition to media and entertainment, the Metaverse is expected to be used in various fields such as education and retail.
On the other hand, the laws and regulations related to the Metaverse business are extremely wide, and it is necessary to pay attention to various laws and regulations such as transaction and financial regulations, intellectual property, and data. Therefore, as a series, we will introduce a wide range of laws and regulations related to the Metaverse.
This time, we will focus on “Overview of the Metaverse and Laws, and the Metaverse and Laws Concerning Transactions”, and will explain the laws and regulations regarding ownership and cross-border transactions related to items traded on the Metaverse.
What is the Metaverse
Metaverse is said to be a coined word coined by American writer Neil Stephenson in a novel by combining “Meta” (meaning “higher order”) and “Universe” (meaning “world”). I’m here.
There are various definitions of the Metaverse, and in terms of the greatest common denominator, it can be summarized as “an online world that creates various values ​​such as economic value through communication.”
The main examples of metaverse business are:

Mainly provides a metaverse space as a communication platform between users
What provides the Metaverse space as an online game
Aiming for utilization in business and industry

It is expected to be used in various fields regardless of the business domain.
Features of Metaverse x Law
Regarding the Metaverse, the specific legal system is not sufficiently developed at present. Therefore, when a business operator enters the metaverse business,

Trading perspective
Rights protection perspective

It is necessary to consider mainly the following regulations and legal issues.
Regulatory and legal issues from a trading perspective

Digital content is the target of transactions: arrangement of relationships with civil law ownership rights, etc.
Cross-border transactions are conducted: arrangement of applicable law and jurisdiction, etc.
Transactions on non-face-to-face platforms: dealing with transactions by minors, dealing with impersonation, dealing with consumer protection, etc.
Digital currencies such as crypto-assets are the mainstream of settlement: Sorting out the relationship with financial regulations, etc.

Regulatory and legal issues from the perspective of rights protection

Possibility of infringement of digital content created by various companies and individuals in the Metaverse: Sorting out the relationship with copyright and other intellectual property rights
Potential infringement of privacy, honor, and moral rights: securing remedies for rights infringements, etc.

In this article, we will explain the regulatory and legal issues (1) and (2) from the perspective of transactions using hypothetical cases.
Cases of Metaverse x Transaction Laws (including Ownership and Cross-border Transactions)
Digital content is the target of transactions: On the relationship between ownership of items in the Metaverse space and civil law regulations

Example: Mr. A purchased an item Y that can be used in the metaverse space X. Mr. A purchased land Z in metaverse space X. Can Mr. A claim ownership of Item Y and Land Z in the Metaverse space?


Under the Civil Code, “ownership” means the right to use, profit from and dispose of property (Article 206 of the Civil Code). The object of ownership is tangible property (Articles 85 and 86 of the Civil Code), which is limited to immovable property and movable property.
In other words, for real estate, the land and its fixtures (a typical example is a building) are subject to ownership (Article 86, Paragraph 1 of the Civil Code), and for movable property, the subject of ownership is “tangible objects” other than real estate. (Article 86, Paragraph 2 of the Civil Code).
If land or items on the Metaverse become subject to ownership, the following rights are granted:

Right to claim return when possession is taken away from another person
Right to request elimination of interference when use is obstructed by others
The right to claim prevention of interference, which seeks preventive measures against a person who may cause interference

However, since neither Item Y nor Land Z are digital records, i.e., land and its fixtures or tangible objects, no ownership rights can be conceived for land or items in the Metaverse, and Mr. A makes a claim based on ownership rights. I can not do it.
Then, what kind of method can be considered to protect Mr. A’s rights in the Metaverse? Legally, Mr. A’s right to use item Y and land Z on the metaverse is organized with the right of use set based on the terms of use applied in metaverse space X and other contracts related to service use, and use It is conceivable to allow free use of land or items on the Metaverse within the scope of rights stipulated in terms and conditions, and to protect such rights.
In addition, what kind of rights are specifically recognized and what kind of restrictions are imposed (whether it is possible to receive a loan by leasing or setting collateral, etc.) will be stipulated in the terms of use, etc. for each business operator.
Cross-Border Transactions: Regarding Governing Law and Jurisdiction

Example: Metaverse space X is operated by Japanese corporation A. Mr. E, who lives abroad, purchased item Y that can be used in metaverse space X.


Arrangement of applicable law
In the event of a dispute with a user residing overseas in a transaction in the Metaverse space, the governing law will become an issue as follows. If the parties do not select the governing law, there is a high contractual risk in the event of a dispute, etc., and it is necessary to take measures such as prescribing the governing law in the terms of use, etc.

If the party chooses which country’s law to apply ⇒ The law of the chosen country shall apply.
Even in the case of (1), if the consumer applies a specific compulsory law (=a law that is compulsorily applied even if the parties make different arrangements) in the law of their habitual residence (in short, the country where they live) If you indicate your intention to apply ⇒ The country’s compulsory laws will apply (Article 11, Paragraph 1 of the Act on General Rules for the Application of Laws).
If there is no agreement in ① ⇒ The law of the land (country) that is most closely related to the contract will be applied (Article 8, Paragraph 1 of the Act on General Rules for the Application of Laws).

In addition, there are further branches depending on the type of receivables. For example, as a general rule, the law of the country where the result of the offense occurred applies to claims for damages due to tort (Article 17 of the Act on General Rules for the Application of Laws).
Among them, acts related to defamation and credibility are subject to the victim’s habitual residence law (Article 19 of the Act on General Rules for Application of Law), and there are further exceptions (Article 20 of the Act on General Rules for Application of Law) ~Article 22).
Jurisdiction
Under the Code of Civil Procedure, in principle, it is possible to designate a Japanese court by agreement of the parties (Article 3-7, Paragraphs 1 to 3 of the Code of Civil Procedure). However, in the exceptional case of a consumer contract, unless the consumer invokes a separate agreement, the court must go to the court of the country where the consumer had an address at the time the contract was concluded. (Article 3-7, Paragraph 5 of the Code of Civil Procedure).
lastly
As described above, this time, focusing on the fact that economic transactions are conducted in the Metaverse space, I explained the regulations related to ownership and cross-border transactions among the laws related to the Metaverse x Transactions. From the next time onwards, we will explain other laws related to transactions, laws related to Metaverse × financial regulations, and laws related to Metaverse × intellectual property.
Especially in the intellectual property part, we will explain the laws and regulations related to NFTs and tokens exchanged on the Metaverse, and the relationship between intellectual property rights and content on the Metaverse such as skins that can be attached to digital twins and avatars. .
At law firm ZeLo, we provide legal advice to many clients regarding the metaverse business, leveraging the knowledge we have gained through research and practice focusing on the potential of blockchain and crypto-assets since before they became popular. In 2022, we will launch a team that specializes in three web fields such as blockchain, crypto assets, NFT, and metaverse, and have established a system that can provide more specialized services.
We also accept consultations at spots, so please feel free to contact us.
Related: Law firm ZeLo/Foreign law joint venture official website


Contributor: Attorney Yusuke Sawada (Daini Tokyo Bar Association)
Law firm ZeLo and foreign law joint enterprise
Graduated from Kyoto University Faculty of Law in 2011, completed Keio University Law School in 2013, and passed the bar examination in the same year. Appointed public prosecutor in 2014. In 2019, he registered as a lawyer (belonging to the Daini Tokyo Bar Association). In 2019, he joined Sato Sogo Law Office. In 2021, he joined the law firm ZeLo. His main areas of expertise include web3 (blockchain, NFT, crypto assets, metaverse, etc.), litigation/dispute resolution, crisis management, M&A, general corporate, personnel and labor, and venture/startup legal affairs.



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