UK recognizes NFTs, Dubai introduces Metaverse licensing

In recent months, the development of the new digital age (referred to as “Web 3.0”) has taken a steep ascent, with many industries shifting their boundaries to accommodate the next technological evolution and the World Wide Web. Complementing this rapid development and progress has been a huge interest in Web 3.0 with everyone jumping into the “meta pool”. In April 2022, Wasel & Wasel Arbitrator Services hosted one of the first online discussions on the legal issues of the Metaverse, NFTs and Web 3.0 as a whole. The webinar generated significant engagement, leading to follow-up articles and people asking for more. But key questions have emerged about certain aspects of Web 3.0, most notably what exactly is the metaverse that spearheads Web 3.0? In its simplest form, think of Ready Player One.

Exploiting the core concept of the first mover advantage, companies across a variety of industries and sectors have begun to dive headfirst into the metaverse. Epic Games, the company behind the popular immersive video game Fortnite, has launched a billion-dollar funding round to support growth opportunities in the metaverse, Microsoft is developing its own digital environment within the metaverse called Mesh, and Apple is currently working tirelessly on more advanced ones Virtual reality gear that would revolutionize the Metaverse experience. The latter should be available in stores in four different variants by 2024.

Effective May 3, 2022, the Dubai Virtual Assets Regulatory Authority (“VARA”) became the world’s first regulator to enter the Metaverse with the establishment of its Metaverse headquarters in the dynamic virtual world aptly named “The Sandbox”. VARA was established to provide a secure and progressive operating framework for the growth of the virtual assets industry while ensuring market and investor protection. This decision reflects, among other things, the UAE’s commitment to the new economy and confidence in the security and sustainability of Web 3.0 ecosystems. With VARA’s historic beginnings in the Metaverse, it will seek to ensure the regulator for its industry is accessible in its environment and facilitate collaboration between global virtual asset service providers, industry thought leaders and international regulators.

VARA’s debut in the Metaverse comes shortly after the Emirate of Dubai enacted Virtual Assets Regulation Act No. 4 of 2022, which also established VARA itself. Dubbed the “VAL,” the law creates a legal framework for companies and individuals in relation to virtual assets such as NFTs and cryptocurrency. Articles 4 to 14 of the VAL set out in detail the framework and functioning of the VARA. Articles regulating virtual assets start at Article 15, with Article 15(a) immediately stating that:

“No one can carry out the activity in the emirate [Dubai] without obtaining permission from VARA. »

“Activity” is defined as any of the activities referred to in Article 16 of the VAL that are subject to the oversight of VARA, including:

  • The provision of operational and management services for virtual asset platforms (Article 16(a)(1))
  • The provision of exchange services between virtual assets and local or foreign currencies (Article 16(a)(2))
  • The provision of services related to virtual asset wallets (Article 16(a)(6))
  • The provision of services related to the offering and trading of virtual tokens (Article 16(a)(7))

Section 20 of the VAL describes the offenses and administrative penalties that VARA can impose, including suspension of the license for a period not exceeding six (6) months (Section 20(b)(1)) or revoking the license in its entirety and even the cancellation of business licenses (Section 20(b)(2)). Section 22 of the VAL handles complaints as follows:

“Any affected party may, within thirty (30) days of notification of the dispute, lodge a written complaint with the Director-General against any decision, action or measure taken against it under this Act or decisions made under this Act. decision, action or measure. A decision will be taken on the complaint within fifteen (15) days of its transmission to the committee set up by the Director General for this purpose. The Committee’s decision on the complaint is final.

Across the street in the UK, Lavinia Osbourne, prominent blockchain diversity leader and founder of Women in Blockchain Talks, won an important early victory in the High Court of England and Wales, the first of its kind to recognize NFTs. as a legal interest subject to blocking until the matter is resolved. While courts have previously recognized cryptocurrencies as legal assets subject to injunctions, this is the first time NFTs have received the same treatment.

The case, which resembles a Netflix show synopsis, involved two “Boss Beauties” NFTs that were removed from Osbourne’s digital wallet without his knowledge or consent. Osbourne, working with a security and intelligence firm, was able to locate the NFTs in two separate digital wallets. Osbourne has appealed to the High Court of England and Wales for an injunction to freeze the NFTs to prevent their sale. The injunction was granted on March 10th and then extended until the end of the trial on March 31st.

Hacking and theft are an increasingly common problem for NFT holders. Since space is still a “wild west” when it comes to legal remedies or regulation, this can mean those who have had their NFTs stolen are not guaranteed to get them back. These legal decisions recognize for the first time that NFTs, like cryptocurrencies, are property and give NFT holders a legal avenue to press for the return of stolen assets.

Today, with the creation of VARA and VAL, the rapid growth of the metaverse, and the growing need for a legal framework for digital assets such as cryptocurrency and NFTs, disputes are bound to emerge around the world and dispute resolution processes will follow. Who knows, a virtual asset arbitrage center might be on the horizon. But the Web 3.0 boom is unprecedented and insurmountable, and only time will tell how far virtual reality will be pushed before it becomes our reality.

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