UK Recognizes NFTs, Dubai Launches Metaverse Licensing

Over the past few months, the development of the new digital age (dubbed “Web 3.0”) has taken a steep tilt, with many industries shifting their perimeters to accommodate the next evolution of technology and the World Wide Web. Complementing this rapid development and progress, a huge interest in Web 3.0 has taken over, 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 substantial engagement and led to follow-up articles and people asking for more. But key questions have surfaced regarding certain aspects of Web 3.0, most important of all, what exactly is the metaverse that is leading the charge on Web 3.0? In its simplest form, think Ready Player One.

Playing on the core concept of first-mover advantage, companies across a wide range 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 fuel growth opportunities in the metaverse, Microsoft is developing its own digital environment, within the metaverse, dubbed Mesh, and Apple is currently working tirelessly on advanced virtual reality gear that would revolutionize the Metaverse experience. The latter should be available for sale in four different variants by 2024.

Effective May 3, 2022, the Dubai Virtual Assets Regulatory Authority (“VARA”) became the world’s first regulatory authority to enter the Metaverse with the establishment of its Metaverse headquarters in the dynamic virtual world, aptly named “The Sandbox”. VARA was created to provide a secure and progressive operating framework for the virtual asset industry to grow, while ensuring market and investor protection. Among other things, this decision reflects 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 is accessible to its industry in its environment and facilitate collaborative engagement between global virtual asset service providers, thought leaders in the industry and international regulatory authorities.

VARA’s debut in the metaverse comes just after the Emirate of Dubai enacted the Virtual Assets Regulation Act No. 4 of 2022, which also established VARA itself. Dubbed “VAL,” the law establishes a legal framework for businesses and individuals with respect to virtual assets, such as NFTs and cryptocurrency. Articles 4 to 14 of the VAL establish in detail the framework and operation of the VARA. Articles regarding the regulation of virtual assets begin at Article 15, with Article 15(a) immediately stating that:

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

“Activity” is defined as any of the activities referred to in article 16 of the VAL which are subject to the supervision of VARA, including:

  • The provision of virtual asset platform operation and management services (Article 16(a)(1))
  • The provision of exchange services between Virtual Assets and national 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 details the offenses and administrative penalties that VARA may impose, including license suspension for a period not exceeding six (6) months (Section 20(b)(1)) or revocation of the license in its entirety and even the cancellation of trade licenses (section 20(b)(2)). Section 22 of the VAL deals with grievances as follows:

“Any affected party may present a written grievance to the Director-General against any decision, action or measure taken against him under this Act or resolutions taken under it, within thirty (30) days of the date of notification of the dispute. decision, action or measure. The grievance will be determined within fifteen (15) days of the date of its referral to the committee formed by the Director General for this purpose. The committee’s decision on the grievance will be final.

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

The case, which resembles the synopsis of a Netflix show, involved two “Boss Beauties” NFTs, which 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 filed an appeal with the High Court of England and Wales seeking an urgent injunction to freeze the NFTs to prevent their sale. The injunction was granted on March 10, then extended until the end of the proceedings on March 31.

Hacking and theft are an increasingly common problem for NFT holders. As space is still a “Wild West” when it comes to legal recourse or regulation, this may mean that those who have their NFTs stolen are not guaranteed to get them back. These legal rulings recognize for the first time that NFTs, like cryptocurrency, are property, giving NFT holders legal recourse 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 surface in worldwide and dispute resolution practices will follow. Who knows, maybe a virtual asset arbitrage center is 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 until it becomes our reality.

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UK Recognizes NFTs, Dubai Launches Metaverse Licensing

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