Legal Challenges for Metaverse in China

On February 17, 2022, Yifan He, CEO of Red Date Technology and the Executive Director of BSN Development Association, spoke at the Innovation and Investment Forum on Metaverse Application about the compliance issue of Metaverse in China. As Metaverse is still a part of the Internet, Yifan believes that compliance is imperative for the sustainable and rapid development of Metaverse in China. Besides, a legal maxim says that “everything which is not forbidden is allowed,” which suggests that the law encourages the development and innovation of new things when there are no written rules. Thus, everyone is welcome to participate in Metaverse as long as they do not cross the line.

Why do we need compliance in Metaverse? What are the challenges that come with Metaverse compliance in China? Yifan dissects it from five aspects.

· Metaverse and digital currency

In the future, digital currencies will be everywhere in Metaverse. However, the road of Metaverse in China will be different because any form of cryptocurrencies or stable coins would be illegal in China. Some Chinese tech firms may find themselves making mistakes by using credit points for transactions in Metaverse, which are prohibited to trade according to the People’s Bank of China. Credit points can only be used to redeem services and products in Metaverse.

· Metaverse and licensing

Does one need to obtain a license before constructing a Metaverse? The answer is yes in China. Companies will need an ICP license and game registration number from China’s National Press and Publication Administration (NPPA) — formerly the State Administration of Press, Publication, Radio, Film, and Television (SAPPRFT). Metaverse must also meet Chinese game requirements, such as being careful about kids under the age of 18 playing games too much.

Currently, in China, Metaverse is still considered a part of the game industry. But it will eventually grow out of its shell to something completely different from games.

· Metaverse and digital asset

Assets can take the form of commodities, currencies, stocks, or anything with a tangible monetary value. In Metaverse, assets are divided into two categories, including real assets and digital assets, such as a photo or a video. And one thing we can know for sure about assets is that they come with two different types of value. One is used for a purchase and the other is used for investment. Since every asset market is regulated and there is no exception for that in Metaverse. Digital assets in Metaverse are not securities. They can’t be securitized and we need to implement strict regulations to prevent speculation.

· Metaverse and interoperability

Metaverse will finally come when everything, from people to roads to spaces, would be interoperable. It will be made up of many independent local networks and it’s very much like the Internet at its early stage. When there will be a unified interoperability protocol, there will be an interconnected global Internet, which can be regarded as Metaverse. Data can move freely from one Metaverse to another following the data security rules in different jurisdictions. For tech giants in China, they should steer clear of some business models or designs in Metaverse to avoid breaking China’s anti-monopoly law.

· Metaverse and NFT

As a distributed data certificate, NFT will become the best underlying technology for the digital ownership of all the assets and items in Metaverse. This is made possible because NFTs come from decentralized and co-governed blockchain protocols, making NFTs more interoperable and transparent. NFTs can be minted by private keys that state a user’s rights to one item in Metaverse. Different users with varying levels of permission can distribute their NFTs across platforms or connect them to third parties using those keys.

In January 2022, the BSN Decentralized Digital Certificate (BSN-DDC) Network ( went live to support the legal issuance of NFTs in China. The mission of the Network is to create a distributed database for global users. As a sub-network of the BSN supported by multiple Open Permissioned Blockchains (OPB), the BSN-DDC Network provide a diverse, transparent and reliable environment for users to mint NFT/DDC with easy-to-use smart contracts, APIs and SDKs.



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