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Emerging Legal Tech Forum: Even as the metaverse emerges, traditional legal questions guide its growth

Zach Warren  Manager for Enterprise Content for Technology & Innovation / Thomson Reuters Institute

Zach Warren  Manager for Enterprise Content for Technology & Innovation / Thomson Reuters Institute

During Thomson Reuters Institute's recent Emerging Legal Technology Forum, panelists held a vivid discussion of the metaverse and its impact on the legal industry

TORONTO — The metaverse can present exciting opportunities for legal professionals to advance their own practice and to serve clients entering these new fields. However, anyone looking to tackle the new paradigm can’t forget that normal rules of legal engagement still apply, warned panelists at the Thomson Reuters Institute’s 5th annual Emerging Legal Technology Forum.

In a session titled, Approaching the Verge: Opportunity and Reward in Web 3.0 Technologies, panelist Amy ter Haar, legal counsel at Global University System and board member of Ocean Falls Blockchain Group, began by exploring the positives of the metaverse, noting that the metaverse is not just one technology, but rather “the ability to interface with technology in a whole new way.”

Emerging Legal Tech Forum
Amy ter Haar

In a typical transaction, for example, there is one party (often an intermediary, such as a bank) in charge of recordkeeping and information. But when parties in the metaverse enter into a transaction using the blockchain, both parties can access and change information as needed, with a secure record of those changes verified by all parties. In that way, ter Haar said, the metaverse is “disempowering intermediaries and gatekeepers and empowering people.”

Still, the metaverse can be tough to define for those not engaged in the space, she added. “If you engage in the exercise of replacing the word metaverse in a sentence with the word cyberspace, you’ll find that 90% of the time the meaning doesn’t change.”

To better envision how the metaverse paradigm can change interactions, panelist Matthew Rappard, chief technology officer at security company Vaultie, said to think of how most people interact with the internet on a daily basis. Generally, he said, “there is this loss of the concept of privacy.” Every person has equipment to record video, apps that track location, easier access to secure information like bank accounts, and more. On the other end, the metaverse can provide users with another path via the ability to present as a different self. Video content creators called Vtubers present as online avatars that are wholly disassociated, where viewers never see their actual identities.

“You’re ending with this kind of switchover where in the public world you’re seeing less privacy, but in the digital world you’re seeing something different,” Rappard explained, adding that the switch comes with a virtual world that provides more control. “When we’re talking about the metaverse, it’s the ability to control your identity and how that identity interacts with smart contracts.”

Where the Metaverse and law intersect

When legal disputes arise, however, the metaverse’s nascent nature and increased focus on privacy can be a hindrance as much as a boon. While panelist Yinka Oyelowo, principal lawyer at Toronto-based Yinka Law, believes that the metaverse and associated blockchain technology “simplifies a lot of the processes that we see in real estate,” for instance, she acknowledged that resolving metaverse-related disputes remains “very hypothetical.”

Consider the case of trust and estate issues: Who would take ownership of a piece of metaverse property if the original owner passes away? While smart contracts encoded within the blockchain are very good at executing the specific terms of a contract, they may also need to take into account how a transfer of property would be executed and the rules in any jurisdiction that may apply.

Emerging Legal Tech Forum
Matthew Rappard

“It’s quite complex, because the jurisdictional requirements for British Columbia are going to be completely different from the requirements in New Hampshire in the US,” Oyelowo noted. Law firms helping with this type of dispute would need lawyers that not only vet jurisdictional issues, but also understand the technology and are versed in the laws around trusts and estates.

Further, a regular issue when it comes to physical real estate is airspace: Who owns the three-dimensional area above or below a piece of property? However, real estate in the metaverse does not function in the same way, and determining airspace rights becomes difficult. Assumptions about the physical world “aren’t easily transferred over to the metaverse. It takes quite some time to understand the issues,” Oyelowo said, adding, however, that also means opportunity. “There’s a lot of fertile legal ground for those involved in trusts and estates, for commercial real estate.”

Indeed, all panelists pointed to the opportunity for legal professionals to provide clarity to emerging metaverse risks. The Digital ID & Authentication Council of Canada (DIACC) has been investigating ways to authenticate online identities while still maintaining confidentiality and privacy, Rappard noted. Oyelowo also pointed to startups that have been linking face IDs with cryptocurrency wallets, where a wallet holding crypto funds is opened through dual-factor authentication that includes both the facial scan and a unique code.

Emerging Legal Tech Forum
Yinka Oyelowo

But even as these opportunities emerge, those in the legal world still need to look out for risks — and make sure they abide by ethical guidelines. Even those Vtubers who don’t show their offline identity present a legal and ethical challenge, Oyelowo said. “While most potential clients will be forthcoming with their identity while engaging in the metaverse setting, some clients… may prefer anonymity.” But in a province such as Ontario, this can be a problem: Before giving advice, attorneys are ethically bound to verify the client’s identity. And especially if the two parties are only conversing in a virtual world, clients may physically be in a jurisdiction with different or less stringent ethical boundaries.

That means that although the virtual world is emerging, physical considerations are still necessary. Therefore, attorneys should take care to “obtain identity documents that you are satisfied are valid” from the person behind the avatar, not just the metaverse avatar itself, Oyelowo explained.

Ultimately, the experts agreed that the metaverse will continue to evolve, with new opportunities and potential pitfalls both emerging in the coming weeks and months. Regardless of how it develops, what remains certain is that the metaverse will be an engaging space to watch going forward.