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CHENG Jinhua | The legal foundation of the metaverse and its construction
2023-12-01 [author] CHENG Jinhua preview:

[author]CHENG Jinhua


The legal foundation of the metaverse and its construction

Author *CHENG Jinhua

Professor of Koguan School of Law, Shanghai Jiao Tong University
Vice President of China Institure for Social-Legal Studies

Abstract: Concept, technology, capital, and law are four important driving forces for the development of the Metaverse. The technological infrastructure for metaverse development is paid with more attention, while the construction of the legal foundation for the metaverse is often overlooked, which is one of the significant reasons hindering the healthy development of the metaverse. From the perspective of the operation of the metaverse economic system, virtual human, digital assets, smart contracts, digital currencies, and virtual spaces constitute the five basic elements, and the legal protection of these five basic elements forms the legal foundation of this system. Current Chinese laws and regulatory policies generally adopt a "neutral and cautious" attitude towards the development of the Metaverse. Therefore, there is a need to change this stance, solidify the legal infrastructure and promote the healthy and orderly development of the Metaverse, and provide a strategic opportunity for China to participate in and lead the global digital transformation competition.

Key words: Metaverse; law and technology; digital economy; virtual human; digital currency; digitalization of renminbi

1.Introduction: the issue of legal security in the construction of the Metaverse

The year 2021 has been called the global "Year of the Metaverse". But only two years later, in 2023, the metaverse is cooling down rapidly and seems to have come to a crossroads. On the one hand, five ministries and commissions of the Chinese central government, including the Ministry of Industry and Information Technology (MIIT), jointly issued the Three-year Action Plan for the Innovation and Development of the Metaverse Industry (2023-2025) on September 8th, which, for the first time, gave guidelines on the supporting technologies, industrial applications, standardized governance and the development of software and hardware of the metaverse industry from the national level, and continued to regard the development and construction of the metaverse as an important track for China to participate in and lead the global digital transformation. As a follow-up to the above Action Plan, MIIT released the "Preparation Plan for the Metaverse Standardization Working Group of the Ministry of Industry and Information Technology (Draft for Public Comments)" on September 18th , which intends to further build up the "Chinese standards" for the development of metaverse technology and industry, and to promote the docking of the Chinese standards with the international standards. But on the other hand, many Chinese local governments and investors from all walks of life who had made a big fuss about the layout of metaverse track have quietly put down the metaverse flag, and some of them have turned to ChatGPT, the new hot spot of the year 2023. What is particularly noteworthy is that after observing for a period of time, there are also more and more scholars at home and abroad reflecting on and criticizing the metaverse from the theoretical level.

The metaverse has gone from "hot" two years ago to "still warm" now, reflecting not only the general trend of people's attitude towards the development of new technologies and industries, but also the deep-rooted problems faced by the development and construction of the metaverse (as well as all types of digital virtual spaces in a wider scope): how to guarantee the healthy and orderly development of the metaverse and other types of digital virtual spaces at the level of the legal system? To address this issue, if we focus on the metaverse, it can be roughly divided into two stages. The first stage is that since the beginning of the 21st Century, with the upgrading and development of the video game industry, there have been a number of treatises discussing the general legal issues of digital virtual worlds. The second stage is that, as the metaverse has become the focus of attention from all walks of life, the global theoretical and practical community has again begun to focus on legal issues related to the development of the metaverse. In China, in the past two years, a number of works have also been published, among which are general legal and rule of law theories, intellectual property rights, criminal law and regulations, administrative law and regulations, monetary payments and other related issues focusing on the construction and development of the metaverse. These existing studies have been very helpful and inspiring in answering the above questions, but the existing studies have either generalized the legal issues related to the development of the metaverse, focused on localized legal and technical issues, or focused on the legal regulation of the risks of the metaverse, while comparatively neglecting the systemic constructive function of the legal system on the development of the metaverse.

In fact, as early as 20 years ago, Cory Ondrejka, who was then the CTO of Linden Lab and led the development of the game The Second Life, wrote an article stating that the goal of The Second Life was to technically process the metaverse scenarios described by Stephenson in Snow Crash and collectively create a grand plan for the metaverse by means of User Generated Content (UGC), and emphasizing the importance of the law for the development and construction of metaverse. Compared to the new technologies and industries brought about by the first to third industrial revolutions in human history, the new technologies and industries brought about by the fourth industrial revolution, which is characterized by informatization and intelligence, have put forward new requirements for the legal system. Traditionally, the initial start of new technologies and new industries do not need the intervention of the legal system, and only when the new technologies and new industries become more and more popular and generate risks and security issues, the law will gradually regulate. For information technology and industry, the early intervention of the legal system is becoming increasingly important, and even new technologies face the question of whether they are legally compliant on the "first day" of their emergence. From artificial intelligence to metaverse to ChatGPT, all of them are like this. For such new virtual digital space technology and industry as metaverse, the legal system not only plays the function of escorting, but also is an inseparable part of the "ship" itself. In the final analysis, the metaverse is not only a technological construct, but also a legal construct. Therefore, for the development of metaverse and other virtual digital space technologies and industries, not only a technical base is needed, but also a legal base. The current cooling down of the metaverse construction and development in the world (especially in China) is to a large extent caused by the lack of legal base support. Therefore, this paper advocates the study and construction of a legal base for the metaverse.

2.The dynamics of the metaverse: from concept to law

At a time when the metaverse has just become a global hotspot, a research team from Tencent Technology and Fudan University released the "2021-2022 Metaverse Report". The report proposed the concept of "metaverse rate", using immersion as a measurement indicator. The report argues that the metaverse is an effort to create an imaginary world outside of the real world, an endeavour that has existed since ancient times and has taken different forms. In China, these forms range from ancient to modern, including cave paintings, campfire stories, oracle bone inscriptions, Chinese characters, theatre, China's Dunhuang murals, romantic novels and comics, radio dramas and TV movies, VR, etc., and show a "metaverse rate" that ranges from low to high as the creators become more and more immersed in their imaginative worlds. The fact that many people don't agree with the concept of "metaverse rate" doesn't make it any less inspiring. Looking at this concept, or at the history of human society's imagination and construction of "other" virtual worlds, we can identify several dynamics that have had a significant impact on the development and construction of the metaverse.

The first motivation is perception. Obviously, the formation of all types of virtual worlds requires imagination, and human beings conceive types of virtual worlds based on their imagination, and usually give their imagined virtual worlds some kind of value, such as heaven, hell, or the afterlife. Of course, perceptions are also evolutionary, progressive, and usually reflect the development of the real physical world. Stephenson's Snow Crash is recognized as the first literary work to introduce the idea of a 'metaverse'. However, similar ideas had already appeared in other literary and philosophical works, and have evolved further in subsequent literary works such as Top Gun. The transfer of metaverse-like concepts from literature and philosophy to film and television presupposes the ability of technology to visualize virtual worlds.

Therefore, technology is the second driving force behind the development and construction of the metaverse. From the technological dimension, a common viewpoint is that the technological foundation of the metaverse can be summarized by BIGANT, where B refers to Blockchain, I to Interactivity, G to Game, A to AI, N to Network, and T to Internet of Things. Among them, decentralized blockchain technology is the underlying technology of the metaverse, technologies such as VR and AR are the entrances to the metaverse, while technologies such as big data and AI provide the technological support, with the most critical technologies including embodied intelligence, digital twins, virtual digital people and neural rendering. Because technological support is key, technological development and the layout of related industries have also been the focus of planning by Chinese governments at all levels. Of course, even if there are good concepts and technologies, I am afraid that the development of metaverse technologies and industries will be difficult if there is no financial and other resources to support them. At least since the "Year of Metaverse", there have been many investors entering the field globally, bringing economic incentives to the development of the industry. Some scholars even believe that the creation of the metaverse is "a collusion between technology and capital". Therefore, the third driving force behind the development of the metaverse is capital.

In fact, the importance of concepts, technology and capital to the metaverse has been widely recognized. The theoretical studies of Chinese scholars have also examined the developmental dynamics of the metaverse from these three perspectives. For example, according to Yang Aihua, myths and philosophical depictions and visions of the ideal world have accumulated the ideological foundation of the metaverse; brain-computer interfaces and artificial intelligence have laid the technological cornerstone of the metaverse; and capital, society and user demand are the external forces that drive the development of the metaverse. For example, according to Ji Weidong, there are three basic types of metaverse development dynamics: First, industrial metaverse driven by hardware methods such as communication technology and digital twins; Second, consumer metaverse driven by software-based methods such as online games; And third, investment metaverse driven by blockchain-based methods.

However, it is not enough to realize that ideas, technology and capital (or social needs in a larger sense) drive the metaverse. The uniqueness of the metaverse in relation to other technologies and industries is that while it is a virtual digital space constructed by technology, it is also a socio-economic system with substantive content. Socially, there are also virtual communities in the metaverse organized by a large number of individuals. Economically, there is also the creation of goods by (digital) people and the trading of goods between (digital) people and (digital) people in the metaverse. Thus, the socio-economic systems in the metaverse can be reduced to digital codes, but these digital codes in turn carry the real socio-economic actions of human beings and have an impact on reality and the future.

How can the metaverse achieve ascension from digital coding to socio-economic activity? What makes people believe that the digital people and digital objects created by platform companies, themselves and other users will not disappear in the next moment, and how can they believe that those digital virtual parcels are perpetual and worth spending money on? The mystery is that these digital codes are not just technological artefacts, but also carry the commitments and consensuses of stakeholders to those technological artefacts, and are mandatorily binding-most ——often legally-binding-to each other. In other words, while the metaverse, as a new digital socio-economic system, is a great technologically-assisted creation of human concepts and has been developed as a result of the drive for capital, the socio-economic system in virtual digital space is essentially a legal construct. Thus, the fourth dynamic that is critical to the development of the metaverse is the legal system. The legal system allows for the entrenchment, even immortality, of what is created by digital coding.

Considering the metaverse as a legally constructed virtual digital space has both a real and a due value. At the actual level, the digital elements of the metaverse are given legal meaning and reduced to legal rights and obligations, and only then will people be able to participate in the metaverse in a long-term, comprehensive and in-depth manner. Only then can virtual digital people, digital property, digital plots of land, etc., be continuously created ——similar to the countless large-scale pioneering efforts in human history, in which wastelands and frontiers were continuously opened up because the pioneers benefited from them. When designing The Second Life, Ondrejka predicted that if users in the digital world were empowered to create content collaboratively, and if the results of their creations could be transformed into real-world capital and wealth, an online world such as the Metaverse could be built, and user-generated content is an important feature of the Metaverse's virtual space construction.

In the virtual world set by traditional video games, real-world players can enter the game to take part in the game and experience the fantasy journey of the virtual world as some kind of character, but the game character is set and has an ultimate goal. Even in a game of real-time strategy, where the gamer appears to have more autonomous choices, the landscape and the ending are also pre-set by the game developer. Therefore, although traditional video games are also constructing virtual digital worlds, the game developers set the behavioural space and course of action of the game characters through technological coding, and are not decentralized metaverse, which are unlikely to form an organic socio-economic system.

Therefore, the creation of a new socio-economic system requires the mobilisation of all participants and the fullest autonomy for all. As advocated by Professor Balkin of Yale Law School, users of virtual worlds need the freedom to play, the freedom to design and the freedom to co-design. With these freedom to participate in the creation of the metaverse, and with the fruits of that creation fully guaranteed by law, the construction of the metaverse can achieve the effect of "many hands make light work". At the same time, in a normative sense, it is only by giving virtual digital persons an independent and autonomous status through the law that a decentralized metaverse can, in a sense, surpass the centralized real society and become an alternative that people can consider.

Of course, the legal construction of the subject or object of some new type of socio-economic system is not a creation of the metaverse era. One of the most typical examples of the construction of the subject of a socio-economic system is the emergence of the legal person. "Legal persons", as the name suggests, are legally fictitious persons. In the traditional agricultural society, it is difficult to imagine that there will be a kind of legal fiction person who only assumes limited liability ——limited liability company in the social economic life, while in the modern industrial and commercial society, if there is a lack of companies and other legal persons, the operation of the social economic system will be unimaginable. In a broader sense, in modern society, the so-called personality is a kind of legal anthropomorphism and construction. One of the most typical examples in terms of the object construction of the socio-economic system is financial products. In modern society, financial products have become an integral part of the functioning of the economic system. Whether they are bonds or securities, they are essentially legal constructs that provide a strong guarantee to the contributor of the right to receive future cash claims.

In short, compared with other virtual spaces that have appeared successively in the history of mankind, the metaverse, although also digital and virtual, is a socio-economic system with substantive content. Although the hardware and software of information technology are the prerequisites for the construction of the metaverse, if the socio-economic system of this digital virtual space is not active enough, the digital space constructed by technology will only be a "digital desert". Therefore, the most basic social and economic system elements necessary for the construction of the metaverse through the law are also the driving mechanism necessary for the development of metaverse technologies and industries. On the other hand, the combination of law and technology to enhance the effectiveness of its own social construction is precisely the evolution from "Law 1.0" to "Law 3.0".

3.The legal base of the metaverse economic system

The foregoing demonstrates that the digital socio-economic system, which is a central part of the metaverse, is difficult to form without the constructive role of law. In this section, the paper will further focus on the operation of the metaverse economic system and show which laws should be the institutional pillars for the effective operation of the metaverse. The reason why this paper focuses on the metaverse economic system for analysis is that the economic development and construction of digital virtual space has a greater global consensus, and it is easier to form global cooperation and construct relatively uniform legal system norms. Meanwhile, compared with economic construction, social construction in digital virtual space is more localized and involves more complex and multiple legal and other norms, so it needs a longer period of exploration and practice in order to form a consensus. In addition, getting economic returns from the construction and operation of metaverse economic system is also the main motive for governments and enterprises to lay out the development of metaverse industry.

To elucidate the legal pillars of the metaverse economic system, it is first necessary to clarify the key components of the digital virtual world economic system. According to US-based metaverse bestselling authors as well as investors such as Haeckel and Luet, there are four key elements of a metaverse economy, which are entrepreneurs (individuals, groups, or businesses that create economic value through the production and sale of digital goods), capital (which includes physical plants, office buildings, and other means of production, etc.), labourers (individuals employed by the entrepreneurs and directly engaged in the production or provision of services), and land resources (plots of land on which factories, shops, studios, etc. are placed). The above views of Haeckel and Luet and others are closer to the elemental composition of the real-world real economy. Zhao Guodong and others, who introduced the metaverse systematically earlier in China, argue that the metaverse economy also has four elements, which are digital creation (creating products needed by digital people), digital assets (determining the property rights belonging to the products created by digital people), digital market (building a digital virtual trading place for the flow of products and confirming the rules that must be followed in the transactions), and digital currency (the currency used to pay for the transactions of digital products ). In addition, Yang Dong and others, legal scholars who have long been concerned with blockchain research, have argued that the constituent elements of a metaverse economy include (digital) identities, (decentralized) organizations, (digital) assets, and (transactional) behaviors.

From the above point of view, just as there are different perceptions of the definition of the metaverse, there are also different perceptions of the constituent elements of the metaverse economic system. Compared with the real economic system of modern countries, this paper believes that the metaverse economic system should be composed of the following five basic elements: virtual digital person, digital property, smart contract, digital currency and virtual space. Accordingly, there should be a legal system that guarantees the effectiveness of these five basic economic elements, which is the legal base of the metaverse economic system advocated in this paper.

Firstly, whether in the form of a digital twin, a virtual symbiosis or a digital native, the virtual digital person is the first constituent of the metaverse economic system and requires a clear legal definition of its status. This is obvious. The virtual digital person includes both entrepreneurs and labourers, as advocated by Haeckel and Luet et al, as well as subjects of the digital economy in other forms. In order to ensure that virtual digital persons can be subjects of the metaverse digital economy, there needs to be a corresponding legal construct. In this regard, there have been initial explorations and practices in global theory and practice. However, before the metaverse became a global hotspot, the theoretical research paid more attention to the rights of game users (people in the real physical world) to the avatars they created in the virtual digital world, especially the distribution of rights and responsibilities in terms of copyright. However, in the metaverse economic system, the virtual digital person is not only an object created by the platform or the user, but should be the main body participating in economic activities, and therefore the legal status of the virtual digital person should be constructed from the perspective of the market subject.

In 2009, Linden Lab published the Declaration of Avatar Rights. In this somewhat tongue-in-cheek text, modelled on the French Declaration of the Rights of Man and of the Citizen, virtual digital beings, or "avatars", are given the same sovereignty as humans. Of course, when Linden Lab published this declaration, it also stated that it was neither the company's terms of service nor the code of conduct for its game The Second Life. This declaration is far from reality, and is merely a utopian expectation for the future. In theory, a number of scholars have been exploring the legal subject status of virtual digital persons. In practice, although there are legislative explorations in Japan and the European Union that treat virtual digital persons as legal subjects, they are more likely to treat virtual digital persons as a kind of legal object and explore its legal relationship with the creator as well as the mechanism for allocating legal responsibility in case of infringement.

Second, the digital economic system cannot function without the digital property created by users and their avatars and their legal protection. In the virtual worlds set up by traditional video games, the vast majority (if not all) of the content is created by the game developers, and users only use the content and cannot create it. Conversely, one of the essential features of the metaverse that distinguishes it from traditional digital spaces is user-generated content. In The Second Life, over 99% of the content is user-generated, and most of it is done together through creative, instantly interactive teamwork. In this process, users are both consumers like traditional gamers, but also creators. It is the involvement of the user or player in creation that makes the metaverse as varied, uncertain, and desirable as the real world.

Therefore, it is important to protect the rights to user-generated content so that they can trade and recreate with the content they create. Legal rights and protection of digital property is not only important for users, but also for developers and investors in the metaverse. Developers and investors may lack incentives to continue developing and investing if their inputs do not translate into property income. To incentivise more people to develop and invest, it is important not only to protect the possibility of their inputs being converted into property in the metaverse, but also to give them the opportunity to realize their digital assets into real-world assets. Without the ability to realize, investors will encounter very practical difficulties, such as not having the means to use digital property as collateral to secure a loan. The general direction of legal protection of digital property is not too controversial in relation to the legal status of virtual digital persons, and a number of research studies exist. However, what is trickier and controversial in this area is how to legally define non-homogenized passes (NFTs). In metaverse and other virtual digital spaces, the more valuable digital content created by users is usually stored and traded in the form of NFTs. Countries that are more active in the construction of the metaverse and Web 3.0 will protect the property rights of NFTs as general commodities to varying degrees. In China, on the other hand, the current legal and regulatory policies protect NFTs to a lesser degree overall.

Once again, transactions in the metaverse are usually carried out with blockchain technology, so there is a need for legal safeguards for such smart contracts. As mentioned earlier, the technological foundation of the metaverse can be summarized as BIGANT, where B refers to the blockchain. Blockchain is the cornerstone of the metaverse. With the technical support of blockchain, all metaverse interaction behaviors, including commodity transactions, can be carried out in this decentralized way and automatically executed when the agreed conditions are met. From the viewpoint of contract contracting and performance, the emergence and application of blockchain technology has elevated commodity trading by an energy level and greatly reduced the risk of default after the conclusion of a contract. Therefore, contract transactions via blockchain, also known as "smart contracts", are examples of "legal codification". The widespread adoption of blockchain-enabled smart contracts in metaverse and other virtual digital spaces is no longer a fundamental challenge in current national practice, but rather a refinement and optimization of legal norm-setting and regulatory policy implementation.

Subsequently, whether it is the user themselves or their avatar, or even the native digital person, trading with other digital economic agents through smart contracts after creating digital content, consideration must be provided, and therefore a legally recognized digital currency is indispensable. In a metaverse economic system, it is also theoretically possible to barter for transactions. Of course, it is conceivable that this approach is very inefficient. In other words, in order to support the efficient operation of a digital economic system, some kind of digitized currency for payments is inevitably required. Currently, common payment methods are crypto-virtual currencies issued by different platforms with blockchain technology, such as Bitcoin and Ether. Most crypto-virtual currencies have Web 3.0 genes, which in principle match the decentralized metaverse economic system and are the most efficient in terms of efficiency. But on the contrary, no matter what kind of crypto-virtual currencies, they also have natural defects in the current digital commodity trading and payment: due to the lack of endorsement and effective regulation by sovereign powers, users are too speculative, and the value of the currency is too volatile, which is not conducive to the exchange of virtual currencies, and it also brings a lot of obstacles for the holders to liquidate their assets into real assets (of course, we cannot rule out the possibility that some people intentionally liquidate their assets into the fiat currencies of sovereign powers for money laundering purposes). Although some countries recognize the legal status of crypto virtual currencies to a certain extent, many countries, including China, severely prohibit the circulation of virtual currencies. In theory, economic agents could also use digitized legal tender to pay for transactions in the metaverse or other digital space economies. However, so far, no sovereign state's legal tender has fully realized the function of flexible use and legal exchange in the digital economic system. It should be said that finding a legal and effective digital currency for the metaverse economic system is the biggest bottleneck encountered in the current development and construction of the metaverse.

Finally, in the metaverse, virtual digital persons and digital property also theoretically need to "reside" somewhere, and therefore necessarily involve the development and construction of virtual digital space and its legal definition. This is similar to the fact that, in the real economic system, land and the space attached to it are indispensable core elements of economic activities. However, the need for and legal definition of virtual space is less urgently required in a metaverse digital economic system than in the other four elements mentioned above. This is partly due to the fact that virtual land, sea, and air space are not exactly scarce things in the metaverse, and are therefore less in need of legal rights. Legal characterization of virtual space in the metaverse is necessary when economic activities in the metaverse interact and conflict with land or other spatial rights in the real physical world. Currently, the relevant legal theory and practice are also still in their infancy.

Figure 1 provides a schematic representation of the legal security system of the metaverse economic system. In the schematic diagram, the five economic elements of virtual digital person, digital property, smart contract, digital currency and virtual space and their legal protection are connected as a whole, constituting a complete legal protection system. Therefore, the development and construction of the metaverse economic system not only requires that the legal safeguards of each element be complete, but also requires that they be coordinated and integrated with each other. Only in this way can the metaverse economic system be active, and the virtual space of the metaverse constructed by the technological base can become an active economic community and, in turn, promote the construction of a social community.

Fig. 1 Legal base of the metaverse economic system

4.Strengthening the legal infrastructure for the development of the metaverse

In contrast to the enthusiasm of governments at all levels for the construction of a technological base for the metaverse, China's legal system embodies an overall position of "insensitivity + antipathy" towards the metaverse economic system. The so-called "insensitive" position means that the entire Chinese legal system basically has no clear direct response to the metaverse. As far as the five basic elements of the metaverse economic system and its legal safeguards mentioned above are concerned, what can be understood at present is basically an inference about the existing laws and their implementation, but no direct legal answer can be found. The exceptions are the legal positions expressed by some local courts in the last two years in response to related disputes. One example is that in the first case involving virtual digital person infringement heard in the first half of 2023, the Hangzhou Internet Court denied, by way of a decision, that virtual digital persons are entitled to copyright and neighbouring rights under China's existing copyright legal framework. In another example, in early 2021, in a civil dispute involving Bitcoin, the Shanghai Baoshan District People's Court found by way of a decision that Bitcoin was virtual property and protected it (and not that it was a virtual currency). In terms of legislation, there are currently no legislative motions in the national and local legislatures that specifically address the development of metaverse construction.

The position of emphasizing technology over law is also reflected in national planning for the development of the metaverse industry. In the Three-Year Action Plan for the Innovative Development of Metaverse Industry (2023-2025) issued by the MIIT and other central ministries and commissions, the thirteenth key construction task, "Improvement of Metaverse Collaborative Governance Mechanisms," although it mentions "continuously improving the policies and regulations of the metaverse", it is only that, and the specific practice is not clear. This half-sentence is immediately followed by the phrase "strengthen the tracking and judgement of risks in the metaverse, and create a governance system with sectoral coordination and social participation". Judging from the foregoing, the main purpose of the action plan's reference to "improving metaverse policies and regulations" should be to regulate metaverse risks rather than to construct laws.

In fact, if we analyse other relevant laws and regulations and regulatory policies, we can find a more "antipathetic" attitude. Among them, the most obvious is the regulator's attitude of cracking down on crypto-virtual currencies. In September 2021, People's Bank of China and ten other departments jointly issued the "Notice on Further Preventing and Resolving the Risks of Virtual Currency Trading and Speculation", which made clear the attitude of cracking down on virtual currencies such as bitcoin, ethereum, and tetcoin. Although the intention of the Notice is to maintain the economic and financial order of the country and to put an end to illegal and criminal activities such as gambling, illegal fund-raising, fraud, pyramid schemes, money laundering that speculation in virtual currencies breeds, in order to protect the property security of the people, and it is not aimed at the metaverse, but under the premise that legal tender digital currencies are not able to be effectively applied to the digital economy, the crackdown on virtual currency objectively leads the construction of the economic system of the virtual digital space, including the metaverse, to be difficult. Considering the crucial importance of the legal system for the development and construction of the metaverse industry, the author suggests that China's legislature, law enforcement and judiciary should change the stance of "insensitivity + antipathy", and actively explore the construction of a legal base for the metaverse that meets the national conditions. Combined with the basic framework of the metaverse legal base mentioned above, the author believes that the following legislative, law enforcement and judicial policies can be considered.

Firstly, the legal status of virtual digital persons should be clarified gradually through dispute settlement by means of judicial trials. At present, a more reasonable position is to clarify as much as possible the legal object status of virtual digital persons in relation to their creators, as well as the rights and obligations of virtual digital persons in their status as agents engaging in all kinds of activities on behalf of their creators or owners. Since virtual digital persons are relatively new, it is not appropriate to clarify their legal status directly through legislation. Only when judicial decisions are sufficiently abundant and the consensus of all sectors is relatively clear can consideration be given to the formulation of a special law regulating the rights and responsibilities of virtual digital persons.

Second, regarding the protection of the legal status of digital property and smart contracts, there is no major controversy at the legal level, so it can be considered to further strengthen the protection of digital property and smart contracts by amending or adding relevant articles of the Civil Code. Considering the key role of blockchain in the development of the metaverse industry, the law should also protect the property rights and validity of NFT products produced through blockchain technology as much as possible.

Third, the most critical task at present is to establish a legal and effective digital currency to improve the trading system in the virtual digital space. Payment methods are the center of the metaverse, both the core battlefield for major companies to capture the economic market of the metaverse and may be the biggest obstacle to realizing the metaverse. There are two different directions here that need to be balanced. One direction is to further promote the digitization of the renminbi, especially in terms of technology, to explore digital renminbi that conforms to the trading habits of the metaverse and other virtual digital spaces. If only a digital renminbi is simply launched, it is like a traditional shopping mall opening an online mall, which is not a real e-commerce. Therefore, making the digital renminbi conform to the inherent logic of digital transactions is a huge challenge that the central government faces in promoting the construction of the metaverse. The other direction is to appropriately relax the control of encrypted virtual currencies, and to promote the legalization and compliance of virtual currency transactions in a positive list manner. For example, encrypted virtual currencies such as Bitcoin also have the value functions of guaranteeing transaction autonomy, facilitating international online settlement, and unifying global settlement units. Therefore, for virtual currencies, new monetary policies that keep pace with the times need to be formulated, rather than being regarded as a monster. Specifically, it can be chosen to select and optimize encrypted virtual currencies for small-scale pilot trading in a public-private partnership and Sino-foreign joint venture manner. In short, it is not advisable to ban virtual currencies "across the board", but to place the trading and use of virtual currencies in a controllable range for exploration and operation. The digitization of the renminbi is more of a technical issue, and the legalization of virtual currencies is more of a legal issue. The two can also be carried out simultaneously and staggered.

Finally, for the digital virtual space, for the potential conflict between virtual digital space and real physical space rights, we can explore the accurate, three-dimensional and digital registration of physical space rights in the real world. Accurate, digital and three-dimensional registration of the status of physical space rights is an important support for the development of the virtual space industry. After the rights status of the physical space is digitized, the confirmation information will be uploaded to the blockchain through rigorous procedures for virtual product project parties to query whether the space they plan to develop has any right restrictions, and to achieve seamless connection between the physical space and the virtual space, so that the virtual space user can realize the smart contract right agreement with the physical space right holder. This will, on the one hand, solve the conflict of rights, and on the other hand, lay the infrastructure for future real-world businesses in the metaverse era.

In general, we still have a long way to go in building the legal foundation for the metaverse. Of course, this does not mean that we are far behind. The current legal system restricts the metaverse and other digital space industries, not just a problem China faces, but a global phenomenon. Even in the United States, where the interaction between law and technology is relatively advanced, the legal system does not provide adequate protection for the metaverse. As the American Bar Association Journal said in a commentary article in late 2022: "The virtual world and Web3.0 have been all the rage, but the law is stuck in the Web1.0 era." Considering the irreversible digital transformation and the potential important role that the metaverse may play in the digital society, we should view the constraints and adjustments of the legal system on the development of the metaverse from the strategic height of global digital transformation national competition.

As some scholars have pointed out, the "high-tech frontier competition" led by information technology is a key area of current international politics. The focus of this competition is on the definition of the new world shaped by information technology. A new space competition era has arrived beyond the land, sea, and sky. For example, although blockchain technology represented by Bitcoin has not yet replaced sovereign state currency, nor has it subverted the global financial system, it has already had a significant impact on global political economy and governance. For the construction of the metaverse and other types of digital virtual spaces, or one day in the future, human society needs to design a legal order that is completely different from the real physical world. This legal order may even be completely entrusted to "avatars" to formulate and enforce the governance rules of the virtual space. However, for the time being, a more pragmatic approach is for us to take the initiative to design legal rules that are in line with the orderly development of the metaverse. Our stance towards the development and construction of the metaverse should be: "Give a helping hand and see it through." The most important thing is that China cannot miss the opportunity to lead the era of "digital exploration" again!