China's Metaverse: Regulating Cryptocurrencies, NFTs and Data Privacy

Summary

---

|

• It is virtually impossible to use Bitcoin or other cryptocurrencies in the metaverse in China given the stringent regulations in place and whether e-CNY, a digitalized version of China's legal currency issued by PBOC, will be a substitute for cryptocurrencies remains to be seen. 

|

• China's first copyright infringement case relating to NFT digital works has shed some light on how current Chinese copyrights law will apply such as the legal nature of NFT digital works and an NFT platform's intermediary liability. 

|

• An additional major challenge posed to entities operating the metaverse is compliance with China's data protection laws and the statutory data localization and cross border data transfer requirements in China and other jurisdictions.

While the metaverse is bringing about a host of new and exciting business opportunities in China, it has also raised a number of issues and potential risks in a variety of legal and regulatory areas, such as intellectual property, financial transactions, data privacy and cybersecurity…

Metaverse, the definition of which is "beyond universe", has been described as an immersive and constant virtual 3D world where people interact through an avatar to be entertained, make purchases and transact with crypto-assets, or work without leaving their seat. The Metaverse has been trending globally, and China is no exception. Chinese companies are actively taking initiatives to enter the metaverse. While the metaverse is bringing about a host of new and exciting business opportunities in China, it has also raised a number of issues and potential risks in a variety of legal and regulatory areas, such as intellectual property, financial transactions, data privacy and cybersecurity , antitrust, etc. In particular, cryptocurrency, which functions as the currency in the metaverse is subject to very stringent regulation in China, and non-fungible tokens (NFTs) which function as novel and major assets in the metaverse involve complicated intellectual property issues. Major privacy concerns or challenges have also arisen in association with the metaverse from a China data protection law perspective.

The Chinese government has been adopting a strict stance towards bitcoin since its inception, and it has taken a similar approach in its regulation of cryptocurrencies since 2017 by issuing numerous rules and notices aimed at restricting cryptocurrency trading and related activities