Regulating the Metaverse Economy: How to Prevent Money Laundering and the Financing of Terrorism (SpringerBriefs in Law)

This open access book examines regulating an environment that has no jurisdiction, is fully anonymous and infinitely vast? Welcome to the Metaverse, an online virtual reality that is expected to add billions to the global economy. The Metaverse offers a new type of virtual economy with practically endless business opportunities. The question is how to prevent these opportunities from being abused to commit money laundering and finance terrorism (MLFT). This book explores the current European Union legislation designed to prevent MLFT in connection with the Metaverse. It analyses the legislation in relation to the three traditional stages of MLFT: placement, layering and integration. Furthermore, some additional risks specific to the Metaverse are discussed, such as Non-Fungible Tokens (NFTs) and the high level of anonymity. The book concludes that the current legislation is not suitable for facing the new challenges of the Metaverse. In turn, the book puts forward a novel approach to regulating and enforcing MLFT legislation: using a system of smart assets equipped with AI to prevent and detect MLFT. In addition, it makes recommendations on how to improve the legal framework with regard to the new challenges arising from the Metaverse. Particular attention is given to creating a legal framework that incorporates the use of smart assets and the Internet of Things, in order to provide a safe environment for potential users and society. With a solid background in financial law and technology, the author successfully creates a novel system of regulation and enforcement that is based on the use of automatic enforcement, whilst keeping sufficient legal safeguards in place for potential Metaverse users. This book will be of interest to anyone interested in the Metaverse. Whether you want to regulate it or open your own virtual business, it’s a must-read! Acknowledgement Contents Chapter 1: Governing the Meta-World Finances References Chapter 2: What Is the Metaverse? 2.1 Introduction to Virtual Reality 2.2 Development of Online Realities 2.3 Metaverse, the Future? References Chapter 3: The Virtual Currency Schemes 3.1 Introduction 3.2 Virtual Currency Schemes 3.3 The Metaverse 3.4 The `Real ́ Virtual Economy References Chapter 4: Money Laundering and Financing of Terrorism via the Metaverse 4.1 Introduction 4.2 The Three Phases of MLFT 4.2.1 Placement 4.2.2 Layering 4.2.3 Integration 4.3 Additional Risks Associated with the Metaverse 4.3.1 Anonymity 4.3.2 Jurisdiction 4.3.3 Non Fungible Tokens 4.4 Conclusion References Chapter 5: Regulating the Technology (Placement) 5.1 Introduction: The EU Approach to the Placement of Funds 5.2 Entity 5.3 Custodian and Non-custodian Wallets 5.4 Digital Entity 5.5 Classification of Digital Personality 5.6 Jurisdiction on Transactions Made to Third-Countries 5.7 Smart Contracts 5.8 Conclusion and Recommendations References Chapter 6: Currency (Layering) 6.1 Introduction 6.2 Cryptocurrencies 6.3 Centralized Currency Issuers 6.4 Legal Tender 6.4.1 The Digital Euro 6.4.2 Cryptocurrencies As Legal Tender 6.5 Conclusion and Recommendations References Chapter 7: Integration into the Legal Economy 7.1 Introduction 7.2 Defining the Economy 7.3 Value and Games 7.4 Local Use 7.5 Conclusion and Recommendations References Chapter 8: Non-fungible Tokens and Stateless Firms 8.1 Non-fungible Tokens 8.2 Stateless Firms References Chapter 9: Conclusion