After a few months of policy speculation around potential EU initiatives on the subject of Metaverse, the European Commission finally came up with a communication in July 2023. The novel strategy on 'Web 4.0 and virtual worlds' laid down the European vision and underlined the economic and social potential of virtual reality, along with key pillars and actions to utilise the advantages of this technological transition.
The EU estimated that the global market size for Metaverse developments could exceed 800 billion euro by 2030 compared to the 27 billion value in 2022. To support this growth, the EU wants to get ahead of the development and implement EU values and fundamental rights, along with putting people at the centre of interoperable virtual worlds.
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VisitObviously, the European Union decided to use a different terminology. When the initiative was first announced, the Commission stated that it is going to be about virtual worlds such as the Metaverse. A few debates led the European Commission to leave behind the term Metaverse and substitute it with the concept of virtual worlds combining with the Web 4.0.
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VisitThe Commission laid down two definitions to explain this. According to the European vision, virtual worlds refer to persistent, immersive environments based on technologies such as 3D and extended reality (XR) which make it possible to blur the lines between physical and digital worlds in real time for the purposes of working, socialising, learning, providing entertainment, designing and carrying out financial transactions.
But wait, what is Web4 (referenced in this article as web 4.0 in early mention)? According to the strategy, this concept refers to the expected fourth generation of the World Wide Web based on the use of advanced artificial intelligence, the internet of things, virtual worlds, and blockchain transactions, along with an integration of digital and real objects and environments.
If you are a crypto novice, you should be able to understand the third generation first. To learn more, we suggest reading this article: 'What is Web3?'.
First announced back in September 2022, the policy paper on virtual worlds has been put off as long as it could be. The preparatory process included the emergence of the Virtual and Augmented Reality Industrial coalition and a citizen's panel where they gathered insights from 150 randomly selected EU citizens. In July 2022, the Commission issued publicly the Metaverse strategy.
It was stated previously that the policy paper won’t have legislative effects; as a document that has no real teeth, it presents more a discussion or a start of something than a formal bill. It merely pointed out that some action is going to happen in the future.
The non-legislative initiative was sent to the European Parliament and the Council for consideration. When the strategy was presented, it was pointed out that relevant legislation already exists in fields such as data governance, platform regulation, data privacy and consumer protection. Aside from a few side effects, there haven't been more mentions in relation to potential regulatory gaps or emerging threats.
The strategy states that the Digital Europe and Creative Europe programs will support the development of skills significant for the development of virtual world technologies while also researching how these technologies could impact people’s health as part of its human-centric vision.
If you are confused about the new terminology, you’re not alone. When the European Commission announced the pillars for its Web4 and virtual worlds strategy, the responses from the community were mixed. A part of the community was confused while the other part joked about developing new iterations of the web.
The catch is that, before the Commission announced the strategy, nobody knew what Web4 really is.
The terminology was criticised by industry experts and institutions as well. It has been stated that it is disappointing that the Commission which craves interoperability badly has failed to align with the international community on terminology.
For example, countries such as Finland, South Korea and Japan launched Metaverse strategies while the EU is settling on becoming a leader in the sphere of virtual worlds and Web4.
The EU’s definition of Web4 mentions an integration between digital and real objects and environments, along with enhanced interactions between humans and machines. To understand what this concept means, we have to take a look at what Europe aims to develop.
In terms of the European vision, the fourth iteration of the internet could look like the development of smart cities. Given that the EU is already investing in initiatives such as Destination Earth and Local Digital Twins for smart communities and the European Digital Twin of the Ocean, it seems that the EU is mainly focused on underlying infrastructures for smart cities.
The link between virtual real estate and the Metaverse was recognised long before this strategy. If you're interested in how it worked out, why not read this article: 'Metaverse and Real Estate: Should I Get into Virtual Real Estate?'.
The problem is that the EU decided to use a lot of buzz words to describe a completely new term out of the blue. The next technological transition should become an open, secure, trustworthy and inclusive digital environment based on virtual world technologies; using such narrative doesn't explain the new terminology well, but looking at current use cases and similar initiatives could.
Using the term virtual worlds as the synonym for Metaverse appeared in three 2022 policy papers – papers drafted by the European Parliamentary Research Service (EPRS), the U.S. Congressional Research Center (CRC) and the /OECD. These policy papers used the two terms interchangeably.
Even though the explanation is quite ambiguous, the difference lies in the fact that the European Commission considers the concept of virtual worlds as an improved Metaverse encompassing divergent levels of immersivity, persistence and synchronicity.
The European Commission's strategy aims to go ahead on Metaverse development to reflect EU values and fundamental rights, along with a push for interoperability, openness and immersive technologies. The EU's vision is to create a human-centric virtual space where European businesses could thrive on the single market.
The EU strategy is in line with the 2030 objectives of the Digital Decade policy program and its three essential pillars – skills, business and virtual public services. The fourth pillar refers to infrastructure and it was addressed by the Commission’s connectivity package dealing with cloud computing and edge capacities.
The first component was set in place to provide access to safe and trustworthy information, build a pool of virtual world specialists and provide guiding principles for virtual worlds.
It recognised that launching a talent pool of specialists is important and announced to work closely with Member States to lay down a pipeline of virtual worlds specialists, along with supporting the development of digital skills.
Virtual worlds rely on the use of potentially invasive technology; allegedly, extensive reality technology could pose substantial risks to human rights and could lead to a more invasive collection of sensitive data and surveillance. The European Union has acknowledged the importance of managing such risks to provide a wider user acceptance and experience within the inclusive digital environment.
Therefore, the first pillar includes the development of three points of progress – a talent pool for highly skilled specialists, developing digital literacy and reflecting EU values for people’s well-being.
At the moment, there is no ecosystem within the EU that can bring together divergent players of the virtual worlds’ value chain. To foster innovation, the Commission stated its aim to support creators and media companies within the EU to test new tools, bring together professionals and industrial users with the addition to develop regulatory sandboxes.
The strategy announced the launch of a new European partnership that would bring together stakeholders to foster innovation and create a technical roadmap for the transition. The new virtual worlds would put even more pressure on the emergence of a connectivity infrastructure which is needed to enable these developments to happen in the first place.
The business-related pillar is based on three main points – partnerships, interoperability and innovation.
To utilise the opportunities provided by digital worlds, the EU supports societal progress and the emergence of virtual public services. Aside from investing in above mentioned initiatives such as Local Digital Twins and Destination Earth, the EU is preparing to launch the European Virtual Human Twin to support clinical decisions, and CitiVerse, an immersive urban environment used for city management.
The third pillar includes bringing together the creation of smart cities and communities, virtual governance, and expert knowledge, along with a system for monitoring the development of virtual worlds.
The policy document mentions the need to shape global standards for the emergence of open and interoperable virtual worlds ensuring that the market won’t be dominated by a small number of big tech players.
Even though the Commission plans to engage with Internet governance stakeholders worldwide and promote novel standards reflecting EU values, no clarity exists on the governance system of these virtual worlds.
At the moment we don’t know whether there will be a unified borderless virtual world or several divergent virtual worlds that are not connected. Additionally, it is unclear what will happen when this innovation is at its mature stage – should the governance be centralised or based on a decentralised framework?
According to the Commission, the EU advocates for global governance of virtual worlds by providing fair standards to prevent domination of large players on the global market.
For now, the European Commission mentioned only a market tipping scenario which is based on the risk of having several big players assuming the role of gatekeepers of virtual worlds and creating barriers to enter the market.
Obviously, the EU wants to establish itself as a leader in the field of Metaverse development and the fourth generation of the internet. A few sentences revealed that the Commission is worried about the potential dominance of big tech companies.
Before this strategy saw the light of the day, big tech companies such as Meta Platforms, Apple, Microsoft and Google have produced their own versions of AI and the Metaverse.
In the beginning of 2023, the EU antitrust chief warned that there might be abuses of competition law within the Metaverse. To level the playing field, the strategy proposes bringing together experts, media companies and a variety of other stakeholders to create an industrial ecosystem for the virtual worlds, along with setting up regulatory sandboxes to aid businesses in testing their ideas.
While the EU’s strategic plan may be a race with big players on the tech scene, it includes a number of benefits for smaller players to join the next technological transition as equals.