'Regulate the use case, not the tech,' metaverse and NFT experts tell EU policymakers

Regulation should focus on the use cases rather than technology, metaverse and NFT industry leaders told European Parliament lawmakers, in a meeting to discuss Web3 industry recommendations for future policy. 

“We are in the early days and not even scratching the surface,” said Ripple’s Markus Infanger in the meeting, while outlining that adoption of a “new, economic sphere” would be boosted by regulation. 

At the helm of the meeting was MEP Stefan Berger, who led the Parliament’s negotiations on the Markets in Crypto-Assets regulation. MiCA largely excludes NFTs, barring a reference to large groups of NFTs which may be considered “fungible” financial instruments. That will be up for the interpretation of regulators who will write implementation rules for the bill next year.

“Thinking of NFTs solely as financial instruments is not the right approach,” Fabian Vogelsteller who authored the Ethereum-based ERC-20 token standard, which gave rise to the ICO hype of 2017. 

The Parliament’s center-right European People’s Party worked together with a Brussels-based crypto advocacy group, Blockchain for Europe, to organize an educational workshop on NFTs and metaverse covering use cases and policy recommendations.

The industry experts said that NFTs are not an asset class, and expanded on wide-ranging use cases from real estate to entertainment to commerce. Different uses of blockchain must be regulated on a case-by-case basis, they said, and innovation must not be stifled on the way. 

They gave various analogies to bring their point across: A collectible football card is not the same as a Tesla share, and should not come under the same provisions. When it comes to the underlying technology — a contract is not the same as toilet paper, though both are made of paper, for example.

“We welcome regulation — we just hope you get it right,” said Jeffery Haas, chief revenue officer of AtomicHub, at the meeting. 

MEPs Stefan Berger and Stelios Kympouropoulos assured their guests that the lessons from the workshop will be brought into parliamentary talks and that the discussion is ongoing. 

NFTs will receive a bespoke report from the European Parliament nudging the European Commission to propose legislation following the suggestions. When it comes to metaverse, the EU institutions are still in early exploration days. The Commission launched a Virtual and Augmented Reality Industrial Coalition in September as a bridge for the VR industry to communicate with policymakers.

NFTs may still see more stringent regulation coming from the anti-money laundering package currently in negotiation in the Parliament, which is anticipated to face a vote in early 2023.