KLRI : KOREA LEGISLATION RESEARCH INSTITUTE

▶ Application Plans for Self-Regulation in the Context of the Metaverse, Perceived as a Leader in Emerging Technology and New Industry

○ Self-regulation means that a private individual, business, industry, etc. which was previously subject to government regulation takes on the role of regulating entity. It generally means that a business, industry, or private individual autonomously conforms to the standards set by the government as a method of overcoming inadequacies and recovering effectiveness of government regulations.  

○ Self-regulation is proposed as a complementary measure to government regulation in various sectors of society. It is distinct from deregulation, which aims to alleviate or eliminate public regulations that may either excessively impose regulations or undermine market factors. It also differs from unregulation which means avoidance from the government, confrontation with the government, or planned separation. The purpose of self-regulation is not to dismantle or ease the regulatory framework, but to change the actors building and operating the regulatory framework. The mechanisms for materializing self-regulation exist complementarily with the government rather than being completely independent.  

○ The metaverse is closer to a categorical concept encompassing complex phenomena rather than a single concept indicating a specific and particular object. Thus, various forms of the metaverse can appear depending on what technologies and contents serve as the focal point for mediating reality.  

○ The metaverse is still in its early stage in the market, being mainly utilized in entertainment sector, but it is expected to be utilized in various industries later. Continuous investment and technological innovation by global enterprises, along with the proliferation of platforms satisfying people’s desires will spread the metaverse more.

○ In order to simultaneously pursue both the development of the metaverse industry and the enhancement of trust through the assurance of economic and social stability, there is a need to research appropriate regulatory countermeasures. This study is to examine the application of self-regulation in the metaverse, perceived as a leader in emerging technology and new industry.

Ⅱ. Major Contents

▶ Self-Regulation as a Regulation Method

○ Self-regulation is generally defined as “any regulatory system in which the subject of regulation commands itself and forces to produce results (including cases of individual corporate level or through industry associations, etc. representing their subjects).” Plus, this includes cases where the motive for self-regulation is granted due to the existence of intentional external influences on that regulation.  

○ The core meaning of self-regulation is that business operators, which were traditionally the subjects of regulation, prepare the standards they should abide by themselves and comply with them, thus take the position of the regulator. Self-regulation means a shift from government and administrative control to the dimension of self-accountability for business operators. 

○ The relationship between the entities responsible for self-regulation and the government can be classified into four categories based on the premise. These categories include (i) ‘Mandated self-regulation,’ the form in which organizations operating in a particular industry in the market are requested by the government to make and execute a form of autonomous regulation within the broad framework set by the government, (ii) ‘Sanctioned self-regulation,’ the regulation where business operators make the basic structure and specific regulations of self-regulation on their own, but ultimately require the approval from the government for it to take effect, (iii)  Thirdly, ‘coerced self-regulation.’ Business operators make and formalize regulations on their own, but in the event that business operators fail to regulate themselves, it is a form of self-regulation that responds to the government’s threat of imposing legal regulations, and (iv) ‘Voluntary self-regulation,’ the regulation that takes place on the basis of the judgment and initiative of business operators or business operator associations, entirely independent of direct or indirect intervention by the government.    

○As an example of self-regulation, there is the Korea Internet Self-Governance Organization (KISO), which is currently operating as a representative self-regulatory organization in the domestic Internet portal sector. The self-regulation functions performed by KISO are considered close to the functions of voluntary self-regulation. In practice, these authorities were granted to each Internet portal business operator and were delegated to the KISO again. Thus, these can be considered close to voluntary self-regulation. 

▶ Metaverse Policy and Self-Regulation

○The concept of the metaverse is defined as the ‘convergence of virtually expanded physical reality and the physically persistent virtual space,’ ‘a socially virtual world,’ ‘an intersection of Web 2.0 and online gaming,’ ‘a virtual world for social, economic, and cultural activities,’ and ‘a fantasy or hallucination that artificial intelligence (AI) and big data technology recreated in a multi-sensory way.’

○The metaverse is organically evolving in various forms following technological advancements, user influx, and usage patterns. It is not an innovative technology which is solely dependent on a single technology    but is ‘evolving’ and ‘expanding’ even at the current stage through the combination and convergence of diverse digital technologies such as AR/VR/MR, big data, artificial intelligence(AI), etc.  

○ Metaverse is categorized into four types based on the combination of two axes of technology: ‘augmentation and simulation,’ as well as ‘internal technology (Intimate) and external technology (External).’ These four types are augmented reality, life-logging, mirror worlds, and virtual worlds.

○ The size of the metaverse market began with a focus on extended reality (XR), virtual reality (VR), augmented reality (AR), and mixed reality (MR), as the initial industry and market were not specified. It is expected to form a new market through convergence with the existing ICT market based on these. Major global big tech companies in the metaverse field are planning for the enhancement of market dominance that they can acquire through the preoccupancy of platforms such as securement of large volumes of user data, profit from payment transaction fees, etc.

○ The initial government policies regarding the metaverse mainly began with the promotion of the industry and spread across various industry sectors, including public and industrial fields. Augmented reality focused on promoting expansion and convergence of virtual convergence technology (XR : extended reality), as augmented reality encompassed AR/VR/MR entirely and evolved into virtual convergence technology (XR), which is an approach embodying the metaverse. Subsequently, in April 2021, the government established a policy specifying the ‘metaverse’ for the first time. 

○The regulatory direction for new sectors like the metaverse, which did not exist in the past, can be seen suitable to apply self-regulation. For this, it is needed to diagnose the limitations of the existing regulatory system in promoting the growth and development of the industry and market of the metaverse, to discuss on how to apply self-regulation to solve these problems, and to apply and evaluate it according to the metaverse’s specific sectors and stages in the application process of self-regulation. 

▶ Legislative Trends Regarding Self-Regulation in the Metaverse

○ As of July 2023, when examining the content of self-regulation included in the four bills related to the metaverse proposed to the National Assembly, the focus is on the establishment grounds and the scope of work of self-regulation organizations.   

○ The introduction of self-regulation in the sector of metaverse can serve as a rule of thumb for assessing the applicability of self-regulation in other industries in the future. Thus, the nature of self-regulatory organizations needs to be clearly defined even in the process of creating subordinate laws.    

○ The regulations have only stipulated the authorizations such as the approval or designation of the relevant department for the establishment of self-regulatory organizations. However, in order to ensure the effectiveness of self-regulation, there is a need to regulate the responsibilities and authority of the relevant department in more detail.  

○ In case of the metaverse, since the industry has not yet invigorated and various business models have not yet appeared, no consensus has been made on what regulations are needed and how far self-regulatory organizations can and should play a role. Accordingly, it is difficult to specify precisely what tasks self-regulatory organizations should undertake. In terms of the scope of work for self-regulatory organizations, continuous changes are needed according to the development stage of the industry.  

▶ Key Insights on Self-Regulation in the Metaverse

○ The government-driven regulatory policy is now shifting to the policy emphasizing collaboration among various interested parties. In this process, the need for self-regulation, sharing the regulatory authority with the private sector, is increasing. Moreover, the necessity of self-regulation has been more emphasized recently, as the new industry sectors which did not exist in the past emerged due to the development of digital technology.   

○ As the metaverse related technology is rapidly developing, it is crucial to respond swiftly and flexibly based on technological expertise. However, due to the characteristics of government bureaucracy, there are limitations in regulating it appropriately in a timely manner. Formulating regulatory policies through close collaboration with market participants is needed. In cases where government intervention is not required, delegating partial authority to market participants to determine standards and principles (self-regulatory type) rather than the government-driven regulation policies can be an optimal alternative for harmonizing the promotion and regulation of the industry.   

○ In order to promote the emerging industry known as the metaverse and to protect users, it is needed to seek solutions to properly harmonize the activation of industry and user protection through self-regulation by delegating certain authority to market participants who can swiftly and accurately grasp the ever-changing market status and problems. 

Ⅲ. Expected Effects

▶ Exploring Application Plans for Self-Regulation, Particularly in the Context of the Metaverse  

○ A self-regulation application plan that delegates partial authority, allowing market participants to determine standards and principles by themselves, rather than relying on government-driven regulatory policies.      

○ A plan that can properly harmonize the activation of the industry and 

  user protection through self-regulation for the promotion of the emerging industry called the metaverse and user protection