1. Adopt a technology-neutral approach that focuses on “same risks, same rules”

1. Adopt a technology-neutral approach that focuses on “same risks, same rules”

Web3 technologies like blockchain and digital assets are already supporting numerous use cases, from making supply chains more efficient to creating entirely new forms of digital goods. We believe a tech-neutral approach to web3 regulation means:

Not all digital assets are the same, nor should they be treated the same.

At this still-early stage of innovation, rather than adopting a one-size-fits-all approach to regulation, policymakers should take into account web3 technologies’ varying use cases. New risks should be assessed, but new rules may not be needed when existing ones may be sufficient. Getting the regulatory balance right will mean taking the time to assess the market function of the particular activities involved and determining what new regulations are needed to keep people safe while promoting innovation.

For example, the fact that some of the more prominent early blockchain projects focused on financial use cases does not mean all blockchain-powered products inherently pose the same risks as financial ones. Financial regulations should only be applied to financial use cases, like payments and securities offerings, and non-financial digital assets should be treated in a similar way to other non-financial goods and services.

At present, a perspective informed principally by skepticism of cryptocurrencies hangs over blockchain’s non-financial applications and risks stymying innovation in the sector.

Regulators should start from the premise that when a web3 activity resembles an activity in the physical world, it should be treated in a similar way.

Where blockchain-based assets have analogues in the physical world, blockchain regulation should follow suit. For example, a creator who makes NFT-based digital art should be treated by regulators as analogous to an artist who makes physical art. Similarly, many non-financial blockchain-based assets are akin to the digital equivalents of concert tickets, trading cards or lithographic copies of paintings.

To the extent regulations apply at all, there should be a like-for-like approach to blockchain tech’s physical equivalents. Just as is the case in the physical art and collectible markets in many jurisdictions, regulations could be combined with more novel mitigations, which may be advisable when digital assets exceed certain value thresholds.

Moreover, the types of consumer protections that exist in the physical goods space may not be well-suited to blockchain-based digital goods, so new methods, including the use of blockchain analytics to help mitigate fraud, scams and other consumer harms, may be needed once these markets have developed and rules can be appropriately tailored.

New technologies may satisfy current standards.

In addition to informing how policymakers should approach regulation, a tech-neutral stance could also create opportunities to improve access to services and risk management. Where a decentralized and/or blockchain-based solution can meet the standard for demonstrating eligibility for a service (e.g. digital identity verification for age that protects personal information) or for establishing an organization for a common enterprise (e.g., a decentralized autonomous organization or token-governed entity), it should face similar regulatory treatment to legacy methods and models.

It is frequently noted that even people who lack a physical government ID often own a basic smartphone. A digital ID can open up new economic opportunities for people by allowing them to demonstrate eligibility for services in a privacy-preserving manner by indicating to third parties that the holder has undergone identity verification without sharing their actual personal information. We hope governments will take advantage of this type of implementation of digital ID and consider ways to allow for its development and acceptance, while assuring citizens that their privacy will be safeguarded.

Similarly, digital assets could serve as the basis for new categories of personal property and digital goods, thus creating new, user-friendly and efficient ways to register ownership of goods. We believe that this could be an important building-block of the metaverse ecosystem by giving people additional confidence in their rights as owners of blockchain-based tokens. While this will require some time to assess, we welcome governments exploring how to provide greater legal clarity.

How Meta is applying this principle to promote economic opportunity.

The monetization tools available to creators on our platforms make use of a range of technologies, including blockchain, and we are continually expanding that set. Since we introduced the ability to create and sell digital collectibles both on and off Instagram, creators are harnessing their presence on our surfaces for their economic benefit. The first creator to create and share their digital collectibles, @driftershoots, saw their collection of 50 digital collectibles sell out in seconds. Other early creators like @donalleniii and @vinniehager made collections using Meta Quest Pro and Quest virtual reality tools and also sold out within minutes.

As we look to the metaverse, we are empowering creators in Horizon Worlds, our immersive virtual reality social experience, to build experiences and games, find their communities and build a business. We have also designed an integrity framework to reward creators for being trustworthy actors. We are testing new features that give creators the tools to sell items across our metaverse offerings, such as the Avatars Store. By being part of the program, they gain access to the ability to sell in-world objects and goods, bonuses and support from Meta partner managers.