FROM HYPE TO REGULATION: LEGAL RESPONSES TO THE RISE AND FALL OF THE METAVERSE ECONOMY

Abstract

This Research paper attempts to examine and analyse the legal nature and law which govern virtual property, covering the concept of ownership, transfer, and regulatory challenges within the metaverse. This Research paper aims to set-out the struggles of traditional legal framework to adapt to the new digital environment consisting of technologies such as blockchain, artificial intelligence (AI), augmented and virtual reality (AR/VR), 3D modelling, and edge computing converge to form the metaverse. The study explains blockchain technology, as it reinforces non-fungible tokens (NFTs) which is the key standard for virtual ownership. It also attempts to analyse how existing legal framework in India for property laws, such as the Transfer of Property Act 1882[1] and the Sale of Goods Act 1930[2], could bring virtual assets under its legal parameters. A comparative analysis of the UK, US, EU, and Indian legal frameworks shows how different legal approaches helps in classification of digital assets. The UK Law Commission’s recommendation demonstrates a progressive shift toward recognising virtual property rights by introducing a new category of “digital objects”.[3] The Research paper highlights the inadequacy of existing property laws for resolving the exclusive cross-jurisdictional and ownership challenges posed by digital environments, concluding that just providing conceptual foundation is not enough. It advocates for a harmonised global governance framework integrating statutory law, soft law principles like the UNIDROIT Principles of International Commercial Contracts[4], and platform-specific regulation to ensure certainty, accountability, and protection of digital ownership.