How can metaverse and Treasury be understood in the new digital economy?

The word “metaverse” has been gaining more and more popularity and, recently, the first Spanish metaverse has started its own commercialization stage. As expected, in this digital world, commercial transactions are expected to take place that, to a greater or lesser degree, may constitute taxable events. Do you want to know how the digital economy can work between the metaverse and the Treasury? Here we tell you about it!

What is the metaverse?

Before you begin to understand how taxation would work in the Metaverse, it is critical that you understand what it is. To begin with, it is not something new that started with the name change of Facebook’s parent company to Meta. Although, it is worth noting that this triggered the focus on this technology.

In general terms, the metaverse can be defined as a virtual world where each person will have a user and a personalized avatar that can interact with other avatars, as well as coexist in a parallel reality to the physical reality we know.

However, it is important to mention that the aspirational metaverse that appears in science fiction movies does not yet exist. What does exist are many virtual worlds, but they are not yet interconnected. 

What is the new Spanish metaverse like?

Now that you understand better what the metaverse is, we will concentrate on the first Spanish metaverse, where any user will be able to acquire a fully customizable “plot”.

The acquisition of this parcel will be made by means of non-fungible tokens, better known by their acronym in English: NFT. In this way, a kind of property register can be created with respect to the “good” acquired.

However, the purpose of acquiring one of these virtual plots can vary greatly. There are those who want to develop their own virtual business to sell their real or virtual products, offer services and/or compete and organize eSports or gaming events, among others.

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How does the world of video games and eSports combine with the virtual economy of the metaverse?

For some time now, we have seen how video games such as the Sims or Second-Life propose a kind of virtual reality where people can do activities parallel to the physical reality.

This evolution of the industry to what you know today as the metaverse is an idea that is here to stay and will undoubtedly mark an important milestone in the world of video games and eSports.

If we take the reality of the virtual economy to gaming and eSports, we will find that, for example, there are games where users earn rewards for their achievements in the form of NFT or cryptocurrencies. In the end, these assets can be housed in the wallet or sold at the market price.

These are the popular play-to-earn games, of which many of the existing metaverses are based on blockchain technology. Since, as we mentioned, cryptocurrencies or NFT are needed to carry out transactions within virtual worlds.

Of course, if we start from the assumption that these types of games have their own metaverses based on native cryptocurrencies and tokens, we can deduce what implications will derive from these virtual transactions, as well as those that will derive from the receipt of in-game assets and rewards.

What is the role of cryptocurrencies in the metaverse?

The cryptocurrency ecosystem is also part of this paradigm shift and functions as a bridge for the world of eSports and gaming to leverage. 

The games of the future will include blockchain technology, first with NFTs and then with proprietary currencies, aspects that fit perfectly with cryptocurrencies.

According to Vidal Scasso, cryptocurrencies will make life easier for users, as well as empower them within the metaverse to enjoy a fast, reliable and transparent way to leverage the value they generate in it.

However, the expert encounters a certain problem that is, above all, ideological in nature: users are looking for decentralized and Meta is not. If the public has a choice between centralized and decentralized, they will quickly go for the second option. And that’s where other blockchain projects become relevant.

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What role does the Treasury play in what will be the new digital economy?

As is to be expected, the virtual world of the metaverse will give rise to transactions that, to a greater or lesser extent, will constitute taxable events that merit taxation.

Even so, there are still no pronouncements by the Directorate General of Taxes (DGT) regarding taxation in the metaverse. However, where there are queries in this regard is in the world of cryptocurrencies.

To help you better understand what would be the role of hacienda in the digital economy of the metaverse, we will share two examples:

• The purchase and sale of cryptocurrencies may generate capital gains or losses in the same way as a market share would. This being so, the transaction must be included in the savings base of the corresponding Personal Income Tax (IRPF) return. It must be taxed, according to the scale applicable to savings income, at a marginal rate of a maximum of 26%.
• Regarding the sale of plots of land in the new Spanish metaverse, Article 7 of the Real Estate Cadastre Law defines what is meant by urban real estate, understanding it as that with urban infrastructure services and located in the population center. In this sense, and according to the Spanish metaverse, could virtual land fit this definition? 

From this last example we could say that it would seem that the virtual land does not fit the definition of urban real estate. But, in any case, a category is needed to determine whether any income obtained from the rental of the virtual plot of land could be considered as income from real estate capital or not.

Now, considering all of the above, it is not surprising that, in the near future, the DGT will begin to issue resolutions regarding potential transactions or acquisitions in the metaverse.

How will the Treasury and the metaverse be able to understand each other in the new digital economy?

Other questions concerning the Treasury’s intervention in the new digital economy are: how much taxable income will be accrued, what mechanisms will the Tax Agency implement to control transactions carried out in the virtual world, and many more. And many more.

However, it should also be noted that the metaverse is not free of controversy, as the laws that would govern it are still in the process of being established. How would transactions be regulated, would people behave the same way in the metaverse and in the real world, can virtual legal situations be equated with real ones, and, if so, should they be? And, if so, should they?

In truth, the answers to this list of questions are still being created and are the ones that will lead the way for users to enjoy legal certainty and operate within a regulatory framework configured to the digital world.

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