Scholar argues that Web 3.0 technologies require federal regulatory guardrails.
According to a study conducted by The Centre for Countering Digital Hate, a user faces abuse on Meta’s online platform every seven minutes. The study indicates that common harms range from child exploitation to exposure to inappropriate sexual content, discrimination, and even violent threats. Experts now suggest that online disinhibition—a tendency for individuals to behave more recklessly in virtual spaces—plays a key role in contributing to these behaviors and perhaps reveals a dangerous truth about the future of the internet.
In a recent article, Eliza Yip, member of the G7 Research Group, argues that Web 3.0 technologies such as Web3 and the metaverse introduce complex legal and ethical challenges, particularly around data privacy, user safety, regulation, and democratic norms. She warns that developers, keen to innovate at any cost, ignore critical ethical problems. And, despite private sector attempts to mitigate inappropriate behavior, Yip argues that federal regulation is necessary to combat substantial risks to individual rights and freedoms.
Yip traces the internet’s evolution through version Web 1.0, which focused on static content, and Web 2.0, which prioritized user-generated content and social media. In 2024, Yip argues, the internet stands on the verge of Web 3.0—a fundamental shift in both form and function. Yip explains that Web 3.0, unlike its predecessors, will be decentralized. That is, internet sites will be hosted and administered by individual users, rather than controlled by a single administrator, and will be built on the same technology underpinning blockchain-based cryptocurrencies.
The metaverse, Yip notes, is a new technology used by Web 3.0 that provides an immersive digital environment for multiple users to interact in real-time and across geographical distances. According to Yip, major corporations such as Meta and Microsoft have pioneered versions of a metaverse, where users can relax, shop, and work.
Yip cautions, however, that although new developments such as the metaverse are exciting, an increased stream of technological innovation has desensitized regulators to associated harms.
Yip explains, for example, that policymakers should be concerned about the protection of data in the metaverse. Yip claims that the sheer amount of data collected and consolidated—from user movements to personal interactions—are vulnerable to external cyber-attacks. And, according to Yip, many companies use artificial intelligence to process user data without consent, raising concerns about the internal misuse of sensitive information as well.
Yip links these lax privacy norms to the COVID-19 pandemic, which she claims accelerated digital adoption without adequate safeguards. The U.S. government, in response to the pandemic, partnered with Palantir—a private data-mining company—to expand the Department of Health and Human Service’s surveillance capabilities. Similarly, Meta allows foreign governments to establish virtual embassies and services within its metaverse. Barbados, for example, opened a virtual embassy to provide visa services, but Yip warns that it collects vast amounts of sensitive user data, including eye and body movements, with little oversight.
Although companies such as Meta have introduced tools to protect users, Yip argues that only federal regulations can adequately address these concerns. And although the U.S. has started shifting toward user-focused data protection policies, similar to the European Union’s General Data Protection Regulation, Yip argues that such efforts remain limited. She concedes that the California Consumer Privacy Act marked a significant first step, but cautions that only a small minority of states have enacted similar laws, leaving large regulatory gaps.
Yip claims that without stronger oversight, Web 3.0’s decentralized nature could lead to widespread surveillance and commodification of personal information— a trend she calls “surveillance capitalism.” In this model, corporations treat human behavior as predictable and profitable, analyzing vast amounts of data to eliminate uncertainty in marketing and selling products. Yip warns that with decentralized networks underpinning Web 3.0, users will have even less control over their information.
The ethical challenges extend beyond data privacy, according to Yip. Yip highlights how real-world harms, such as harassment, discrimination, and exploitation, could intensify in the metaverse. She explains that the immersive nature of the metaverse makes negative interactions feel more profound, with psychological effects similar to real-life experiences. Furthermore, Yip claims that the lack of effective governance frameworks leaves users vulnerable to abuse in these virtual environments.
Yip also points to growing corporate consolidation as a threat to Web 3.0’s promise of decentralization. Although Web 3.0 theoretically empowers users, she argues that large corporations now dominate key digital spaces, prioritizing profit over privacy. Corporate influence, according to Yip, could marginalize vulnerable communities and exacerbate inequality. Even decentralized structures such as Decentralized Autonomous Organizations favor wealthy token holders, undermining any perceived democratic potential.
Governments, Yip contends, lag far behind in developing the necessary infrastructure to regulate Web 3.0. Cryptocurrencies, foundational to any decentralized digital ecosystem, remain highly volatile and are exploited frequently by scammers. Despite notable successes, such as the IRS’s 2021 recovery of $3.5 billion in stolen cryptocurrency, Yip warns that many victims find little recourse, as regulatory frameworks remain weak.
International cooperation, Yip explains, is often limited as well, especially when perpetrators reside in hostile nations such as North Korea, which in 2021 stole $395 million in cryptocurrency. According to Yip, the decentralized nature of cryptocurrencies complicates efforts to trace or recover assets.
Yip concludes that Web 3.0 technologies are promising, but dystopian. Despite corporate insistence that technological developments are made in the pursuit of efficiency and access, Yip warns that a lack of regulatory oversight will have devastating consequences.
