The Future of Religion in the Metaverse

Tech companies are investing in the Metaverse and recognizing the importance of religious communities. Some have already been regularly meeting in the Metaverse and conducted religious rituals like baptism. The Metaverse would play a key role for religious communities soon. Many questions remain, though, as to whether that relationship will be beneficial for the religious communities and their members or merely help the Metaverse platform companies prioritize for profits in the name of religious faith at any cost.

Religious communities have long been key players in gathering people in congregation throughout history. Hence, it is not a surprise that religious communities have been actively exploring the true potential of the Metaverse during the pandemic. As the Zoom meeting has become the new norm regardless of age, gender, background, and the level of digital literacy, the road to the Metaverse has been paved with a mix of hype and hope. At the same time, the questions of who owns and governs the infrastructure necessary for meeting and growing faith-based communities in the Metaverse raise concerns. 

The Metaverse is the future of the new communication channel and media that can be compared to the invention of the printing press of Gutenberg. Gutenberg’s printing press accidentally collided with the protestant reformation led by Martin Luther and John Calvin, that shaped the modern world. The Internet has already vastly changed the way we interact with our family, friends, and colleagues. Everyone will be connected to everyone else in a much simpler, more humane, accessible, and interactive way as the Metaverse emerges. We can do part of our personal relationships in the Metaverse beyond a physical barrier. 

The anonymity in the Metaverse can help people feel more confident about themselves, motivating them to share deeply personal issues with others. The Metaverse puts everyone behind the avatar. In fact, that helps people in the Metaverse to be more true to themselves. Now, VRChat, for example, has more than 25,000 virtual reality communities that include worship and counseling services for a bunch of teens and 20-something. The Metaverse can allow members to freely meet without judgment regardless of their physical ability or appearance. For people with social phobia, it is much easier for them to be more actively engaged with others in the Metaverse than in a public place of worship. 

Ranging from spiritual meditations in fantasy worlds to traditional worship services in virtual liturgy in hyper-realistic and church-alike environments, religious communities can experience a fellowship that is just as genuine as what they used to have at an old brick-and-mortar temple. It is yet quite controversial, though, if religious activities like baptism to the avatar surrounded by their relatives and friends in the Metaverse shall be respected as the expression of orthodox religious beliefs and practices in the real life.

My key assumption is that robust religious life will certainly continue to grow within the Metaverse. People would first see what the religious communities are trying to do in the Metaverse. Later, people will witness how the Metaverse is completely reforming the landscape of the religious communities and their regular gatherings for worship. Therefore, we need to tackle many important questions and create dialogues among key stakeholders of the Metaverse and religious communities if new religious modalities could emerge in the Metaverse and if the Metaverse reduces or increases religious and social conflicts that we have never seen before. 

We need to deep dive into rather controversial subjects at the juncture of technology, religion, and sociology. We must start dialogues on specific matters such as the civic necessity of religions in the Metaverse to build a just world at peace. It shall be done with respect to the rule of law and the need of reorienting digital platform’s moderation approach to center the protection of not only major religions, but also marginalized religious communities in the Metaverse.

Leading tech companies like Meta (formerly Facebook) are interested in creating partnerships with leading faith communities to make sure that future communal innovations are taking place on their own platforms and continue to invest in them. Pandemic has also increased the popularity of the Metaverse churches like the Robloxian Christians on the Roblox. However, what that means for faith communities themselves still remains to be seen. Therefore, for those who self-identify as religious and care about the future of religion, they have a lot of work to do. 

The Metaverse may influence dramatic changes in our social and religious norms. That said, we should lean in and claim our role in shaping the spiritual worlds within the Metaverse that is being created. As we enter into the Metaverse, we should not also forget about the mental and spiritual harm that people have already experienced in their real life as harassment based on their religious identity, race, gender, or sexual orientation. We shall safeguard people in the Metaverse from the menace of bigotry coming from other humans of difference as everyone should stand at equal footing in the Metaverse. 

The Metaverse may redefine what humans and humanity will be. The Metaverse would be constructive around faith and spirituality for a diverse set of religious communities in terms of creating a quasi-physical sense of connectedness for widely dispersed people. We can also create the Metaverse that allows religious communities to gather together in unprecedented ways of learning and growing in wonderous spiritual experiences. 

I envision seeing more leading religious institutions which start training and nurturing future leaders in the Metaverse.  They shall not only investigate how faith communities leverage the Metaverse to gather people, but also publish work on how to develop faith relationships on the Metaverse with the specific concerns of the moral and political rules and freedom of religious expression.New religions may emerge. At least, the transformation of old ones in the face of the Metaverse is imminent in search of true being and virtual immortality. Regardless of spiritual and ethical tradition, the Metaverse should create a safe new space of liberation and peace for an expanding circle of people with different beliefs, seeking to know one another and recognizing differences under their common values.

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There is No Place to Hide: Would NFT be Taxable?

NFT stands for non-fungible token. It’s a fancy term for a unique digital asset that is associated with blockchain technology. Regardless of recent ups and downs of cryptocurrencies, businesses relating to NFTs have rapidly expanded. It encompasses both tangible and intangible assets such as music, fine arts, sports, hard jewelry, virtual goods, and so forth. NFTs will likely continue their double digit growth in the coming years despite recent troubles with cryptocurrencies. 

Korea has once taken up almost 30% of global cryptocurrencies and NFTs trades. Perhaps, zero tax on digital assets has propelled the adoption of NFTs. Due to its popularity, National Tax Services (“NTS”) has announced that NFTs would be taxed in the coming years. However, there are yet no clear rules, regulations, and even taxable legal definitions of NFTs or broadly digital assets although the legislators have been working on it. 

NFTs have come into prominence at the global scale as a way for creators to get fair compensation for their creative endeavors. It is also helpful for collectors to access a new type of investment worthy assets with ease. Each NFT comes with a unique ID that will be instrumental for a verifiable transaction history. This information should be traceable and secure as it is stored in the blockchain.  

Selling an NFT with cryptocurrencies, fiat money, other NFTs, or any goods or services is considered a taxable event. Creators who use NFTs to digitize their original work would be interested in monetizing their work by selling the equivalent of their original work. The creators still maintain original authorship to the work, and they may produce and sell other copies. However, the unique digital code assigned to each NFT acts like a proof of ownership. Hence, when an NFT is sold, it is a taxable event. The buyer may also have to pay taxes. 

NFTs are taxable. It should be taxed like other assets. But, the process is not going to be that simple. Until further guidance is announced to NFT transactions, taxpayers must apply existing principles of current tax law to NFT transactions. For example, the Internal Revenue Service (“IRS”) in the United States has increasingly issued specific guidance on the tax treatment of cryptocurrencies in recent years. The IRS has also included NFTs in discussions of broader digital assets. 

Despite the strong interest in NFTs, there is no specific legislative guidance currently available in Korea regarding whether NFTs are taxable or not. If so, what is the fair tax rate and tax base of NFTs for tax purposes? In order to delve into and discuss NFT-related tax issues, the first step would be to establish a sound legal definition of NFTs.
In sum, NFT transactions may be viewed as a transfer of a virtual asset or an investment worthy contract, which is one of the securities, or simply a right to the underlying asset such as  copyright or neighboring rights to copyright. In 2022, the IRS released a draft stating that NFTs would be considered digital assets, similar to cryptocurrencies. If NFTs are sold for profit, it would be considered as Capital Gain or Collectible in the tax definition. There is an additional tax aspect that also needs to be considered for sellers of NFTs that have seen the rise in value in recent years. Works of art in real life, for example, are considered collectibles and are taxable at the higher rate at 28%.

One thing to remember, though, NFTs differ from cryptocurrencies. Hence, taxpayers should not treat NFTs in the same manner as we do with cryptocurrencies. Unlike major cryptocurrencies such as Ethereum, which are fungible, NFTs are not interchangeable with each other. In theory, they cannot be directly exchanged for other currencies, goods, or services. However, a growing number of NFTs are attached to real collectibles, not virtual ones. Oftentimes, they are actively changing hands. NFTs that are attached to hard jewelry or expensive cars, for example, are actively traded in respective vertical NFTs.

Many policymakers think that NFT holders owe taxes. Because cryptocurrencies are not the same as fiat currencies such as dollars. Buying with cryptocurrencies is more like selling a stock to get the money to buy an art piece. When an NFT is purchased with cryptocurrencies, the gain or loss on the cryptocurrencies that are used must be calculated for a tax purpose. They could be taxed as a short-term or long-term capital gain, though.

You will likely have to pay taxes upon the sale of NFTs in the near future. If you’re a creator, it would be taxed as ordinary income. As a subsequent owner of NFTs, they are taxed differently depending on the use case and the length of duration that you have held onto. It is not yet 100% clear if tax authorities classify NFTs as collectibles any time soon. Holders must pay taxes upon purchasing NFTs due to the disposal of their cryptocurrencies. When you purchase NFTs with cryptocurrencies, it will also trigger a taxable event as you will have to pay taxes on any capital gain from your cryptocurrencies trading. If NFTs are eventually classified as a collectible, which is also not impossible, it would be subject to the 28% capital gains rate in the case of the U.S. like other collectible assets such as stamps, artwork, and precious metals.

NFTs are a new type of asset. Current tax law is slow to adapt and does not have provisions specifically related to the tax treatment of NFTs. All tax treatments outlined in various forecasts are yet quite speculative based on existing tax law. If you are investing in NFTs, you must be sure to keep good records of your transactions and seek relevant support from tax professionals with domain expertise. Soon after tax authorities release additional guidance, the taxation of NFTs will become more clear and spread fast. No matter what the law says, proper documentation and evidence of your purchases and sales history would minimize potential tax risks in the near future. 

IN THIS CHRISTMAS SEASON: PRAYING FOR YOUR SAFE RETURN, MY FRIEND

Working for a nonprofit organization (“NPO”) gives people an opportunity to make a positive impact. However, identifying the right cause and creating a NPO is a different story, though. Entrepreneur is someone who is willing to launch a new venture and accept full responsibility for running the organization. It will be a rewarding experience if everything goes well as planned. 

NPOs are generally supposed to improve quality of life for others at a community, local, state, national, or even global level. A big difference with a profit corporation, though, is that NPOs are not attached to private or financial gain, but dedicated to public interest or the betterment of society by and large. It means that there is no monetary gain or financial upside for the founders of NPOs. 

Solomon Song (aka Solnamoo Song), a friend of mine from elementary school days, is a flutist by training. He has been featured on various professional music labels and TV shows as a composer and instrumentalist. He is a prolific presenter and inspirational performer at finest musical events and also Christian missionary gatherings around the world. Song has been in Ukraine ever since the Ukraine war began, first, as a musician to comfort kids evacuating from Ukraine at the brink of war at a train station in the Polish border town, but now as a leader of humanitarian relief efforts driving into 220 cities in Ukraine by carrying in relief supplies and transporting out refugees. 

Solomon Song is now traveling to Kherson (Херсон), one of most conflicted areas in Ukraine where he and his crews are fully exposed to life threatening events at any moment. Christmas is a time for family unwrapping gifts and sharing laughter in comfort. However, this winter, Song is in a duty of great responsibility that he has created by himself in compassion for the people in Ukraine going through the most difficult time in their lifetime. He is driving for 10+ hours, unloading heavy boxes in severely cold weather in Ukraine and looking up at the sky with a feeling of unease if there is any sudden attack. Friends and family are in prayer for his safe return and the end of the war in Ukraine. 

Gary Haugen is an attorney and the founder of International Justice Mission (“IJM”). Gary Haugen used to work as a human rights lawyer at the Department of Justice. He left his job and started IJM in his small kitchen along with his 2-3 friends 25 years ago with the vision, but no money, to fight against modern-day slavery. Since early days, IJM has effectively mobilized people and resources and tightly worked with senior leadership of law enforcement and criminal justice in the developing countries to rescue children in sex traffiking and bring justice where there is oppression. 

What Haugen and his team does is a difficult job. IJM has even lost its people as IJM was an easy target from criminals who see IJM’s work inhibits their profit-making opportunities out of law enforcement. IJM is an extraordinary global organization that works with local justice systems to protect the poor who are exposed to violence and oppression. Unbelievably, it could still happen in all countries and any cultural context and children account for almost 30% of those who have been trafficked. Haugen once defined and said “justice is about the use of power and the use of power with moral excellence.” After quitting his decent job at the Department of Justice, he could have gotten into a 6 figure salary job at any top law firm with his pedigree. However, he has no regrets about starting off IJM. He is more dedicated to his conviction than ever.

Now, the war between Russia and Ukraine makes women and children extremely vulnerable to trafficking. We need an immediate and collective response to solve this problem. IJM works on it, too. We don’t know when the war will end but it must end soon. Prolonged negative impact for children who have lost their land and family during the war would be significant. A lot of mothers have been kidnapped and also traded into the sex traffiking chain and kids have no where to go. I am also stuck with sadness and my thoughts go out to all those who have lost their family and hope and all field workers and their families who try to support them.

Conviction does not pay their bill. Like profit-making businesses, NPOs are also facing rising costs. NPOs should stay focused on how they can transfer their conviction and motivation to inspire others. Good nonprofit leaders should inspire their staff and volunteers to act but also find resources to scale up and continue their mission. Sustaining nonprofit causes during economic downturns and finding resilience is a daunting task even for those who are committed. Money is still out there but NPO leaders should turn their mindset for donors as donors won’t bless those NPOs that are not effectively and efficiently running. 

Nonprofit leaders will continue to make an impact during an economic downturn, given that more people would need services and public benefits from NPOs during this difficult time. It is also possible to increase awareness by serving its community in a greater way during a recession. NPO leaders shall prioritize their efforts based on efficacy and exercise caution around their major capital investments, unnecessary staffing, and the cost for fund-raising.

Nonprofit causes are not a nice-to-have. My friend who risks his life on the ground to serve humanitarian efforts once challenged me saying that you wouldn’t even imagine what the war zone would be really like qnd what is really needed there unless you witness it with our own eyes. Oftentimes, it is not about money or supplies. Timely and tactical support that solves the most critical problem during the war is much better than just dumping out overstocks or flowing money into quasi international organizations that have huge overhead expenses, but no direct impact.

We need to grow wonderful nonprofit causes. Though, like I exchanged a short goodbye to my friend in prayer, those committed leaders should survive first. We are getting into a severe winter. We can’t let people down who are directly exposed to life-threatening moments. No matter what the circumstances are, I look forward to my friend’s safe return. Be well, my friend.

Idea is Cheap. Execution is Expensive.

There is no shortage of remarkable ideas. Real work always comes with timely execution. Ideas are just theories if entrepreneurs do not spit them out. What makes the difference is an entrepreneur’s will to execute and carry it on no matter what the circumstances are.

The market is tough right now. Valuations have come down. There are no glorious venture exits in the pipeline. Startup entrepreneurs tend to lower the size of their next funding round. As a consequence, it lowers pre-money valuations. In addition, it is not only Twitter that has signaled a huge wave of layoffs and hiring freezes in the coming weeks.  

Entrepreneurs are facing headwinds. Ventures would take a few years until they are fully mature to go public or become an acquisition target. Any formidable venture exit would come back when the economy becomes more vibrant a few years later. When it comes to startup funding, a default option is a failure. Why do you even bother creating a business profit if there is no sufficient funding? As a matter of fact, winter might have already come. 

College endowments in the U.S. posted biggest gains last year. But, this year, college endowments marked biggest losses since the last major global financial crisis, owing in part to double-digit losses in the U.S. equity markets during the first half of 2022. Harvard and other elite universities were no exceptions. Harvard University endowment lost $2.3 billion, blaming the loss on the global market downturn. More than one-third of Harvard’s annual operating revenue comes from contributions from the endowment. Hence, these losses are significant and adversely affect nearly every aspect of the university’s work. 

In contrast, Yale University is the only school in the Ivy League that reported a positive return on its endowment in the last fiscal year. All Ivy League universities saw endowment slides. Yale’s 0.8% return is its lowest since 2009. It is a toothpick return compared to its incredible investment result in 2021, which marked a whopping 40.2% in return. Like other elite universities, Yale saw huge volatility in its portfolio construction and declining market’s effect. Though, Yale’s positive result is unique among eight elite universities in the Ivy League. Gain is always better than loss. 

What makes a real difference? Yale was the first major university endowment to fully embrace the concept of alternative investing. The Yale model follows broad diversification of assets in principle, allocating less to traditional U.S. equities and bonds while investing more in alternative investments like private equity, venture capital, hedge funds, and real estate. 

Over years, Yale has established strong relationships with the preeminent alternative investment managers, providing Yale with a durable and long-term advantage. With that, Yale has once again produced investment returns that can only be rated as excellent in the context of the rough market volatility and uncertainty. 

Venture capital has turbocharged endowment returns. Historically, high-performing university endowments have religiously backed venture capital and enjoyed unprecedented levels of returns thanks to the growth of technology and innovation adoption, which are encompassing every facet of a business and the economy.

Particularly, Yale’s interest in venture capital has been persistent. 22.6% of Yale’s endowment was allocated into venture capital in 2020. The target allocation for venture capital was even set higher at 23.5%. On average, the U.S. university endowments have approximately 7.7% in venture capital. So, Yale’s exposure and enthusiasm for venture capital is quite significant. At Yale, the venture capital portfolio earned an annualized return of 21.3% for the ten years ending June 30, 2020.

It is a challenging time for venture capital. Venture funding in Asia sank to its lowest level in many 4 years. Global venture funding for the third quarter in 2022 was also down by 53% year over year, hitting the lowest in many quarters. Despite this slow-down, there is yet significant dry powder that is already committed to venture capital, raising over $150 billion to date this year. It shall be deployed in early stage companies in various forms in the coming months. 

To weather the economic downturn, entrepreneurs ought to focus on execution, customer acquisition & retention, and unit economics. Every customer counts and every single dollar matters. Venture capital is supposed to offer valuable advice to entrepreneurs simply beyond cash. Venture capital needs to bring relevant experience, extensive business networks, and critical managerial support to the table when the market significantly slows down and the funding landscape is not promising. Entrepreneurs should put every sweat on execution demonstrating a path to profitability and early maturity. 

Venture capital with lasting support from backers like university endowments certainly adds value to entrepreneurs through its own business acumen, often providing decades of experience in founding and scaling businesses that could be used to develop strategies for success at every stage of the venture lifecycle. The reputation of venture capital that goes along with investment, therefore, should not be under-estimated. Such associations for startups early in their lifecycle with reputable venture capital can be a valuable resource for them to cut through the noise and establish their firm ground in the industry.

Last three months in 2022 will offer a good proxy for what the new normal would look like. Slow investment activities over the past summer would likely result in a much slower season because it would take longer to get up to speed into the deal pipeline. Full-year VC activity would finish strong, though, well above the $200 billion mark in 2022. However, the narrative for the venture capital industry continues to change dramatically. 

This current down period is like only two seconds in multiple sequels of drama. Innovation isn’t correlated with the markets. VC returns are not highly correlated to public equities, either. The market will bounce back, and investors will continue to direct funding to early stage companies with proven business models, strong market dominance, and compelling value propositions. We often forget it when the market is good. Therefore, it is time to challenge the business execution, not the venture capital model itself. 

Strategic Decoupling in Key Tech Sectors: Another Pressure Point

Decoupling literally means the separation of previously tightly linked systems so that those systems could independently operate. In layman’s terms, decoupling refers to an economy that would be able to grow or shrink without corresponding external factors or other economies. 

What has been correlated with others in the past no longer moves in-step according to expectations. The renminbi (“RMB” or Chinese yuan) has broken its traditional ties with the U.S. dollar (“USD”), which has been followed by much visible divergence in recent months, for example. Currently, uncertainties reign. What complicates assessments of potential USD-RMB decoupling is, though, the prolonged impact of pandemic uncertainties, geopolitical tensions and wars, and central banks’ monetary policies and rates hike under inflation pressures. These are not just about economic issues anymore.

Global supply chains are so complex. The whole global supply chain is tightly interlinked together. As we’ve seen from pandemic to war, supply chain disruptions have a huge negative impact on global industrial production, trade, inflation, and so forth. Supply chain is supposed to be more resilient without sacrificing competitiveness, economic interest, and national security. 

However, global geopolitical tensions, economic and techno nationalism strain weak links especially in global tech supply chains. Development, reach, and success of emerging technologies are highly dependent on tightly linked global supply chains and research networks. Efficiency under tight coupling has begun to diminish and been replaced by pursuit of resilience under loose coupling in global supply chains. Supply chain decoupling will further accelerate in the wake of superpower rivalry. 

To further these changes, decoupling of the U.S. and Chinese technology supply chains is well underway. The U.S. presidents have committed to rapid decoupling without knowing what consequences would really follow. The Chinese Communist Party (“CCP”) is pushing its policy agenda, “Made in China 2025” and “China Standards 2035” initiatives, with intention to shore up China’s plans to proclaim independence and dominate in cutting-edge technologies and future industries. This techno-nationalism is on an unprecedented scale, putting $1.4 trillion on a digital infrastructure and public spending to advance this policy agenda. 

The U.S.-China competition has already reached a tipping point. It has also morphed into a new technology cold war. There should be the high cost as extensive trade and commercial ties would continue on uncertain terms. This is not ideal and, formidably, global technology supply chains are at risk. The consequences of a technology cold war are negative for any companies which depend on foreign technologies as well as their global suppliers and R&D networks. Ultimately, it is bad news for consumers. Local technology companies could gain from rising nationalism and domestic substitution to a certain extent, though. But, it is a lose-lose game at the end.  

Tensions between the U.S. and China have sparked calls for policies to decouple the multifaceted economic ties that have connected these two superpowers for decades. Advocates in Washington D.C. have argued that such policies should ensure the U.S. economic leadership, reduce its dependence on Chinese technologies and strategically important materials, and ultimately limit any potential vulnerabilities in key sectors that are important for national security and intelligence activities. 

The U.S. past efforts to decouple supply chains in satellite technology is a good example. Lately, policymakers have also pushed export control and trade policy for A.I. related technologies. Only a few days ago, the Bureau of Industry and Security (“BIS”) under the Biden Administration announced new extraterritorial limits to China on the export of any advanced semiconductors, chip-making equipment, and supercomputer components. 

Decoupling is likely to continue even if it might be a lower priority for the Biden Administration at least on the surface. Given that China and the U.S. mutually see potential risks as they are overly dependent on each other, there is a momentum that won’t disappear easily in the short-term. Trump’s rather erratic and scattershot regulation and public statements offered little clarity to participants in the global supply chain. Biden’s actions are supposed to be more systematic than Trump’s, but long-term U.S. goals have remained largely hidden underneath bureaucratic opacity, business of politics, and rhetorical platitudes. Semiconductor export control policy is only a tip of the iceberg. 

Technology is the engine that powers economic prosperity and growth. Many are worried about if America is prepared to defend or compete in the A.I. era. America has been technologically dominant for such a long period of time during and after the cold war, where we witnessed competition from political, economic, ideological, diplomatic, military, social, and technological dimensions between the U.S. and then the Soviet Union. 

In this past superpower rivalry, emerging economies like East Asia, India, Latin America, and Africa were adversely affected in many ways. The situation has not changed much for the betterment in the emergence of the new technology cold war. This domination has been characterized by the process of globalization, largely led by the U.S., in virtually every sphere of our lives. 

Now, multinational companies face situations where they need to make a more difficult decision. The U.S. will continue to reassess whether and how to remain in their technology leadership, interdependent from its major rival, China. Semiconductor export control may strengthen domestic innovation and hobble its chief rival, China, but would that be enough to protect core national security interests or retain hegemony by any means? 

We should not take it for granted, including all those innovations and technologies that we have enjoyed over decades. A strong contender of global tech leadership, China, has already emerged. China is moving fast with such astonishing speed while we are all still staring at it and trying to understand the true implications. Both the U.S. and China’s tech sectors continue to benefit businesses, universities, and citizens in countless ways, providing skilled labor and highly value-added business revenue opportunities to sustain the global economy and relentless efforts to advance R&D. But that same technology leadership could also power wrong persons building upon unfair trade practices, repressive social control, or even military forces with wrong intentions. So, we shall take it all in stride and make the right next move.