On October 24, 2024, FINRA released an eye-opening report, The Metaverse and the Implications for the Securities Industry, addressing the securities industry's potential engagement with the metaverse—a rapidly evolving virtual landscape. The report underscores emerging use cases, industry challenges, and regulatory considerations for broker-dealers and other FINRA member firms looking to leverage immersive virtual technology to innovate in customer engagement, data visualization, trading, and investor education.
Potential Use Cases for the Metaverse in Securities
The report outlines a variety of potential applications for the metaverse in the securities industry:
- Data Visualization: Enhanced virtual data dashboards that allow financial professionals to interact with market data in real-time through immersive interfaces.
- Virtual Trading: Virtual trading floors and simulation environments where investors can engage in live trading within a digital framework.
- Digital Twins and Industrial Metaverse: Creation of digital replicas of real-world trading environments for training and strategy testing.
- Payments and Transactions: Streamlined virtual payment systems that could support seamless transactions within the metaverse.
- Training and Collaboration: Remote learning and professional training using augmented and virtual reality, enhancing remote collaboration in an increasingly digital securities sector.
- Investor Education: Virtual educational experiences that can simplify and personalize complex financial concepts for investors.
- Customer Solicitation and Service: Direct customer engagement and support through immersive experiences, potentially enhancing personalized financial guidance.
Challenges to Consider
The report highlights several critical challenges, including:
- Resource Needs: High technological and financial costs involved in metaverse adoption.
- Data Privacy and Cybersecurity: The complexity of protecting user data within virtual platforms and safeguarding against cyber threats.
- Regulatory Compliance: Balancing innovation with adherence to evolving regulatory standards is crucial as firms integrate new technology into their operations.
Regulatory Considerations
FINRA emphasizes that existing regulatory obligations will extend to metaverse-based activities, as FINRA's regulations are designed to be technology-neutral. Thus, firms incorporating the metaverse into their services must ensure compliance with relevant FINRA rules and federal securities laws. How these requirements apply will depend on specific use cases and the manner of implementation. Although the report does not introduce new regulatory requirements, it highlights that ongoing adherence to standards such as data privacy, communication with the public, and recordkeeping will be key as firms explore metaverse technologies.
FINRA's Call for Public Commentary
In a proactive move to further understand and engage with this technology, FINRA is seeking public commentary from industry participants exploring metaverse applications. Firms, tech innovators, and other stakeholders are invited to submit their insights by March 14, 2025.
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