Financial watchdog FINRA published a report on the metaverse, highlighting the need for financial firms implementing platforms in it to operate within legal boundaries.
Self-regulating, non-governmental organization the Financial Industry Regulation Authority (FINRA) has released a report with findings about the metaverse and the legal implications for financial firms operating within it.
The FINRA delved deep into the state of the metaverse, mentioning the outlook for the digital realm, and reminded securities and finance firms of their duty to adhere to governmental financial laws and its own rules. The report acknowledges that the once-raging digital realm has been known for gaming and entertainment use cases but holds significant importance to other use cases like finance.
“While the true implications of the metaverse may not be known for years, this report is designed to serve as an initial step in beginning an important dialogue with market participants about potential use of the metaverse within the securities industry,” the report read.
It also mentioned that the revenue derived from the metaverse could reach $800 billion this year and could provide $3 trillion to the Gross Domestic Product (GDP) by 2031. FINRA bases this on the innovation that this technology could breed in novel but explosive fronts like virtual trading, digital twins, data visualization, payments, and more.
FINRA Mentioned the Challenges Prevalent With Metaverse Implementations
The report also spoke of the challenges associated with the technology, “including those related to technology development and adoption as well as risks associated with privacy and cybersecurity.” It spoke of how metaverse projects, in efforts to make digital avatars as real as their clients, collect tremendous amounts of specific data. With that comes the responsibility of maintaining the data appropriately to protect their users’ privacies.
Regarding cybersecurity, it cited another report that mentioned, “[w]hile phishing and social-engineering attacks continue to be a top threat vector in our current digital ecosystem, the risk of bad actors impersonating your personal virtual banker/adviser or your boss/colleague and giving you directions to execute malicious tasks in a virtual room only gets compounded in the virtual world.”
Beyond that, cybersecurity risks can also arise when the security measures of metaverse technology provided by vendors do not align with the internal operational and compliance systems of firms implementing projects in the digital realm. FINRA advised such firms to “examine the entirety of their network segmentation and access controls to ensure that new devices and applications adhere to firm cybersecurity policies.”
