FINRA says rules still apply in the metaverse

The Financial Industry Regulatory Authority (FINRA), a non-governmental, self-regulatory organization, recently published a report outlining the potential regulatory implications for securities and finance firms operating in the metaverse.

Along with a breakdown of the current state of metaverse activity in the finance industry and projections for the technology’s future, FINRA also dedicated several paragraphs of the report to reminding businesses that both its rules and relevant government regulations apply to their activities in the metaverse just as they would otherwise.

“Member firms should also be mindful of the potential implications to their regulatory obligations as they consider whether to incorporate the metaverse into their internal systems and processes or use this technology within product offerings,” wrote the authority in the report published on Oct. 24.

The metaverse opportunity

The report indicates global metaverse revenue “opportunity” could reach $800 billion in 2024 and is “expected, by some, to contribute over $3 trillion to global Gross Domestic Product (GDP) by 2031.”

While metaverse technology often tends to focus on gaming and industrial applications, FINRA investigated several use cases for the finance industry including data visualization, digital twins, and virtual trading. It also identified several challenges facing the metaverse industry as a whole and, specifically, finance use cases.

Chief among the challenges identified was security and privacy. As the term “metaverse” is somewhat nebulous and covers numerous technology verticals, ensuring specific platforms meet the regulatory needs of financial institutions, brokers, and dealers is of the utmost importance for smooth adoption, according to the report.

FINRA also pointed out that, despite the experimental nature of many business projects in the metaverse, those endeavors still fall under the same legal constraints and requirements as any other dealings in the financial services industry.

Per the report:

“FINRA reminds its member firms that FINRA’s rules—which are intended to be technology neutral—and the securities laws more generally, continue to apply if member firms use the metaverse in the course of their businesses, just as they apply when member firms use any other technology or tool. Using any given technology does not absolve firms of their regulatory obligations.”

Source: https://cointelegraph.com/news/financial-industry-regulatory-authority-rules-still-apply-metaverse