The Financial Industry Regulatory Authority (FINRA) has released a report examining the potential advantages and challenges of metaverse adoption within the securities sector. The report underscores the need for firms to navigate these challenges responsibly to promote ethical and effective metaverse applications.
FINRA suggests that the metaverse can offer new ways for firms to engage and educate investors, but it also presents obstacles firms must address before adoption. A key issue is data privacy: while the metaverse requires substantial user data for effective integration, this may expose users to heightened privacy risks. Collecting and analyzing such data could leave users vulnerable to malicious actors seeking to exploit personal information.
Cybersecurity also stands out as a prominent challenge, with risks compounded by virtual impersonation tactics, where bad actors may mimic colleagues or superiors to conduct fraudulent actions.
The report, referencing a 2022 KPMG study, warns of the risks that any new application can introduce to a firm’s cybersecurity landscape, expanding the threat surface.
Additional technical hurdles include the lack of interoperability between different metaverse platforms and the costs associated with upgrading both technology and personnel to manage these systems effectively.
FINRA’s report further recommends proactive steps to address the metaverse’s unique regulatory and operational risks. To enhance data security, firms should prioritize privacy protections, maintain thorough recordkeeping, and clearly disclose which data is collected and how it is shared. By doing so, firms can foster trust in virtual environments where real-world personal data intersects with digital activity.
On cybersecurity, FINRA advises firms to align metaverse technology with their operational and compliance frameworks, ensuring that access controls and network segmentation meet existing cybersecurity standards.
Beyond technical concerns, FINRA encourages firms to consider how metaverse strategies might impact their regulatory obligations. The report urges companies to account for these insights when designing or adjusting practices to remain compliant with current regulations.
