FINRA Releases Metaverse Regulation Report, Blockchain Holds the Key

FINRA Metaverse Regulation Report Offers Key Insights for Financial Institutions Global Metaverse Revenue Opportunities Expected to Reach $800 Billion by 2024 [Unblock Media] In a recently released report, the Financial Industry Regulatory Authority (FINRA) highlighted that the metaverse could have potential regulatory impacts on securities and financial firms. FINRA has recommended that financial institutions carefully consider their regulatory obligations when integrating the metaverse into their systems and processes or using this technology in their product offerings. According to the report, global metaverse revenue opportunities could reach $800 billion by 2024 and contribute more than $3 trillion to global GDP by 2031. Currently, metaverse technology is primarily focused on gaming and industrial applications. However, FINRA has investigated several use cases for the financial industry, including data visualization, digital twins, and virtual trading. Data visualization technology simplifies the understanding and analysis of complex financial data, while digital twin technology offers a virtual transaction environment similar to real financial transactions. In the case of virtual trading, platforms within the metaverse can provide real-time trading of virtual currencies or digital assets, offering a differentiated experience from traditional trading methods. Global consulting firms McKinsey and EY predict a surge in metaverse-related investments and consumer spending. They evaluate that financial institutions will have opportunities to offer new customer experiences and build sustainable revenue models through virtual spaces. Nevertheless, several challenges associated with metaverse technology were also identified. The most significant challenges are security and privacy. All financial transactions and data transmissions within the metaverse are more complex and diverse than existing financial systems, presenting risks such as hacking or information leaks. There could be security disparities between metaverse platforms, which could present significant vulnerabilities in protecting financial data. To address this, blockchain-based security systems and real-time monitoring systems will play crucial roles. Additionally, to prevent fraud in virtual environments, user education and real-time fraud detection technologies are necessary. FINRA stressed its commitment to technological neutrality and emphasized that the same regulatory obligations apply to business activities utilizing the metaverse as they do with other technologies or tools. While the economic potential of the metaverse could be immense, thorough security and regulatory compliance are essential to realize this potential. This reflects the main issues that could arise when the financial services industry adopts the metaverse. FINRA's outlook and warnings will serve as major guidelines as new technologies like the metaverse are integrated into the financial sector.