The Metaverse and the Implications for the Securities Industry

The term “metaverse”² has attracted significant attention and curiosity in recent years from the media, entertainment and technology sectors. Though the term has no concrete definition, and interpretations may differ, the metaverse is generally viewed as the next evolution of today’s internet.³ For the purposes of this report, the term “metaverse” refers to virtual worlds that are immersive and interactive and may be experienced in new ways through technological developments in hardware and software.⁴ Metaverse environments may include digital spaces using various techniques to allow individuals to engage in social or business activities through the internet or other networked platforms.⁵

To date, gaming platforms have been at the forefront of metaverse adoption, but companies are developing other entertainment and business applications.⁶ According to one estimate, the global metaverse revenue opportunity could approach $800 billion in 2024 versus about $500 billion in 2020.⁷ Moreover, the metaverse is expected, by some, to contribute over $3 trillion to global Gross Domestic Product (GDP) by 2031.⁸ According to one estimate from the World Economic Forum, 15 percent of the digital economy is already moving to the metaverse, with projections of metaverse activity, led by gaming and e-commerce, reaching 700 million people worldwide by the end of the decade.⁹ Market professionals have also noted that financial institutions have significant opportunities to invest and participate in the metaverse going forward, given the likelihood of increased desire for digital engagement from future generations of investors.¹⁰ In fact, several major financial institutions indicated they have already begun exploring the metaverse to build more immersive online environments to engage with the next generation of customers and to enhance their operations.¹¹ Government bodies around the world (as well as international organizations) have similarly started focusing on the metaverse, including evaluating its possibilities, the attendant risks and the potential impact on the financial industry.¹²

In light of the growth of the metaverse and its potential to play a meaningful role in the future of the financial industry, staff from FINRA’s Office of Financial Innovation (OFI), which is part of the Office of Regulatory, Economics and Market Analysis (REMA), launched a research initiative focusing on the opportunities and risks that the metaverse may present for the industry. This initiative led to the publication of this report. As part of our research, OFI staff engaged with more than two dozen stakeholders, including securities firms and other financial institutions, hardware and software providers, academics, industry observers, and government entities.

This report summarizes the main findings of our research:

• Section I provides a brief overview of the metaverse, including market trends.
• Section II identifies and analyzes the potential applications for the metaverse that the securities industry is exploring.
• Section III addresses potential use cases, challenges and related factors associated with the metaverse.
• Section IV outlines potential regulatory considerations.

This report is intended to raise awareness among FINRA member firms and the broader securities industry by providing an overview of how developments related to the metaverse may impact business models and processes. 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. Accordingly, FINRA requests comments on all areas of this report.¹³