Endnotes
1 The views and opinions made in this report are those of the authors and do not represent official views or policies of FINRA. This report does not express any official FINRA legal position and does not create any new regulatory requirements or suggest any change in any existing regulatory obligations, nor does it provide relief from any existing regulatory obligations. This report summarizes key findings from FINRA’s outreach and research on the potential impact of the metaverse and related immersive technologies, in the financial services industry, and does not endorse or validate the use or effectiveness of any of these applications. While this report highlights certain regulatory areas that FINRA members may wish to consider, it does not cover all applicable regulatory requirements or considerations. FINRA encourages all member firms to conduct a comprehensive review of all applicable securities laws, rules and regulations to determine potential implications including any regulatory implications of the metaverse.
2 Throughout this report, the terms metaverse, immersive digital experiences, virtual spaces, virtual reality (VR), augmented reality (AR), extended reality (XR), and mixed reality are all used. Each term has different meanings and can be viewed as different components of persistent, immersive, engaging online environments, though we will use the term “metaverse” most often. There is not a single metaverse, nor does the metaverse imply an interoperable online space like the internet or a dedicated type of technology. Rather, there are various immersive online modalities and metaverse environments as well as different technologies to allow users to engage with these different environments. See Eric Ravenscraft, What is the Metaverse Exactly?, Wired (June 15, 2023) (“[T]he term [metaverse] doesn't really refer to any one specific type of technology, but rather a broad (and often speculative) shift in how we interact with technology.”) [hereinafter Wired Metaverse].
3 Swaptik Chowdhury and Timothy Marler, The Metaverse: What It Is and Is Not, Rand (June 20, 2022) (“[I]n Meta’s announcement, they defined the metaverse as ‘an embodied internet where you are in the experience, not just looking at it.’ Similarly, Microsoft described its enterprise metaverse as being ‘…made up of digital twins, simulated environments, and mixed reality.’”).
4 “Metaverse,” Merriam-Webster Dictionary; What is the Metaverse?, McKinsey & Company [hereinafter McKinsey What is the Metaverse?].
5 Wired Metaverse.
6 Ivy K. Lau, Metaverse and Money, PayPal Newsroom (June 5, 2023) [hereinafter PayPal Metaverse and Money].
7 Metaverse May be $800 Billion Market, Net Tech Platform, Bloomberg Professional Services (Dec. 1, 2021).
8 Aywan Awada, The Metaverse Revolution: How Banks Can Tap Into a $860 Billion Market, EY (Apr. 26, 2023) [hereinafter Metaverse Revolution].
9 Martin Armstrong, This Chart Shows How Big the Metaverse Market Could Become, World Economic Forum (Feb. 7 2023).
10 FINRA Investor Education Foundation, Investors in the United States: The Changing Landscape (Dec. 9, 2022); Metaverse Revolution.
11 Reza Akhlaghi, Banking and its Inroad into Financial Markets, Coindesk (June 8, 2023).
12 Digital Regulation Cooperation Forum (DRCF), Immersive Technologies Foresight Paper (Dec. 2023) (noting that the DRCF, a collaboration of regulators in the United Kingdom, is exploring the transformative potential of immersive technologies and is considering related regulatory implications); Carlos Cantu, Cecilia Franco, and Jon Frost, The Economic Implications of Services in the Metaverse, Bank for International Settlements (BIS) Papers No. 144 (Feb. 2024).
13 See Request for Comments section of this paper.
14 J.P. Morgan, Opportunities in the Metaverse (2022) [hereinafter J.P. Morgan Metaverse].
15 World Economic Forum, Metaverse Privacy and Safety (July 2023).
16 World Economic Forum, Interoperability in the Metaverse (Jan. 2023).
17 See, e.g., Cathy Hackl, Defining the Metaverse Today, Forbes (May 2, 2021).
18 Oliver Wyman, Reckoning with the Metaverse: A Primer on the Metaverse and NFTs (2022).
19 Jackie Wiles, What Is a Metaverse? And Should You Be Buying In?, Gartner (Oct. 21, 2022).
20 McKinsey & Company, Value Creation in the Metaverse (June 2022) [hereinafter McKinsey Value Creation Metaverse]. Given that these figures are reported from 2022, the numbers have likely increased.
21 Bloomberg Intelligence Podcast, Developments, Investments & Experiences in the Metaverse: Into the Metaverse (Nov. 2021).
22 Allison Murray, High Fidelity Invests in Second Life to Expand Virtual World, Zdnet.com (Jan.13, 2022). For some, Second Life was among the original metaverse environments created. Johnny Wood, Second Life: What This 20-Year-Old Virtual World Can Tell Us About the Future of the Metaverse, World Economic Forum (Oct. 13, 2023).
23 XR Association (XRA), Reality Check: Why the US Government Should Nurture XR Development.
24 McKinsey Value Creation Metaverse; Michael Dimock, Defining Generations: Where Millennials End and Generation Z Begins, Pew Research Center (Jan. 17, 2019) (“Anyone born between 1981 and 1996 . . . is considered a Millennial, and anyone born from 1997 onward is part of a new generation.”).
25 Daily Active Users (DAU) of Roblox Games Worldwide From 4th Quarter 2018 to 1st Quarter 2024, Statista (July 2024).
26 McKinsey Value Creation Metaverse.
27 Kris Kolo, From Gamification to the Metaverse: 7 New Ways to Engage Your Audiences, VR/AR Association (July 7, 2023).
28 Brooke Auxier and Jana Arbanas, While We Wait for the Metaverse to Materialize, Young People are Already There, Deloitte Insights (July 7, 2023).
29 McKinsey & Company, Marketing in the Metaverse: An Opportunity for Innovation and Experimentation (May 2022).
30 Lucy Maguire, Alo Yoga Takes on Europe, Starting with the UK, Vogue Business (Nov. 14, 2023); Quennie Wong, Shopping in the Metaverse Could be More Fun Than You Think, CNET (Mar. 23, 2022),.
31 Razorfish Study Finds 52% of Gen Z Gamers Feel More Like Themselves in the Metaverse than in Real Life, Razorfish (April 2022).
32 Citi GPS, Metaverse and Money (Mar. 2022) [hereinafter Citi Metaverse and Money].
33 Overcoming the Technical Obstacles of the Metaverse, Landvault (November 2023).
34 J.P. Morgan Metaverse.
35 Gartner, What Is a Metaverse? And Should You Be Buying In?
36 McKinsey Value Creation Metaverse.
37 Janna Anderson and Lee Raine, The Metaverse in 2040, Pew Research Center (June 30, 2022).
38 Three Challenges the Metaverse Will Need to Overcome, Wired; Tim Cross, A Reality Check for the Metaverse is Coming, Time (Nov. 14, 2022).
39 David Karp, The Role of Legal and Compliance in the Metaverse, McKinsey & Company (June 26, 2023).
40 See, e.g., Vanguard, Virtually Immersive; Press Release, Fidelity Opens “The Fidelity Stack” in Decentraland; Becomes First Brokerage Firm with Immersive Educational Metaverse Experience, Fidelity (Apr. 21, 2022) [hereinafter Fidelity Stack in Decentraland];
41 Wired Metaverse (“Broadly speaking, the technologies companies refer to when they talk about “the metaverse” can include virtual reality. . . as well as augmented reality that combines aspects of the digital and physical worlds. However, it doesn't require that those spaces be exclusively accessed via VR or AR. Virtual worlds—such as aspects of Fortnite that can be accessed through PCs, game consoles, and even phones—have started referring to themselves as ‘the metaverse.’”).
42 See e.g., Ben Strack, Fidelity Doubles Down on Metaverse With Financial Literacy Experience, Blockworks (Apr. 27, 2023) [hereinafter Blockworks Fidelity]; Sia Partners, Enter the Metaverse.
43 PWC, Data Visualization in the Metaverse (July 2023).
44 Jakki Bailey, Working Paper, Presence and Memory: Immersive Virtual Reality Effects on Cued Recall, Stanford University, Virtual Human Interaction Lab (2012).
45 Jason Gewirtz, How Virtual Reality Will Change Trading for Pros and Everyone Else, CNBC (Aug. 8, 2021). Ambient communication (e.g., color coding and sizing data) is also seen as a potential way to efficiently convey information to traders at a glance, without overwhelming them with too much explicit detail. Neil Barbour, Chip Designer MediaTek Looking Past Metaverse to “Ambient Era” of Computing, S&P Global Market Intelligence (May 15, 2023); Condeco Software, What is Ambient Computing? (May 15, 2023).
46 See, e.g., Futures Industry Association (FIA), Flextrade Unveils Augmented Reality Headset, FIA Market Voice (June 8, 2017).
47 Citi Taps Microsoft Hololens for Virtual Reality Trading, Finextra (Apr. 7, 2016).
48 Id.
49 As digital representations, the digital twins may represent a differing set of rights and obligations in comparison to the physical objects. Christy Pettey, Prepare for the Impact of Digital Twins, Gartner (Sept. 8, 2017).
50 McKinsey & Company, Digital Twins: The Foundation of the Enterprise Metaverse (Oct. 2022); Siemens Advanta, Digital Twins and Industrial Metaverse.
51 Peter Smulovics, Emerging Technologies SIG Series – What is Digital Twinning?, Dotneteers (Feb. 20, 2023) [hereinafter Emerging Technologies – Digital Twinning].
52 The Increasing Potential and Challenges of Digital Twins, Nature Computational Science (Mar. 26, 2024) (noting that the term “digital twin” was first coined as part of the National Aeronautics and Space Administration (NASA)’s Apollo 13 mission more than 50 years ago); Emerging Technologies – Digital Twinning.
53 Bob Violino, Digital Twins Are Set for Rapid Adoption in 2023, CNBC (Jan. 21, 2023) [hereinafter CNBC Digital Twins]. See also Bernard Marr, Digital Twins, Generative AI, and the Metaverse, Forbes (May 23, 2023) (“When you connect [3D simulated environments] with natural language and AI-based tools, you can literally ask … ‘hey computer, what’s happening on the shop floor?’ or ‘What are the top three issues I need to be paying attention to right now?’”).
54 CNBC Digital Twins.
55 Thor Olavsrud, Digital Twins: 5 Success Stories, CIO (Aug. 5, 2022)
56 Id.; Terry John Myers, LiveWire Celebrates Going Public With Unity Interactive Streaming, Unity (Jan. 23, 2023); Patrick Kulp, Why the NYSE Built a Virtual Replica of its Trading Floor for IPO Events, Tech Brew (Aug. 30, 2022).
57 Samantha Barnes, Digital Twins: Future Drivers of Smarter Decision-Making, International Banker (Jan. 18, 2022).
58 PayPal Metaverse and Money (“Most metaverse users have purchased games (81 percent), music (69 percent) and video entertainment (69 percent). Almost half say they have purchased artwork. Two-thirds have purchased skins and clothing.”).
59 Id.
60 Id.
61 Id.
62 Id. (“[M]etaverse users use crypto much more widely than e-commerce shoppers, suggesting an appetite for innovation. . . .[m]ore than half of metaverse users (56 percent) expect their use of crypto to increase in the next 5 years. A very high percentage of respondents say it is important to be able to use cryptocurrencies (89 percent) and stablecoins (84 percent) for purchases in the metaverse.”).
63 Roblox Looks to Capture Network Effects From AI, Metaverse Headsets, Pymnts (Feb. 7, 2024) [hereinafter Roblox Network Effects]; Roblox, Roblox Terms of Use (Mar. 22, 2024).
64 Roblox Network Effects.
65 Decentraland, Marketplace; Guneet Kaur, A Beginner’s Guide to Buying Virtual Real Estate in Decentraland (MANA), CoinTelegraph (Mar. 6, 2024); The Sandbox, Welcome to the NFT Marketplace; The Sandbox, Buying, Selling and Renting LAND Frequently Asked Questions.
66 The Sandbox, Sand.
67 Marco Qurioz-Gutierrex, This Week in the Metaverse: The Sandbox and Decentraland are Caught in the SEC’s Crosshairs, Yahoo! Finance (June 10, 2023).
68 Lucy Colback, The Rise of the Platform Economy, Financial Times (Mar. 13, 2023).
69 Dan Raju, How Embedded Investing is Overhauling the Way We Invest, Nasdaq (Jan. 27, 2021).
70 McAfee, What is a Data Broker? (Apr. 4, 2022).
71 Justin Sherman, Examining Data Broker Equifax’s Relationships With Millions of Employers, Duke University, Sanford School of Public Policy (Aug. 24, 2022); LexisNexis, Know Your Customer and Due Diligence Solutions.
72 PWC, What Does Virtual Reality and the Metaverse Mean for Training? [hereinafter PWC Metaverse Training].
73 Id.
74 Taehyun Kim, Theory-Driven Design in Metaverse Virtual Reality Learning Environments: Two Illustrative Cases, Institute of Electrical and Electronics Engineers (IEEE) Transactions on Learning Technologies (Dec. 2023);
Robb Lindgren et al., Enhancing Learning and Engagement Through Embodied Interaction Within a Mixed Reality Simulation, Computers & Education (2016).
75 Verizon, Immersive Virtual Reality Training; Jeremy Bailenson, Is VR the Future of Corporate Training, Harvard Business Review (Sept. 18, 2020).
76 Bank of America, Press Release, Bank of America is First in Industry to Launch Virtual Reality Training Program in Nearly 4,300 Financial Centers (Oct. 7, 2021). With respect to collaboration, Microsoft researchers have indicated that avatars in the metaverse can bring colleagues “one step closer to making people feel like they’re together even when they are physically apart.” Microsoft, Great Expectations: Making Hybrid Work Work, Work Trend Index Annual Report (Mar. 16, 2022).
77 PWC Metaverse Training.
78 Citi Metaverse and Money.
79 Id.
80 Id.
81 Paddy Hirsch, The Case for Financial Literacy Education, NPR (May 16, 2023); Allison Schrager, Are Financial Literacy Programs a Waste of Time?, QZ (Oct. 21, 2018); Annamaria Lusardi and Olivia S. Mitchell, The Economic Importance of Financial Literacy: Theory and Evidence, National Bureau of Economic Research, Working Paper 18952 (Apr. 2013); Annamaria Lusardi and Olivia S. Mitchell, The Importance of Financial Literacy: Opening a New Field, National Bureau of Economic Research, Working Paper 31145 (Apr. 2023).
82 Ann Carns, More States Now Require Financial Literacy Classes in High Schools, The New York Times (Dec. 1, 2023).
83 How Brands Are Plugging Into the Emergent Metaverse, Wired (2024).
84 How the Metaverse Can Help With Financial Education: Part 1, Financial Technology Solutions International (FTSI) (2022); How the Metaverse Can Help With Financial Education: Part 2, Financial Technology Solutions International (FTSI) (2022).
85 Fidelity Brings Gamified Education to the Metaverse, Finextra (Apr. 27, 2022) (“The next generation seeks out financial education in all the places they spend time, whether physical or virtual. We’re committed to serve customers in these decentralized communities as they transform and grow.”); David Penn, The Fidelity Stack, Finovate (Apr. 27, 2022).
86 Fidelity, Press Release, Fidelity® Strengthens Commitment to Educating the Next Generation With First-Ever Roblox Experience and New Metaverse Build (Apr. 27, 2023) [hereinafter Fidelity Roblox]; Blockworks Fidelity
87 Fidelity Roblox.
88 Id.
89 A virtual concert of a prominent artist in April 2020 attracted over 45 million people. Arda Orcal, Billboard: Travis Scott’s Astronomical Drew More Than 45 Million Viewers, ESPN (July 24, 2020); Tom, Regan, From ‘Fortnite’ to ‘Roblox’: The Best In-Game Concerts Ever, Ranked (Aug. 20, 2021); FC Barcelona, Barça Vision, the platform with content about the new Digital Espai Barça, (June 19, 2023); Metaverse Fashion Week.
90 Sophie Kinderlin, Banking in the Metaverse? A.I. Could be About to Change the Way You Manage Your Money, CNBC (May 2, 2023).
91 Prominent banks and brokerage firms in Asia have established virtual branches to offer financial services to their customers. Reza Akhlaghi, Banks Have Come to the Metaverse, Coindesk (June 8, 2023); Leah Golob, Canada’s Big Banks Head Into the Metaverse, Financial Post (May 19, 2023); McKinsey Value Creation in the Metaverse.
92 Eliza Gkritsi, HSBC Enters the Metaverse Through Partnership With The Sandbox, CoinDesk (Mar. 16, 2022); The Sandbox, Press Release, HSBC to Become the First Global Financial Services Provider to Enter The Sandbox (Mar. 16, 2022); Fidelity Stack in Decentraland (“The next generation seeks out financial education in all the places they spend time, whether physical or virtual. We’re committed to serve customers in these decentralized communities as they transform and grow.”); Ian Allison, JPMorgan Is the First Bank Into the Metaverse, Looks at Business Opportunities,CoinDesk (Feb. 15, 2022).
93 Fidelity Stack in Decentraland.
94 Jonathan Vanian, Amazon and Fidelity Labs Collaborated on a Virtual Reality Financial Agent, Yahoo! News (May 15, 2018).
95 Citi Metaverse and Money.
96 Chris Arkenberg and Jana Arbanas, What Does it Take to Run a Metaverse?, Deloitte Insights (Feb. 20, 2023).
97 Roberto Hernandez et al., PWC 2022 US Metaverse Survey [hereinafter PWC Metaverse Survey].
98 World Economic Forum, Metaverse Privacy and Safety (July 2023); Citi Metaverse and Money.
99 Gia Snape, Metaverse Risks: How Organizations Can Prepare, Insurance Business (Jan. 20, 2023).
100 Interpol, A Law Enforcement Perspective (Jan. 2024).
101 FINRA, 2024 FINRA Annual Regulatory Oversight Report, Cybersecurity and Technology Management (Jan. 9, 2024); U.S. Securities and Exchange Commission, Cybersecurity.
102 PWC Metaverse Survey.
103 Cyber Considerations for the Metaverse, KPMG (2022).
104 James Hunt, Decentralization in the Metaverse: Who is in Control?, The Block (Oct. 19, 2023).
105 McKinsey Value Creation Metaverse.
106 See, e.g., FINRA Rule 2210 (Communications with the Public); FINRA Rule 3110 (Supervision); FINRA Rule 3120 (Supervisory Control System); FINRA Rule 4511 (General Requirements); FINRA Rule 4530 (Reporting Requirements); Securities Exchange Act (“SEA”) Rule 17a-4 (Records to be preserved by certain exchange members, brokers and dealers); SEA Regulation S-P (Privacy of Consumer Financial Information and Safeguarding Personal Information); and SEA Regulation S-ID (Identity Theft Red Flags).
107 See FINRA’s Interpretive Questions page.
108 Parties should submit in their comments only personally identifiable information, such as phone numbers and addresses, that they wish to make available publicly. FINRA, however, reserves the right to redact or edit personally identifiable information from comment submissions. FINRA also reserves the right to redact, remove or decline to post comments that are inappropriate for publication, such as vulgar, abusive or potentially fraudulent comment letters.