March 12, 2025  

On October 24, 2024, the Financial Industry Regulatory Authority (FINRA) published The Metaverse and the Implications for the Securities Industry, analyzing the metaverse’s potential impact on broker-dealers and investors. The Digital Chamber (TDC) responded with a comment letter supporting FINRA’s proactive approach and advocating for a balanced, technology-neutral regulatory framework.

Assessment of the Report

TDC commends FINRA’s efforts to explore metaverse applications in financial services, such as trading, investor education, and virtual consultations. The Metaverse Report provides a thorough analysis of the metaverse’s potential, outlining both opportunities—such as enhanced customer engagement, operational efficiencies, and new investor education tools—and regulatory challenges. FINRA’s detailed examination of real-world use cases, including virtual branches, gamified investor education, and VR financial advisors, reflects its commitment to staying ahead of technological advancements. By addressing these elements, the report lays a strong foundation for continued dialogue between regulators and industry stakeholders. 

TDC’s Recommendations

In close collaboration with TDC members, we submitted comments addressing these emerging use cases and potential regulatory considerations. Highlights from that comment letter are as follows: 

1. Maintain a Technology-Neutral Framework

FINRA’s existing regulatory framework should remain adaptable to emerging technologies without necessitating broad overhauls. Broker-dealers need clarity on how current regulations apply to metaverse-related activities to foster innovation while ensuring compliance. 

2. Foster Industry Collaboration

FINRA should continue to proactively engage with broker-dealers, platform developers, and other industry participants to identify compliance challenges, data privacy concerns, and best practices for investor disclosures in immersive environments. 

3. Monitor Trends

To ensure its rules remain relevant, FINRA should track adoption rates, evolving definitions of metaverse technologies (VR, AR, digital twins), and emerging cross-border regulatory challenges. 

4. Provide Targeted Guidance Where Needed

The metaverse introduces unique challenges related to compliance, supervision, and recordkeeping. Rather than implementing sweeping new rules, FINRA should clarify how existing regulations apply to decentralized platforms, virtual branch offices, avatar-based interactions, and other novel use cases. Providing targeted guidance will enable firms to implement effective oversight and risk management practices. 

5. Consider Practical and Operational Implications

To ensure regulatory clarity and compliance, FINRA should assess how firms apply existing compliance processes to metaverse innovations rather than imposing outdated standards. A principles-based approach will support responsible adoption while maintaining investor protections. Where rule modifications or new rules may be needed, FINRA should actively solicit feedback from member firms to ensure they have a full understanding of the practical implications involved that necessitate such changes. 

6. Ensure Continued Regulator Education

FINRA should expand its Crypto Hub to include metaverse-related advancements, ensuring a consistent and informed regulatory approach. Centralizing expertise, improving internal knowledge-sharing, and aligning examination and policy efforts will better support responsible innovation in this evolving space. 

Conclusion

TDC remains committed to collaborating with FINRA and other regulators to establish a regulatory framework that supports responsible innovation in the metaverse. As the technology evolves, regulators must remain adaptable, working closely with industry stakeholders to refine policies and address emerging challenges. A flexible, principles-based approach will ensure that innovation can thrive while maintaining market integrity and investor protection.  

We look forward to ongoing discussions with FINRA and policymakers to shape a regulatory landscape that fosters compliance, industry growth, and technological advancement. In addition, we appreciate the contributions to this comment letter by Gavin Meyers, Elaine Critides, and Gene Burd of Pierson Ferdinand LLP for their expertise and leadership in putting together our response. For more information or to get involved in these discussions, please contact us at membership@digitalchamber.org.