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FINRA warns firms of risks in adopting metaverse strategies

FINRA warns firms of risks in adopting metaverse strategies

GrafaGrafa2024/10/28 20:37
By:Mahathir Bayena

The Financial Industry Regulatory Authority (FINRA) has issued a report cautioning securities firms about the challenges of adopting metaverse applications. 

While the metaverse offers innovative ways to engage and educate investors, the report emphasises that firms must address potential risks to ensure responsible development. 

According to FINRA, data privacy and protection remain significant concerns. 

The report highlights that firms aiming to establish a metaverse presence will require large amounts of behavioral data, increasing the vulnerability to data breaches. 

This extensive data collection could expose users to potential cyberattacks by malicious actors. 

FINRA notes that protecting personal information and clearly disclosing the use and sharing of collected data will be key to building trust within these virtual environments. 

Cybersecurity risks are also a major consideration for firms exploring the metaverse. 

The report references a 2022 KPMG study that warns of the heightened threat of bad actors impersonating colleagues or executives to carry out harmful activities. 

Additionally, introducing new applications into a firm’s virtual environment could create vulnerabilities, expanding the threat landscape. 

The regulatory body advises firms to assess the compatibility of metaverse technology with their internal systems and to review network segmentation and access controls. 

Ensuring that new applications align with cybersecurity policies is crucial to mitigating risks. 

FINRA’s report also touches on the technical and personnel upgrades required to implement metaverse applications. 

Firms may face challenges related to the interoperability of different metaverse platforms, as well as the resources needed to build and maintain these virtual environments. 

In its recommendations, FINRA urged firms to be “mindful of the potential implications for their regulatory obligations.” 

It encouraged firms to consider the report’s findings when developing or modifying existing practices to maintain compliance with regulations.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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