Financial services

AR/VR and the Metaverse Will (One Day) Change Financial Services Regulation – Here’s How | Goodwin

This is the first in a series of alerts in which we will explore the practical reality of the opportunities the metaverse will present for the financial services industry and the challenges companies will face when establishing a metapresence. Stay tuned for follow-up alerts as we build on these insights.


Chances are most of these readers haven’t journeyed into the world of virtual reality (VR) and augmented reality (AR) or taken a virtual step into the metaverse. If you don’t have a metapresence yet, that may change soon. Well-known tech companies are devoting significant resources to planting digital stakes in the metaverse through augmented and virtual experiences and services. One even officially changed its name based on the belief that the metaverse is the next digital frontier, similar to the infancy of social media in the mid-2000s.

But will the financial services industry venture into the metaverse? We think so, especially with the growing convergence of means (improved technology and infrastructure), pattern (increased opportunities for customer engagement and business generation), and opportunity (regulatory openness to adjacent concepts plus increased mainstream adoption/use) to utilize this burgeoning technology.


It doesn’t take much to imagine how brokers, exchanges, investment advisers, banks, underwriters, funds, public and private companies and other financial market participants could use the metaverse to promote and develop their activities. Virtual client meetings, branch inspections and regulatory reviews, interactions with colleagues, roadshows, board meetings and investor days are all real possibilities, along with a few dozen ‘others. The pandemic has accelerated the widespread adoption of remote work environments and the shift away from in-person engagement. Metapresence is a logical next step for many companies to consider (although it’s probably a long way off from a time perspective).

Financial institutions operate within a highly regulated construct of complex and often unclear statutes, regulations, rules, regulatory guidance and common law. A foray into the metaverse by any of these market players will be scrutinized by a host of regulators. Regulatory compliance will need to be a priority for everyone in this space. Examples include requirements related to record keeping, communication standards, KYC/customer identification, staff supervision, and cybersecurity issues (particularly in light of increased expectations and scrutiny of the SEC), to name a few.


Many companies will wonder if it is possible to establish a metapresence and, even if it is, if they should. What are the advantages and disadvantages? What are the competitors doing? Is this an opportunity to stand out from the rest of the peloton? Or is it a colossal chasm of risk and liability they step into? Businesses will need to look closely at existing regulatory requirements and proceed with caution and understand that advice from regulators is likely only to come after becoming aware of a development or practice that makes them uncomfortable or which they consider incompatible with the existing rules.

For those who continue, think in 3D will be critical. What we mean by that is:

  1. Design. Map your company’s strategy to implement a metapresence. Identify key considerations, risks, challenges and opportunities for your business. Expect unknowns. Include key stakeholders within your organization and your regulator contacts (keeping them in the dark probably hurts you here). Integrate your systems, processes and controls. Strive to ensure that messages to customers and the market are crystal clear. Then hit snooze on all of it to catch what you might have missed before.
  2. Deployment. The deployment of your metapresence strategy must be done carefully and in a targeted manner. Make sure your staff is well trained. The various components of your real business must talk and work with the virtual components. Your message to the market must be relevant. Stay in close communication with your regulators, not only about successes, but especially about setbacks (and before they turn into real problems).
  3. Devotion. It will take commitment to make sure a metapresence works for your company’s business and it will be a very subjective set of inputs and outputs for each company in the space. Regular and repeated reviews of progress, condition and opportunities for adjustment are essential. Ask your customers and staff what is working/not working. Constantly look for regulatory and compliance gaps and fix them immediately.


As FinReg advocates, it’s incredibly interesting (and yes, very corny) to think about how regulators and courts will apply existing laws and policies to activity in the metaverse. Will the SEC or other regulators be in front of this movement or will they create new rules? Unlikely. Financial institutions will need to exercise caution when establishing a metapresence. It’s no different from the early days of online brokerage, robo-advisors, or even corporate use of social media. If done in a rules-focused and compliance-conscious manner, early adopters can gain an edge over their competition by appearing more attractive to younger investors. And in addition to potentially improving engagement with customers, implementing a metapresence could actually be fun – let’s not forget!