DeFi
Hong Kong eyes DeFi and the metaverse to boost fintech dominance
A recent report from the Hong Kong Institute of Monetary and Financial Research (HKIMR) identified decentralized finance (DeFi) and metaverse technologies as key to the expansion of the fintech sector.
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HKIMR, the research arm of the Hong Kong Academy of Finance (AoF), released two reports on June 25 regarding the impact that the DeFi and Metaverse sectors can have on the country’s fintech sector.
According to Enoch Fung, CEO of AoF:
Emerging DeFi and metaverse technologies, which are closely linked to broader developments in virtual assets and Web3, will likely present various opportunities for the financial services sector in Hong Kong.
The DeFi sector remains untapped
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THE The DeFi sector would have increased from a $6 billion market to more than $80 billion between 2021 and 2023. According to the HKMI, this explosive growth “cannot be ignored.”
With DeFi accounting for only 4% of the overall crypto industry, it has been reported as an untapped market. According to the report, more than 70% of study participants had not yet set foot in this sector.
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The HKMI highlighted that DeFi can potentially open new avenues in financial services. Liquid stakingflash loans and automated market makers were among the few named in the report.
However, the report also recognizes the various risks associated with DeFi, including governance issues, compliance challenges, and technological vulnerabilities.
Addressing these risks has been deemed crucial for sustainable development.
Overall, the study remains optimistic about the unique characteristics the sector offers. The report suggests developing centralized DeFi (CeDeFi) models to “realize the benefits of both worlds.”
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The metaverse sector has also been seen as key to supporting Hong Kong’s virtual assets (VA) ecosystem. The study found that market players are increasingly engaging with this technology.
However, 51% of those involved in the study bet against the metaverse future potential. Respondents cited very limited use cases in this regard that could be integrated into their daily operations.
However, 79% of participants agreed that integrating metaverse applications would enable more engaging brand activities. 33% said technology could also improve operational efficiency.
User adoption and data privacy issues have been reported as the main factors holding back metaverse integration.
The report follows Hong Kong’s recent efforts to regulate the cryptocurrency trading sector.
Hong Kong’s Securities and Futures Commission (SFC) has made registration mandatory for all cryptocurrency exchanges. The regulator will carry out on-site inspections as part of the licensing process.
The move follows increasing cases of fraud and scams in the region. 400 million dollars of cryptocurrency assets were lost to such cases in 2023 alone.
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