DeFi
Hong Kong’s hopes for DeFi and the metaverse rise amid regulatory pressures – DL News
Shipping to Asia
- Officials have trumpeted the Hong Kong financial services sector’s interest in DeFi and the metaverse.
- Companies have been slow to engage in both areas of crypto.
- Hong Kong is committed to becoming the undisputed crypto hub in Asia.
Hong Kong’s financial watchdogs place great emphasis on DeFi and the metaverse.
On Tuesday, the Hong Kong Institute of Monetary and Financial Research, backed by the Hong Kong central bank, released two reports suggesting that the financial services industry is taking an interest in both crypto markets.
“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,” said Enoch Fung, executive director of the institute.
Even though officials are friendly to the idea of DeFi and Web3, it appears that these two areas could also face greater regulatory scrutiny.
Crypto Crackdown
Indeed, last year, Hong Kong’s Securities & Futures Commission attempted to rein in rampant fraud in the crypto industry.
In 2023, investors lost $400 million to crypto fraud in Hong Kong, according to police officials. Rogue exchanges are responsible for a large part of the losses.
Now, crypto exchanges must undergo a rigorous licensing process. While most obeyed, others chose to leave Hong Kong.
Meanwhile, regulators are also developing frameworks for stablecoins and over-the-counter crypto trading.
Join the community to receive our latest stories and updates
And earlier this month, Hong Kong lawmaker Johnny Ng announced the creation of a new Web3 and Virtual Assets subcommittee within the Legislative Council.
Development of the metaverse
With all these regulatory measures as a backdrop, the Hong Kong Institute of Monetary and Financial Research’s optimism on DeFi and the metaverse seems more wishful thinking than reality.
Looking at the results of the report, we see that 85% of market participants expect the development of the metaverse to have a significant impact on the financial sector.
And two-thirds of respondents in the financial services industry said their companies were already engaged in metaverse technology at some level.
And yet, only 16% of companies had actually implemented metaverse initiatives. And just over a quarter were at the discussion stage.
What they do in the Metaverse is also limited.
Although financial institutions in Hong Kong have adopted various metaverse applications to improve interactions with the public, customers and employees, there is less enthusiasm for using the metaverse as an investment tool or sales channel.
The report further flagged major obstacles, including data privacy concerns, limited platform functionality, and a lack of expertise.
Limited user adoption and interest, high development and maintenance costs, and difficulties integrating with existing operations were cited as significant barriers.
Do you have a Hong Kong crypto story? Email callan@dlnews.com.