The reports emphasize the potential for growth and innovation in these emerging sectors, despite the obstacles present in the current DeFi and metaverse landscape in Hong Kong
Decentralized finance (DeFi) and metaverse technologies have been identified as new opportunities to strengthen the region’s position in the global fintech landscape by government-backed studies in Hong Kong.
On June 25, the Hong Kong Institute for Monetary and Financial Research (HKIMR), the Hong Kong Academy of Finance (AoF) research branch, published two reports that each comprehensively analyzed the financial sector’s implications related to DeFi and the metaverse.
The ecosystem’s explosive development from a modest $6 billion market capitalization in 2021 to over $80 billion in 2023 was underscored in Hong Kong’s report on DeFi. In addition, it included:
“These figures indicate that DeFi’s potential is simply too significant to disregard.”
DeFi is untapped mainly, accounting for 4% of the overall crypto-asset market. As illustrated below, more than 70% of the crypto businesses that participated in the study had yet to investigate the technology.
Unlocking the potential of DeFi
The investigation identified governance, compliance, and vulnerability concerns in DeFi; however, there was a general sense of optimism regarding its distinctive attributes.
“DeFi has the potential to offer new financial services, including liquid staking, flash loans, and automated market makers, with improved innovation, automation, financial inclusion, and reduced transaction speed.”
The metaverse was the subject of Hong Kong’s study, which revealed that local financial institutions exhibited moderate engagement despite their significant interest in it.
This discovery is consistent with the sentiment expressed by the respondents in Hong Kong.
Mixed emotions regarding the Metaverse
6% of respondents were metaverse service providers, while over 51% of respondents wagered against the metaverse’s future potential.
Nevertheless, a subset of Hong Kong fintech companies is currently engaged in the pursuit of metaverse-related advancements. Enoch Fung, the executive director of the HKIMR and CEO of the AoF, stated,
“The financial services industry in Hong Kong will likely encounter a variety of opportunities due to the emerging technologies of DeFi and the metaverse, which are closely linked to the broader virtual asset and Web3 developments.”