Hong Kong’s government research has identified decentralized finance (DeFi) and metaverse technologies as potential for expansion in the global fintech sector.
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.
Hong Kong’s report on DeFi underscored the ecosystem’s rapid expansion, which began with a modest $6 billion market capitalization in 2021 and reached over $80 billion in 2023. In addition, it included:
“These numbers demonstrate that DeFi’s potential cannot be ignored.”
DeFi is largely untapped, accounting for 4% of the crypto-asset market. Out of the crypto enterprises that participated in the study, more than 70% had yet to investigate the technology, as illustrated below.
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 provide new financial services, such as liquid staking, flash loans, and automated market makers, with reduced transaction speed and enhanced innovation, automation and financial inclusion.”
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. The sentiment of Hong Kong respondents is consistent with this discovery.
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, some Hong Kong fintech companies dedicate resources to advancing metaverse-related technologies. 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 interconnectedness of the broader virtual asset and Web3 developments with the emerging technologies of DeFi and the metaverse.”
