Government-backed studies conducted in Hong Kong have identified decentralized finance (DeFi) and metaverse technologies as pivotal opportunities to bolster the region’s global leadership in fintech.
DeFi’s Explosive Growth and Potential
The Hong Kong Institute for Monetary and Financial Research (HKIMR), part of the Hong Kong Academy of Finance (AoF), published reports on June 25 underscoring the transformative impact of DeFi and metaverse on the finance sector.
The report on DeFi highlighted its remarkable growth, soaring from a modest $6 billion market capitalization in 2021 to over $80 billion by 2023. This growth underscores DeFi’s significant potential, which currently represents 4% of the broader crypto-asset market. However, over 70% of crypto businesses surveyed have yet to fully explore its capabilities.
Hong Kong’s Opportunities and Challenges in DeFi
While DeFi offers promising new financial services such as liquid staking and automated market makers, it also faces challenges concerning governance, compliance, and security vulnerabilities. Despite these hurdles, optimism abounds due to its capacity for innovation, automation, and financial inclusion.
The study on the metaverse revealed moderate engagement from local financial institutions, despite strong interest. More than 51% of respondents expressed skepticism about its future potential, contrasting with a smaller percentage of metaverse service providers actively supporting its development.
Future Prospects
Enoch Fung, CEO of the AoF and executive director of HKIMR, emphasized that emerging technologies like DeFi and the metaverse are closely intertwined with virtual assets and Web3 developments. These advancements are expected to unlock diverse opportunities for Hong Kong’s financial services industry.
