Government-backed studies in Hong Kong have identified decentralized finance (DeFi) technologies
Government-backed studies in Hong Kong have identified decentralized finance (DeFi) and metaverse technologies as new opportunities to strengthen the region’s dominance in the global fintech scene.
The Hong Kong Institute of Monetary and Financial Research (HKIMR), the research arm of the Hong Kong Academy of Finance (AoF), released two reports on June 25, each detailing the impacts of decentralized finance and transfers to the financial sector.
The Hong Kong report on DeFi highlighted the explosive growth of the ecosystem, from a modest market capitalization of $6 billion in 2021 to over $80 billion in 2023. It added:
“These figures show that the potential of decentralized finance cannot be ignored.”
DeFi, which represents 4% of the total crypto asset market, currently remains a largely untapped market. As shown below, more than 70% of the cryptocurrency companies participating in the study have not yet explored this technology.
Read Cointelegraph’s beginner’s guide to learn more about decentralized finance.
Harness the potential of DeFi
The study noted issues in DeFi regarding governance, compliance, and vulnerabilities, but remained overall optimistic about its unique features:
“DeFi has the potential to enable new financial services, such as liquid storage, flash loans and automated market makers, while reducing the speed of transactions and promoting innovation, automation and inclusion financial.”
When it comes to financial transformation, the Hong Kong study found that local financial institutions demonstrated a moderate level of commitment despite their high interest in financial transformation. This result is consistent with the sentiments expressed by participants in Hong Kong.
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Mixed Feelings About the Metaverse
More than 51% of participants bet against the future potential of the Metaverse, and 6% of them were Metaverse vendors.
However, a sector of fintech companies in Hong Kong are actively pursuing developments related to the virtual world. Enoch Fong, CEO of AoF and Executive Director of HKIMR, said:
“Emerging DeFi and metaverse technologies, closely linked to broader virtual assets and Web3 developments, are likely to bring various opportunities to the financial services sector in Hong Kong.”
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