The Hong Kong government has shifted focus towards decentralized finance (DeFi) and metaverse technologies to enhance its standing in the global fintech arena.
The Hong Kong Institute for Monetary and Financial Research (HKIMR), affiliated with the Hong Kong Academy of Finance (AoF), has published two reports examining the impact of DeFi and metaverse technologies on the financial sector.
One report highlighted the rapid expansion of DeFi, with its market capitalization soaring from $6 billion in 2021 to more than $80 billion by 2023.
DeFi’s Potential Can’t be Ignored: Hong Kong
Hong Kong’s examination of DeFi underscores its rapid growth within the ecosystem and emphasizes the significant potential it holds.
Currently representing 4% of the total crypto-asset market, DeFi remains largely untapped.
The study reveals that more than 70% of crypto businesses involved in the research have not yet explored the potential of DeFi.
Despite challenges related to governance, compliance, and security vulnerabilities, the study remains optimistic about DeFi’s unique attributes, including its capacity to offer innovative financial services, enhanced automation, and promote financial inclusion.
Shifting to the metaverse, the study notes a moderate level of engagement among local financial institutions, despite their strong interest in the technology.
The sentiment echoes findings from respondents in Hong Kong, with more than 51% expressing doubts about the future potential of the metaverse.
Nevertheless, a segment of the Hong Kong fintech sector is actively pursuing metaverse-related advancements, indicating increasing interest and recognition of its possibilities.
Enoch Fung, CEO of the AoF and executive director of the HKIMR, recognizes the intertwined nature of DeFi, the metaverse, virtual assets, and Web3 developments.
“Focusing on emerging technologies like DeFi and the metaverse, which are closely linked to broader virtual asset and Web3 advancements, is likely to unveil numerous opportunities for Hong Kong’s financial services industry.”
Hong Kong Officials Promote City in Canada
Hong Kong government representatives participated in a tech conference in Toronto, where they highlighted the city’s established offshore technology hub tailored for Canadian crypto and Web3 startups.
The Hong Kong Economic and Trade Office in Toronto (Toronto ETO), Invest Hong Kong (InvestHK), and StartmeupHK (SMUHK) collaborated to co-host an event during Collision 2024.
Despite positioning itself as a crypto-friendly hub, Hong Kong faced a series of closures among crypto exchanges in May.
On March 28, 2024, HKVAEX, suspected to be linked with Binance, withdrew its license application. This was followed by IBTCEX, QuanXLab, and Huobi HK on May 14, Gate.HK on May 22, OKX HK on May 24, and Bybit (Spark Fintech Limited) on May 31.
These withdrawals reduced the number of virtual asset trading platforms with active applications to 17, with a total of 11 companies either withdrawing or returning their license applications.
Recently, Hong Kong Legislative Council member Wu Shuo criticized the city’s cryptocurrency licensing system, citing concerns about its impact on market confidence.
