Hong Kong Government Explores DeFi and Metaverse to Boost Fintech Dominance
The Hong Kong government is looking into decentralized finance (DeFi) and metaverse technologies as part of its efforts to strengthen its position in the global fintech industry.
The Hong Kong Institute for Monetary and Financial Research (HKIMR), which is the research arm of the Hong Kong Academy of Finance (AoF), has recently published two reports that examine the implications of DeFi and metaverse on the financial sector.
One of the reports highlights the significant growth of DeFi, with its market capitalization skyrocketing from $6 billion in 2021 to over $80 billion in 2023.
Hong Kong recognizes the potential of DeFi and believes that it cannot be ignored. Currently, DeFi accounts for 4% of the overall crypto-asset market, but it remains largely untapped. The study reveals that more than 70% of crypto businesses involved in the research have not explored the potential of DeFi yet. Despite the challenges surrounding governance, compliance, and vulnerabilities, the study remains optimistic about the unique characteristics of DeFi, including its ability to provide innovative financial services, automation, and financial inclusion.
In terms of the metaverse, the study points out that local financial institutions in Hong Kong have shown a moderate level of engagement with the technology, despite their high interest in it. However, over 51% of Hong Kong respondents express skepticism about the future potential of the metaverse. Nevertheless, there is a sector within the Hong Kong fintech industry that is actively pursuing metaverse-related developments, indicating a growing interest and recognition of its potential.
Enoch Fung, CEO of the AoF and executive director of the HKIMR, acknowledges the close connection between DeFi, the metaverse, virtual assets, and Web3 developments.
Hong Kong government entities recently attended a tech conference in Toronto to promote the city’s offshore ready-to-move technology hub 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 at Collision 2024.
While Hong Kong continues to position itself as a crypto-friendly hub, the region has experienced a series of crypto exchange closures in May. Several exchanges, including HKVAEX, IBTCEX, QuanXLab, Huobi HK, Gate.HK, OKX HK, and Bybit (Spark Fintech Limited), have either withdrawn their license applications or closed down. This has resulted in only 17 virtual asset trading platforms remaining on the application list, with a total of 11 companies withdrawing or returning their license applications.
Recently, Hong Kong Legislative Council member Wu Shuo has criticized Hong Kong’s cryptocurrency licensing system, citing its impact on market confidence.
