Hong Kong Government Explores DeFi and Metaverse for Fintech Advancement
The focus of the Hong Kong government has shifted towards decentralized finance (DeFi) and metaverse technologies with the aim of enhancing its presence in the global fintech sector.
Recently, the Hong Kong Institute for Monetary and Financial Research (HKIMR), the research division of the Hong Kong Academy of Finance (AoF), unveiled two reports examining the impact of DeFi and the metaverse on the financial industry.
One of the reports highlighted the remarkable growth of DeFi, as its market capitalization skyrocketed from $6 billion in 2021 to exceeding $80 billion by 2023.
Recognizing the Potential of DeFi: Insights from Hong Kong
The research conducted in Hong Kong stresses the rapid expansion of the DeFi ecosystem and underscores the need to acknowledge its potential. Despite constituting only 4% of the overall crypto-asset market, DeFi remains largely untapped. The study indicates that more than 70% of crypto enterprises surveyed are yet to explore the possibilities offered by DeFi.
While obstacles related to governance, regulatory compliance, and security persist, the study remains optimistic about the unique attributes of DeFi, including its capacity to introduce new financial services through enhanced innovation, automation, and financial inclusivity.
Shifting focus to the metaverse, the study underlines a moderate level of involvement among local financial institutions, despite a significant interest in the technology. Findings from Hong Kong respondents reveal over 51% expressing doubts about the future potential of the metaverse. Nonetheless, a segment of the Hong Kong fintech sphere is actively pursuing metaverse-related initiatives, signaling a growing curiosity and acknowledgment 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 advancements.
Hong Kong Officials Promote City in Canada
Representatives from Hong Kong government entities recently attended a tech conference in Toronto, showcasing the city’s offshore, readily-accessible technology hub for Canadian crypto and Web3 startups. Collaboration among the Hong Kong Economic and Trade Office in Toronto (Toronto ETO), Invest Hong Kong (InvestHK), and StartmeupHK (SMUHK) led to a joint event at Collision 2024.
While Hong Kong continues to establish itself as a crypto-friendly hub, the region witnessed several crypto exchange closures in May. Notably, on March 28, 2024, HKVAEX, suspected of ties to Binance, retracted its license application. Subsequently, IBTCEX, QuanXLab, Huobi HK, Gate.HK, OKX HK, and Bybit (Spark Fintech Limited) followed suit on various dates in May.
These withdrawals reduced the number of virtual asset trading platforms on the application list to 17, with 11 companies either withdrawing or returning their license applications. Recently, Wu Shuo, a member of the Hong Kong Legislative Council, criticized the cryptocurrency licensing system in Hong Kong, citing its impact on market confidence.