The Hong Kong government is now concentrating on decentralized finance (DeFi) and metaverse technologies to bolster its global fintech reputation.
Recent insights from the Hong Kong Institute for Monetary and Financial Research (HKIMR), the research arm of the Hong Kong Academy of Finance (AoF), back this strategic shift.
According to the HKIMR report, the DeFi sector has seen remarkable growth, with its market capitalization surging from $6 billion in 2021 to over $80 billion in 2023. Despite this rapid expansion, DeFi still accounts for only 4% of the overall crypto-asset market. The report indicates that over 70% of crypto businesses have yet to fully explore DeFi’s potential.
The report also highlights the challenges DeFi faces, such as governance, compliance, and security issues. However, it remains hopeful about DeFi’s ability to offer innovative financial services. These services can increase automation and financial inclusion, making them a significant component of future financial systems.
Metaverse Engagement Among Financial Institutions
Another report from HKIMR delves into the metaverse, showing a moderate level of engagement from Hong Kong’s financial institutions. Despite the interest, more than half of the respondents (51%) expressed doubts about the metaverse’s future potential. Nonetheless, certain segments of Hong Kong’s fintech sector are actively exploring metaverse-related developments, signaling a growing recognition of its potential.
Enoch Fung, CEO of the AoF and executive director of the HKIMR, commented on the integration of emerging technologies with financial services.
“The emerging technologies of DeFi and the metaverse, which are closely connected to the broader virtual asset and Web3 developments, will likely present various opportunities for the financial services industry in Hong Kong.”
Promoting Hong Kong in the International Tech Scene
Hong Kong officials are actively promoting the city as a premier destination for fintech and Web3 startups. They participated in the Collision 2024 tech conference in Toronto, highlighting Hong Kong’s readiness to serve as an offshore technology hub for Canadian crypto and Web3 businesses. This event was co-hosted by the Hong Kong Economic and Trade Office in Toronto (Toronto ETO), Invest Hong Kong (InvestHK), and StartmeupHK (SMUHK).
Despite its efforts to position itself as a crypto-friendly hub, Hong Kong has seen a series of crypto exchange closures. In March 2024, HKVAEX, allegedly linked to Binance, withdrew its license application. This was followed by the exits of IBTCEX, QuanXLab, Huobi HK, Gate.HK, OKX HK, and Bybit (Spark Fintech Limited) in May. As a result, 17 virtual asset trading platforms remain on the application list, with 11 companies withdrawing or returning their license applications.
The withdrawal of license applications has sparked concerns about Hong Kong’s cryptocurrency licensing system. Hong Kong Legislative Council member Wu Shuo has publicly criticized the system, claiming it undermines market confidence. These recent closures and withdrawals underscore the challenges crypto businesses face in navigating Hong Kong’s regulatory environment.
Source: coinfomania.com
