Authorities-backed research in Hong Kong have recognized decentralized finance (DeFi) and metaverse applied sciences as new alternatives to boost the area’s dominance within the international fintech panorama.

The Hong Kong Institute for Financial and Monetary Analysis (HKIMR), the research arm of the Hong Kong Academy of Finance (AoF), launched two experiences on June 25, every detailing the implications of DeFi and metaverse on the finance sector.

Hong Kong’s report on DeFi highlighted the ecosystem’s explosive development from a modest $6 billion market capitalization in 2021 to over $80 billion in 2023. It added:

“These numbers demonstrate that DeFi’s potential cannot be ignored.”

DeFi, which accounts for 4% of the general crypto-asset market, presently stays a extensively untapped market. As proven beneath, over 70% of crypto companies taking part within the research have been but to discover the expertise.

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Tapping into DeFi potential

The research identified present points in DeFi round governance, compliance and vulnerabilities however extensively remained optimistic about its distinctive traits:

“DeFi has the potential to provide new financial services, such as liquid staking, flash loans, and automated market makers, with reduced transaction speed and enhanced innovation, automation and financial inclusion.”

In the case of the metaverse, Hong Kong’s research revealed that native monetary establishments displayed a reasonable degree of engagement regardless of their excessive curiosity in it. This discovering aligns with the sentiment displayed by the Hong Kong respondents.

Blended emotions about Metaverse

Greater than 51% of respondents wager in opposition to the metaverse’s future potential, of which 6% have been metaverse service suppliers.

Nonetheless, a sector of Hong Kong fintech companies is actively pursuing metaverse-related developments. Enoch Fung, CEO of the AoF and govt director of the HKIMR, mentioned:

“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.”