Is Hong Kong the Next Big Thing in Crypto? DeFi and Metaverse Plans Revealed

Hong Kong is positioning itself as a leader in the fintech landscape by focusing on crypto-related sectors such as decentralized finance (DeFi) and the Metaverse.

A recent government-backed study by the Hong Kong Institute for Monetary and Financial Research (HKIMR), part of the Hong Kong Academy of Finance (AoF), emphasized the importance of these digital frontiers in shaping the future of finance in Hong Kong.

Reports released on June 25 analyze the impact and potential of DeFi and Metaverse technologies, highlighting their rapid growth and emerging opportunities.

Hong Kong’s Push Into DeFi and the Metaverse

DeFi research has revealed a significant increase in market capitalization, from $6 billion in 2021 to more than $80 billion in 2023, showing an increase that underscores the potential of the sector.

Despite DeFi accounting for only 4% of the overall crypto-assets market, it remains largely untapped, with nearly 71% of Hong Kong crypto businesses surveyed not yet exploring this approach.

The report remains optimistic about DeFi’s capabilities to “reorganize” financial services with new features such as “liquid staking, flash loans, and automated market makers,” promising reduced processing times and increased investment.

Correspondingly, Metaverse research reveals that although local financial institutions have shown great interest, their engagement remains moderate.

However, more than half of the survey respondents expressed skepticism about Metaverse’s potential, a sentiment that does not reflect the stance of other Hong Kong fintech businesses.

These companies are closely following developments related to the Metaverse, exploring how virtual environments can play an important role in financial services.

Enoch Fung, CEO of AoF and executive director of HKIMR, highlighted the convergence of DeFi, Metaverse, and the wider Web3 technology as critical to the future of Hong Kong’s financial industry. Fung noted in particular:

The emerging technology of DeFi and the metaverse, closely linked to the broader virtual goods and Web3 developments, will likely present various opportunities for the financial services industry in Hong Kong.

Submitting Crypto Hub Status

Hong Kong’s broader strategy includes becoming a new cryptocurrency center and job hub. This objective is supported by recent regulatory developments, such as the Securities and Futures Commission of Hong Kong (SFC) granting initial approvals to 11 cryptocurrency exchanges.

This development is part of a larger effort to license the virtual asset trading platform (VATP), which began in 2022 and aims to help the situation in Hong Kong and the world’s leading crypto hubs such as Singapore and Dubai.

Further fueling the situation, industry leaders suggest that Hong Kong may soon introduce staking options for spot Ethereum exchange-traded funds (ETFs), improving the appeal and performance of crypto-based financial products in the region.

The featured image was created with DALL-E, a Chart from TradingView