- Officials trumpeted the Hong Kong financial services industry's interest in DeFi and the metaverse.
- Firms have been slow to engage the two crypto fields.
- Hong Kong is committed to becoming Asia's undisputed crypto hub.
Hong Kong’s finance watchdogs are high on DeFi and the metaverse.
On Tuesday, the Hong Kong Institute for Monetary and Financial Research, which is backed by Hong Kong’s central bank, released two reports suggesting the financial services industry is keen on the two crypto markets.
“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,” said Enoch Fung, the institute’s executive director.
Even though officials are warming to the idea of DeFi and web3, it looks like the two areas might also draw more regulatory scrutiny.
Crypto crackdown
This is because in the last year, Hong Kong’s Securities & Futures Commission has been attempting to tame the runaway fraud in the crypto industry.
In 2023, investors lost US$400 million to crypto fraud in Hong Kong, according to police officials. Rogue exchanges are responsible for much of the losses.
Now crypto exchanges must submit to a rigorous licensing process. While most complied, others chose to leave Hong Kong.
Meanwhile, regulators are also developing frameworks for stablecoins and over-the-counter crypto trading.
And earlier this month, Hong Kong lawmaker Johnny Ng announced a new web3 and virtual assets subcommittee within the Legislative Council.
Metaverse development
With all this regulatory action as the backdrop, the Hong Kong Institute for Monetary and Financial Research’s bullishness on DeFi and the metaverse seems more wishful than actual.
Drilling into the report’s results, we see that 85% of market participants are expecting metaverse development to impact the financial industry significantly.
And two-thirds of financial services industry respondents said their companies were already engaged with metaverse technology at some level.
And yet only 16% of the firms had actually implemented metaverse initiatives. And slightly more than a quarter were at the discussion stage.
What they do in the metaverse is also limited.
While financial institutions in Hong Kong have adopted various metaverse applications to enhance interactions with the public, customers, and employees, there is less enthusiasm for using the metaverse as an investment tool or a sales channel.
The report additionally flagged major hurdles including data privacy issues, limited platform functionalities, and a scarcity of expertise.
Limited user adoption and interest, high development and maintenance costs, and integration difficulties with existing operations were cited as significant obstacles.
Got a Hong Kong crypto story? Email callan@dlnews.com.
