1、Decentralised FinanceCurrent Landscape and Regulatory DevelopmentsJune 2024Hong Kong Institute for Monetary and Financial ResearchHKIMR Applied Research Report No.1/2024PagesForeword2Acknowledgements3Executive Summary4Chapter 1DeFi and its ApplicationsIn a rapidly evolving landscape,DeFi is developi

2、ng its potential as an alternative financial system that actualises the ethos of blockchain technology.7Chapter 2Risks and VulnerabilitiesDeFi activities highlight a combination of existing and new vulnerabilities that are attracting the attention of financial authorities.17Chapter 3Regulatory Chall

3、enges and International Approaches to RegulationAuthorities in various jurisdictions are adopting diverse approaches to guide the development of DeFi in the spirit of recommendations made by international organisations.26Chapter 4Views of Market Participants in Hong KongOur survey revealed Hong Kong

4、s growing interest and adoption of virtual assets,despite challenges.43Chapter 5Views and Considerations for Fostering a Healthy DeFi EcosystemEffective regulation and deep-dive research can facilitate the development of a healthy and vibrant DeFi ecosystem.56Conclusion66Appendix A:Background of the

5、 Virtual Assets/DeFi Survey67Appendix B:List of Abbreviations68Appendix C:Glossary of Technical Terms69Appendix D:References71ContentsOver the past two decades,the pace of technological advancement has been accelerating at an unprecedented rate,particularly since the emergence of the third generatio

6、n of the Internet(Web3)encompassing individual control of personal data and the use of crypto-assets and blockchain.The attractiveness of Web3 is that it is decentralised,meaning that an intermediary is not necessary for virtual transactions between parties.This represents vast potential to transfor