Prevalence of the unbanked, high digital adoption and other factors make Asia a prime home for the adoption of decentralized finance, Oliver Wyman partner James Gordon told finews.asia.
Asia is known for the prevalence of unbanked or under-banked individuals, high mobile penetration and high crypto adoption coupled with the high cost of cross-border payments in small sums. This makes the region a prime market for decentralized finance (DeFi), according to James Gordon, partner and APAC digital assets lead at Oliver Wyman.
«The Asia Pacific region is a natural home for DeFi adoption,» said Gordon in a conversation with finews.asia.
VC, Regulatory Tailwinds
DeFi adoption is also experiencing other tailwinds including continued venture capital flows into the digital asset ecosystem as well as accelerating regulations to provide clarity and safeguard user interests.
In Singapore, for example, the local regulator launched «Project Guardian» in May 2022 to test the feasibility of applications in asset tokenization and DeFi
«This pilot project demonstrated the feasibility and transformative potential of using DeFi protocols in financial markets with appropriate guardrails,» Gordon said.
Closing Gap
In fact, rapid developments are allowing DeFi to close the gap with traditional finance (TradFi) as established financial institutions explore their role within the ecosystem.
«Traditional institutions in APAC are looking at DeFi protocols to build new or more efficient products, for instance, programmable money to ensure funds flow as intended for grants or charities,» Gordon explained.
Challenges Ahead
Despite the closing gap, there are still hurdles ahead for DeFi including the difficulty of determining the identity of an accountholders while maintaining anonymity and privacy; custody of assets to prevent loss; and user experience.
«DeFi has a number of challenges to tackle before seriously competing with TradFi,» Gordon noted.
«Whilst it’s now quite easy to enter the ecosystem, exploring and understanding the breadth of offerings […] often requires specialist and technical knowledge. For DeFi to fulfill the promise of increasing financial inclusion, its products and services must be accessible and understandable by all.»
