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Asia Leading Global DeFi Adoption, Opens Opportunity for TradFi

Despite reported cases of increased exploits on decentralized finance (DeFi) platforms, financial services company, Visa, says Asian consumers are beginning to experiment with DeFi services and more of them are likely to use them soon.


Asia could lead global DeFi adoption
Citing a study conducted in May 2022 together with YouGov, Visa finds that 21% of Asia Pacific consumers stated they have used DeFi services before. “With this emerging traction, there are large opportunities for innovation and education, as 38% of consumers expressed interest to try DeFi services in the next six months, and 31% of consumers want additional information to learn about the space,” it notes.

The Visa report identifies Vietnam (63%), Indonesia (54%), and India (50%) as countries to likely spearhead DeFi adoption as their markets have the most consumers expressing interest to try the financial services delivered on the blockchain in the next six months. They are followed by Thailand (47%), Vietnam (44%), the Philippines (43%), and China (41%).

Going by development and population trends in Asia, the report suggests that DeFi services are likely to go beyond crypto, and Asia could grow faster in terms of DeFi adoption than other parts of the world.

Visa maintains that with the total value locked increasing from $1 billion to $230 billion between 2019 and April 2022, new innovations are expected to emerge on Ethereum as the largest smart contract-enabled public blockchain as well as Solana and Avalanche to provide financial services in an open-sourced manner.


DeFi losing so much to hacks
As of August 2, 2022, blockchain analysis firm Chainalysis stated that most of the estimated $2 billion stolen in cryptocurrency across 13 cross-chain bridge hacks happened this year. It says that attacks on the bridges – protocols that enable interoperability for users to port digital assets between blockchains – make up about 70% of total funds stolen in 2022 so far. Chainalysis adds that bridges are a target because they run a central storage point of funds that back the “bridged” assets on the receiving blockchain.

To forestall such attacks, and rebuild trust in blockchain technology, Chainalysis suggests that DeFi platforms could make rigorous code audits become a gold standard both for those building DeFi protocols and for the investors evaluating them. The firm says DeFi platforms should follow centralized exchanges which are rarely hacked successfully. They prioritize their security and do not offer services that are vulnerable to attack.


Regardless of stolen billions, DeFi could flourish with traditional financial institutions
The unfolding development could be an opportunity particularly for established traditional financial (TradFi) institutions as Visa highlights three key trends for the future of DeFi in Asia Pacific to watch. They include that user base will expand beyond crypto and work its way into the mainstream as DeFi use cases are developed and consolidated.

Also, with more use cases, they expect to see new business models for financial services likely evolving to meet consumer expectations for lower fees and higher yield. This will bring both benefits and challenges to financial players as they adjust to the shift.

It sees a multi-party approach in which DeFi is not seen to be on in the hands of the crypto community, but incumbent traditional financial institutions playing a role too. As “established leaders in risk management, compliance and fraud mitigation”, Visa thinks financial institutions have the opportunity to leverage their expertise to provide safe bridges for consumers to transact in DeFi.

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