In Asia-Pacific (APAC), though decentralized finance (DeFi) remains a nascent sector, adoption of DeFi services among consumers is growing rapidly, fueled by the region’ burgeoning blockchain and cryptocurrency startup scene.
A 2022 survey conducted by Visa and YouGov, which polled 16,295 adults across 14 markets, found that 21% of APAC consumers had used DeFi services before, a proportion that’s expected to grow 17% points this year, with a further 38% expressing interest to try DeFi services in the next six months.
Vietnam, Indonesia and India among the biggest adopters
Results of the study show that while adoption of DeFi is rising across the whole APAC region, consumers in Vietnam, Indonesia and India were found to be the most open and eager to experiment DeFi services, with 63%, 54% and 50% of respondents polled in these countries, respectively, expressing interest to try DeFi in the next six months.
Japan (9%), Singapore (17%) and Australia (17%), meanwhile, stood at the other end of the spectrum, recording the smallest proportions of consumers willing to try DeFi services.
As interest in and adoption of DeFi services grow, the sector is also becoming increasingly lucrative for criminals and frauds, Visa notes. In 2021, over US$10.5 billion was lost from DeFi platforms due to fraud and theft, a 600% increase from a year prior, according to crypto asset risk management firm Elliptic.
In February 2022, Wormhole, one of the most popular bridges that link the Ethereum and Solana blockchain, was hit by a hack that saw more than US$320 million worth of cryptocurrencies being stolen.
In addition to security risks, the lack of regulations in DeFi services also generate concerns, notably around consumer protection and anti-money laundering (AML) risks, the report notes.
Moving forward, Visa expects the DeFi movement to create new opportunities for incumbent banks and traditional financial services companies. As use cases continue to develop and consolidate, it will become possible for financial institutions, later on, to integrate end-to-end solutions.
For example, financial institutions may be able to provide asset securitization and financing for institutional clients within DeFi protocols. They could also start providing services tailored for Web 3.0-native organizations and entrepreneurs, like insurance underwriting for DeFi protocols, or risk management and compliance as a service.
APAC’s booming crypto sector
The rise of DeFi in APAC is occurring against the backdrop of a thriving crypto ecosystem, booming crypto trading activity and soaring startup valuations. In 2021, crypto transactions in Central and Southern Asia and Oceania (CSAO) rose eight-fold compared with the previous year, accounting for 14% of the world’s total, according to the 2021 Chainalysis Global Crypto Adoption Index. DeFi was the fastest growing category during the period studied, accounting at one point for more than half of all crypto transactions in the region.
One direct outcome of this was the minting of at least seven blockchain and crypto unicorns across the region over the past year or so: Amber Group, a Hong Kong-based crypto trading startup; CoinDCX, a crypto exchange from India; Babel Finance, a Hong Kong-based wholesale crypto financial services provider; CoinSwitch Kuber, one of India’s largest crypto exchange; Matrixport, a crypto finance venture from Singapore; Opn, formerly known as Omise, a startup specializing in online payments and blockchain technology from Thailand; and Dunamu, the operator of South Korean digital asset exchange Upbit.
The rise of DeFi has not only been observed in APAC but also in other regions around the world. Between 2019 and 2020, the total value of digital assets locked into DeFi services increased from less US$1 billion to over US$15 billion at the end of 2020. That amount surpassed US$230 billion in April 2022.