DeFi's Security Challenges Confront Hong Kong's Efforts to Regulate for International Liquidity

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DeFi's Security Challenges Confront Hong Kong's Efforts to Regulate for International Liquidity

Bitget-RWA2025/11/03 20:14

By:Bitget-RWA

- DeFi protocol Balancer lost $128.6M via a V2 pool exploit, triggering pool pauses and a 4% BAL token drop. - Hong Kong's SFC now allows licensed crypto exchanges to access global liquidity pools, easing ringfenced rules to boost market competitiveness. - Ethereum stablecoins hit $2.82T in October volume, with USDC and USDT dominating as traders seek yields amid market volatility. - Hong Kong's reforms align crypto rules with traditional finance, exempting licensed tokens from trading history requirements

DeFi protocol

Balancer

experienced a major security incident on Monday, with hackers siphoning off around $128.6 million worth of assets from its vaults across several blockchains, according to blockchain security company PeckShield, as cited by

The Block

. The attackers took advantage of a flaw in Balancer V2 Composable Stable Pools, enabling them to turn counterfeit fee balances into genuine assets. In reaction, Balancer halted the impacted pools and stated that its engineering team is actively looking into the breach. The platform’s native

BAL

token dropped more than 4% right after the attack, signaling increased market uncertainty, according to the same source.

DeFi's Security Challenges Confront Hong Kong's Efforts to Regulate for International Liquidity image 0

At the same time, Hong Kong’s Securities and Futures Commission (SFC) revealed a significant policy update, now permitting locally licensed crypto exchanges to connect with global liquidity pools, as reported by

Yahoo Finance

. This change moves away from the city’s previous approach, which kept Hong Kong-based order books separate from international markets. By allowing exchanges to access worldwide trading flows, the SFC aims to boost liquidity, enhance price discovery, and strengthen Hong Kong’s role as a leading digital asset center, according to

Bloomberg

The new rules, outlined in a regulatory notice, bring crypto trading regulations closer to those for traditional financial assets and provide exemptions for SFC-approved tokens and stablecoins from the usual 12-month trading history rule, according to a

Yahoo Finance report

. SFC CEO Julia Leung highlighted that these adjustments strike a balance between regulatory protection and market competitiveness, saying, “Once we are confident in investor protection, we do ease restrictions, as we did with global liquidity,” as Bloomberg reported. The SFC also shared plans to finalize licensing systems for crypto brokers and custodians, with the Hong Kong Monetary Authority preparing to issue stablecoin licenses in 2026.

Ethereum’s stablecoin sector reached unprecedented activity in October, with monthly transaction volumes soaring to $2.82 trillion—a 45% jump from September,

The Block

noted.

USDC

led the way with $1.62 trillion in transactions, followed by

USDT

at $895.5 billion. Experts attribute this spike to traders searching for yield opportunities amid ongoing volatility in the crypto market. Stablecoin providers accounted for 65–70% of total protocol revenue during the month, highlighting their dominance in DeFi and international payments, according to

Yahoo Finance

These events underscore the contrasting paths within the crypto sector: while DeFi platforms contend with security threats, regulators in Hong Kong and elsewhere are actively developing policies to attract both institutional and retail investors. As the industry faces hacks, regulatory developments, and new applications, liquidity and innovation continue to drive its expansion.

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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