MENA tops the world in crypto adoption

by Arthur · February 25, 2023

The Middle East and North Africa (Mena) region has topped the world in cryptocurrency adoption over the past year, recent data showed.
The 2022 Geography of Cryptocurrency Report by Chainalysis, the blockchain data platform, showed that Mena-based users received $566 billion in cryptocurrency from July 2021 to June 2022, 48 percent more than they received the previous year.

According to Chainalysis research, issues surrounding the preservation of savings and remittance payments as well as increasingly permissive crypto regulations help explain the trend. “In Turkey and Egypt, fluctuating cryptocurrency prices have coincided with rapid fiat currency devaluations, strengthening crypto’s appeal for saving savings,” the report said. The Turkish lira has inflated by 80.5 percent in the past year; while the Egyptian pound weakened by 13.5 percent. Also important, however, is Egypt’s money transfer market. “Remittance payments make up about 8 percent of Egypt’s GDP, and the country’s national bank has already started a project to build a crypto-based transfer corridor between Egypt and the UAE, where many Egyptian natives work,” the report said.

As key business hubs in the Mena region, the member states of the Gulf Cooperation Council (GCC) are rapidly emerging as key players in the crypto market, the report noted. Saudi Arabia, for example, is the third largest crypto market in the entire Mena, and the UAE is fifth. They also have deep ties to the global crypto markets.

Akos Erzse, Senior Manager of Public Policy at Dubai-based crypto exchange BitOasis, said the main drivers of crypto adoption in the GCC are different from those in the rest of Mena. “When you look at the markets in the GCC, we see that this adoption is driven by young, tech-savvy early adopters with relatively high disposable incomes who are looking for investment options, and have a conviction in crypto right now. Also, adoption is not just on retail or the customer side, but also in the ecosystem, with financial institutions and banks starting to work with businesses like us, Ersze said, adding that recent inflation has helped push cryptocurrency adoption in other parts of the region.

Globally, Chainalysis data shows that global adoption has leveled off over the past year after growing consistently since mid-2019. Global cryptocurrency adoption reached its current record high in Q2 2021. “Since then, adoption has moved in waves – falling in Q3, which saw cryptocurrency declines, rebounded in Q4 as we saw prices rise to new all-time highs, and has fallen in each of the last two quarters as we entered a bear market, the report said. However, global adoption remains well above pre-bulk 2019 levels.

The data suggests that many of those attracted by rising prices in 2020 and 2021 stuck around and continue to invest a significant portion of their assets in digital assets. “Cryptocurrency markets have been surprisingly resilient throughout recent declines. Large, long-term holders of cryptocurrency have continued to hold through the bear market, the on-chain data suggests that these holders are optimistic that the market will rebound, keeping market fundamentals relatively healthy,” it said in the report.

Emerging markets dominate the Global Crypto Adoption Index. “Users in lower middle and upper middle income countries often rely on cryptocurrency to send remittances, preserve their savings during times of fiat currency volatility, and fulfill other financial needs unique to their economies. These countries also tend to lean on Bitcoin and stablecoins more than other countries, the report says.

For the second year in a row, Vietnam ranked first in cryptocurrency usage. A look at the sub-rankings shows that “Vietnam shows extremely high purchasing power and population-adjusted adoption across centralized, DeFi and P2P cryptocurrency tools. Polls done in 2020 found that 21 percent of Vietnamese consumers reported using or owning cryptocurrency,” the report said.

While growth has become more sporadic with the onset of the recent bear market, global adoption remains well above the levels that preceded the 2020 bull market. The data suggests that “a critical mass of new adopters putting capital into cryptocurrency during periods of price growth have a tend to persist even when prices decline, allowing the ecosystem to consistently grow on net across market cycles,” the report says.