The Middle East & 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 per cent more than they received the previous year.

According to Chainalysis research, cases around savings preservation 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 the appeal of crypto for savings preservation,” the report said. The Turkish lira has inflated by 80.5 per cent in the last year; while the Egyptian pound weakened by 13.5 per cent. Also significant, however, is Egypt’s remittance market. “Remittance payments account for about 8 per cent of Egypt’s GDP, and the country’s national bank has already begun a project to build a crypto-based remittance corridor between Egypt and the UAE, where many Egyptian natives work,” the report said.

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

Akos Erzse, Senior Manager for 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 markets in the GCC, we take the view that this adoption is driven by young, tech-savvy early adopters with relatively high disposable incomes searching for investment options, and have a conviction in crypto right now. Moreover, adoption is not just on the retail or customer side, but also in the ecosystem, with financial institutions and banks beginning to work with businesses like us,” Ersze said, adding that recent inflation has played in pushing cryptocurrency adoption in other parts of the region.

Globally, Chainalysis data show that global adoption has levelled off in the last year after growing consistently since mid-2019. Global adoption of cryptocurrency reached its current all-time high in Q2 2021. “Since then, adoption has moved in waves – it fell in Q3, which saw crypto price declines, rebounded in Q4 when we saw prices rebound to new all-time highs, and has fallen in each of the last two quarters as we’ve entered a bear market,” the report said. However, global adoption remains well above its pre-bull market 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 chunk of their assets in digital assets. “Cryptocurrency markets have been surprisingly resilient through recent declines. Big, long-term cryptocurrency holders have continued to hold through the bear market, the on-chain data suggests those holders are optimistic the market will bounce back, which keeps market fundamentals relatively healthy,” the report said.

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 in times of fiat currency volatility, and fulfil other financial needs unique to their economies. These countries also tend to lean on Bitcoin and stablecoins more than other countries,” the report said.

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

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

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