The State of MENA Crypto: Chainalysis Report

MENA Crypto Adoption Soars

The Middle East & North Africa (MENA) region has emerged as a significant player in crypto adoption in recent times. In the latest report shared with BSC News by Chainalysis, users in this region received a staggering $389.8 billion in cryptocurrency between July 2022 and June 2023, or 7.2% of global transactions.

In this year's crypto adoption index, MENA boasts three nations within the top 30: Turkey (12th), Morocco (20th), and Iran (28th). However, it's the United Arab Emirates (UAE) that steals the spotlight, showcasing a remarkably higher share of crypto activity on DeFi (Decentralized Finance) protocols, rivaled only by Israel in the region.

But what fuels this unprecedented adoption of cryptocurrency in MENA? Chainalysis outlined a number of factors that shed light on the driving forces behind this growth for some regions. 

Forward-Thinking UAE Regulators: Pioneering Crypto Hub

It all began in 2016 when Dubai, the UAE's most populous city, initiated its blockchain strategy. Furthermore, in 2018, the Abu Dhabi Global Market (ADGM) laid the groundwork by establishing the world's first regulatory framework for cryptocurrency. Their mission? To create forward-looking regulations that promote innovation, safeguard consumers, and position the UAE as a digital economy leader.

In 2022, Dubai established its own Virtual Asset Regulatory Authority (VARA) with similar objectives. VARA's regulatory framework stands out globally due to its meticulous categorization of virtual asset services and activities, ensuring rules remain responsive to industry needs. 

Turkey: Countering Inflation with Crypto

Turkey, ranking 12th on the Global Crypto Adoption Index, emerges as the fourth-largest recipient of global crypto transaction volume, raking in approximately $170 billion in the past year. 

Unlike the UAE's innovation-driven crypto economy, Turkish users appear to turn to crypto as a hedge against currency devaluation and a means to preserve their savings. The country has seen skyrocketing inflation rates, reaching nearly 60% in August 2023.

The decline of the Turkish Lira began in 2021 when the central bank lowered interest rates by 100 basis points. Since then, the Lira has struggled to recover, hitting record lows in mid-2023. 

Notably, USDT (Tether) is the preferred crypto asset among Turkish users, frequently purchased with the Lira on global exchanges. 

Saudi Arabia: Leading in Crypto Transaction Growth

With a year-over-year crypto transaction volume growth of 12.0%, Saudi Arabia stands out as a leader in the global crypto economy. Retail investors drive much of this growth, diversifying their portfolios with crypto assets. These investors, already engaged in real estate, stocks, and other assets, recognize the transformative potential of cryptocurrencies. They anticipate substantial growth in crypto and perceive it as a valuable addition to their diverse portfolios.

In 2018, the Saudi government declared Bitcoin illegal and warned about the risks associated with other cryptocurrencies. However, despite these warnings, Saudi Arabia's crypto market has flourished.

Crypto Adoption: A Global Resilience

The MENA region's crypto journey illustrates that a critical mass of new users, drawn in during periods of price growth, tends to remain resilient even when faced with market downturns. What's more, countries with unstable currencies or inflation find crypto valuable for safeguarding wealth. 

Conversely, economically stable nations like the UAE explore more sophisticated investment-focused use cases, driving further innovation. The UAE, in particular, demonstrates the significance of regulatory clarity and a regulatory framework designed to foster innovation. These elements attract global players and stimulate the local economy, establishing the UAE as a crypto hub.

An earlier Chainalysis report also found that India leads the way in crypto adoption, followed by Nigeria, Vietnam, and the Philippines. It is evident, regardless of the market conditions, that crypto assets continue to enjoy enduring appeal despite the evolving crypto landscape.