Global crypto adoption dominated by emerging markets, finds Chainalysis

The report from the blockchain intelligence firm ranks 154 countries according to key trading metrics measured through centralized exchanges, DeFi protocols and peer-to-peer trading volume, and analyzes what Chainalysis calls grassroots adoption — where people put most of their money. crypto.

The results show widespread global adoption, from Southeast Asia to Eastern Europe to Latin America, with the US also moving up from last year.

According to Kim Grauer, director of research at Chainalysis, this year’s index doesn’t show material changes from 2021, but it conveys the different ways people use cryptocurrency.

“When we talk about adoption around the world, we have to think about use cases in different regions with different socioeconomic factors at play,” she told Fortune.

Asia

For the second consecutive year, Vietnam topped the list, with the Philippines moving up to second, from 15th. Grauer said the popularity in Southeast Asia can be largely attributed to play-to-earn, blockchain-based games. The most prominent example was Vietnam’s own Axie Infinity, a title that lured players with rewards from lucrative NFTs and led to the creation of “guilds”, or organizations that would pay for the initial cost of playing in exchange for a cut of players’ winnings.

Axie Infinity suffered a spectacular collapse this year after cybercriminals hacked it for more than $600 million, but players – especially in developing markets – have turned to play-to-earn games as a source of income. Even with users fleeing Axie, more play-to-earn titles are on the way, with many developers based in Southeast Asia.

Fourth-ranked India had a different story. According to Grauer, much of the adoption has been driven by NFT marketplaces, such as Tiger Global and Sequoia-backed company FanCraze, which launched in early 2022 to sell cricket-based NFTs.

Grauer said that while many investors may have shied away from more traditional crypto assets like Bitcoin given the bear market, they turned to an asset built around their favorite pastime, which made it more accessible.

“India has been a good example of a new population of people coming into the fold because of use cases presented by DeFi,” Grauer said.

China also ranked in the top 10 — a surprise given the country’s 2021 ban on cryptocurrencies, indicating the ban has been ineffective.

Latin America

Latin America remains a diverse region in terms of use cases and economic context, but Chainalysis’ research indicates that adoption continues to follow the same general trend. Unlike Southeast Asia or India, where many are turning to applications such as NFTs and games, adoption in Latin America is driven by more traditional crypto-assets offered by exchanges and financial technology platforms.

Argentina, ranked 13th, suffers from severe inflation, as well as restrictive banking regulations. For many, crypto offers access to the global financial system, with inherent risks that often outweigh their nations’ weak currencies.

Brazil, Latin America’s largest country and ranked seventh globally, is home to some of the region’s most innovative fintech offerings, including e-commerce giant Mercado Libre, which has both a crypto exchange and its own token through its popular payment tool Mercado Pago. Another example is Nubank, Brazil’s largest digital bank, which reached 1 million users on its crypto trading platform just a month after launching this summer.

USA and high-income countries

Even though the US moved up the rankings this year, Grauer cautioned that gains are relative — in fact, there’s evidence that adoption has plateaued, with 16% of Americans saying they invest in cryptocurrencies. traded or used from two consecutive Pew Research polls, in November 2021 and August 2022.

Although there is a high degree of institutional investment in the US, adoption has not yet gained a foothold among the general public, which is true in other high-income countries. Of the top 20 countries in the global index, 10 are lower-middle income, and eight are upper-middle income, with only two high-income entrants: the United States and the United Kingdom. With financial systems in high-income countries more stable, fewer people are considering riskier assets.

“[These countries] waiting for that killer app to emerge that will bring more people into the fold,” Grauer added.

Elsewhere

Ukraine took third place, although not necessarily because of the large volume of cryptocurrency donations moving into the country after Russia’s invasion. Grauer said Ukraine has always been a tech-savvy country with a high density of startups.

Nigeria and Kenya also ranked in the top 20, which can probably be attributed to the high degree of online payment innovation in both countries, including the M-Pesa mobile banking service in Kenya. Like other countries on the list, Nigeria also deals with a great deal of regulatory uncertainty and economic instability, which may push people towards cryptocurrency.

Overall, the story is the same as last year – global crypto adoption is driven by emerging markets.

“We’ve found that many people simply don’t have the same level of access to investments,” Grauer said, explaining that they’re turning to crypto offerings instead. “We see this a lot in places like India and Vietnam, where there’s a young, tech-savvy population that’s starting to have disposable income.”

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