Mena region is ‘the world’s fastest growing market for cryptocurrency’

The Middle East and North Africa region is the fastest growing cryptocurrency market in the world, accounting for 9.2 percent of global digital currency transactions from July 2021 to June 2022, according to a report by blockchain data platform Chainalysis.

Individual investors in the Mena region received $566 billion in cryptocurrencies during the period, an annual increase of 48 percent, Chainlysis said in its 2022 Global Crypto Adoption Index, which was dominated by emerging markets.

Global crypto adoption has leveled off over the past year after growing consistently since mid-2019. However, it remained well above its pre-bull market levels in 2019, the research found.

The Mena region is “home to three of the top 30 countries in this year’s Crypto Adoption Index: Turkey [ranked 12]Morocco [14] and Egypt [24]”, reads the report.

“In Turkey and Egypt, fluctuating cryptocurrency prices have coincided with rapid devaluations of fiat currency, strengthening crypto’s appeal for saving savings. The Turkish lira has ballooned 80.5 percent over the past year; the Egyptian pound weakened by 13.5 percent.”

Bitcoin fell from a record high of around $68,000 last year to trade at around $19,928 on Tuesday, while the cryptocurrency sector’s market capitalization fell below the $1 trillion mark.

The sector’s rollercoaster ride is far from over, slowed by this year’s stock bear market, global economic uncertainty, higher interest rates and a sharp rise in the cost of living around the world, according to analysts.

Large, long-term cryptocurrency holders continued to hold through the bear market. While their portfolios have lost value, those losses haven’t been locked in because they haven’t sold, Chainalysis said.

On-chain data suggests those holders are optimistic the market will bounce back, it added.

“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 fulfill other financial needs unique to their economies,” Chainalysis said.

“These countries also tend to lean more on Bitcoin and stablecoins than other countries.”

Turkey was the largest cryptocurrency market in the Mena region, with its citizens receiving $192 billion. However, this represents slower annual growth of 10.5 percent, compared to other countries in the region, the report said.

Meanwhile, Egypt was the MENA region’s fastest-growing cryptocurrency market, recording 221.7 percent growth in transaction volumes annually.

Saudi Arabia also showed strong potential, as transaction volumes grew by 195 percent, Chainalysis said.

“In Egypt, digital currencies are used as a way to preserve savings. Cryptocurrencies are an attractive way of protection against currency devaluation,” said Kim Grauer, director of research at Chainalysis.

“Also important in the country is the use of cryptocurrency for remittances – the country’s national bank has already started a project to build a crypto-based remittance corridor between Egypt and the UAE, where many Egyptian natives work.”

Lebanon was third in the Mena region in terms of cryptocurrency transaction volumes, which rose by 120.9 percent annually, followed by Morocco (120.8 percent), the UAE (37.2 percent) and Turkey (10, 5 percent).

The Emirates recorded $38 billion in cryptocurrency activity in the timeframe, compared to $28 billion in the previous year, the index findings showed.

The notable levels of grassroots cryptocurrency adoption in Morocco appear to be linked more to the government’s new permissive digital asset stance than to any specific macroeconomic headwinds, the report said.

“Adoption in the UAE is driven by the country’s clear ambitions to position itself as a global crypto hub,” Ms Grauer said.

“Government support, forward-focused regulations, consumer protection mechanisms, and support for establishing crypto businesses are all driving the adoption of cryptocurrencies and Web3 technologies in the country.”

According to Akos Erzse, senior manager of public policy at Dubai-based cryptocurrency exchange BitOasis, who was quoted in the Chainalysis report, the key drivers of cryptocurrency adoption in the GCC differ from those in the rest of the Mena region .

“If you look at markets in the GCC, this adoption is driven by young, tech-savvy early adopters with relatively high disposable incomes, who are looking for investment options and currently have a belief in crypto.”

Adoption is not just on the retail or customer side, but also involves financial institutions and banks, which have started working with cryptocurrency businesses, he said.

Afghanistan, which was ranked 20th in the 2021 cryptocurrency adoption index, fell to the bottom of the list this year after the Taliban’s takeover of the country last August, according to Chainalysis.

“Under the Taliban’s rule, dozens of crypto traders were arrested and the ruling state agency, the Ministry for the Propagation of Virtues and Prevention of Vice, equated cryptocurrency to gambling and declared it haram,” the report said.

“In August and September – just after the Taliban’s takeover – Afghanistan’s chain activity rose to a temporary peak before taking an unprecedented plunge.

“From November 2021 to today, the chain value received by users in Afghanistan averaged less than $80,000 per month, a far cry from the $68 million its citizens received in the average month before the takeover.”

Updated: 24 October 2022, 07:19