A large analysis of geographic trends in the distribution and use of cryptocurrencies from Chainalysis.
- Global Cryptocurrency Adoption Index
- Methodology
- DeFi Global Adoption Index
- Methodology
- A note on estimating transaction volume
- Methodology
- North America
- Latin America
- Central, Northern and Western Europe
- Eastern Europe
- Central and South Asia, Oceania
- East Asia
- Near East
- Africa
- Global Cryptocurrency Adoption Index 2021: A Complete List
- DeFi Global Adoption Index 2021: The Complete List
Global Cryptocurrency Adoption Index 2021
Global adoption of cryptocurrencies has grown by over 880% thanks to peer-to-peer platforms that drive crypto adoption in emerging markets
We are pleased to share with you the Chainalysis Global Cryptocurrency Adoption Index 2021.
The purpose of the index is to provide an objective measurewhich countries have the highest level of distribution and adoption of cryptocurrencies. One way to do this is to simply rank countries by transaction volume. However, this approach will create a bias in favor of countries with high levels of professional and institutional adoption of cryptocurrencies, since these market segments move the largest amount of capital in cryptocurrency transactions. Professional and institutional markets are critical, but in this index we wanted to highlight the countries with the most cryptocurrency adoption among the common people in the first place and focus more on the use cases associated with private transactions and savings rather than trade and speculation.
Next, we explain the construction methodologyindex before presenting to your attention the countries with the highest levels of cryptocurrency adoption, as well as a few important trends that we found interesting.
Methodology
The Global Cryptocurrency Adoption Index is under constructionon three indicators, which we will discuss in this section. We ranked all 154 countries for each of these three indicators, took the geometric mean of each country's ranking for all three, then normalized this total on a scale from 0 to 1, and thus obtained a score for each country that determines its position in the index. The closer a country's final score is to 1, the higher the ranking.
The cost of cryptocurrencies received in on-chain transactions, weighted by purchasing power parity (PPP) per capita
The purpose of this indicator is toassess the overall level of cryptocurrency activity of each country, but weigh the value in favor of those countries where this amount is more significant in relation to the well-being of its residents and the value of money in the country as a whole.
To calculate this indicator, we assessed the totalvalue of on-chain transactions received by users in each country and weighted the resulting value by PPP per d. as a measure of a country's wealth per average resident. The higher the ratio of the total volume of incoming on-chain transactions to the PPP per day, the higher the rating, which means that with the same volume of received cryptocurrency transactions, the country with the lower PPP per day. will rank higher.
PPP-weighted value of cryptocurrencies received in retail-sized on-chain transactions.
The purpose of this indicator is to assess the levelactivity of non-professional private users of cryptocurrency based on the ratio of the volume of their cryptocurrency transactions to the average level of well-being of residents of the corresponding country. We estimated the total volume of retail transactions, defined in this case as any cryptocurrency transactions under $10K. We then ranked countries according to the resulting value, but weighted it in favor of countries with lower PPP per day.
Trading volume on peer-to-peer (p2p) platforms, weighted by PPP per day. and by the number of Internet users
The volume of p2p transactions accounts for a significant share ofall cryptocurrency activity, especially in emerging markets. For this index, we ranked countries by the volume of p2p transactions and weighted the resulting value in favor of countries with lower PPP per day. and fewer Internet users. The goal was to highlight countries where more residents invest a larger share of their wealth in peer-to-peer cryptocurrency transactions.
Top 20 Global Cryptocurrency Adoption Index 2021
The table below summarizes the top 20 countries from our Global Cryptocurrency Adoption Index, along with values for each of the three metrics that the index is based on.
We found three trends particularly significant.
The overall adoption rate of cryptocurrencies is skyrocketing
Our data shows that residents are allMore countries around the world are starting to use cryptocurrencies, or at least seeing an increase in their adoption. The graph below shows the overall global cryptocurrency adoption index, obtained by adding up the scores of all 154 countries considered on the indicators described above from the second quarter of 2019 to the present.
At the end of the second quarter of 2020, after a periodmoderate growth, the overall cryptocurrency adoption index, calculated using our methodology, was 2.5 points in total for all countries included in the index. At the end of the second quarter of 2021, this overall indicator was already 24 points, which means an increase of 2300% since the third quarter of 2019 and by 881% over the past year. The reasons for this increase in adoption vary across countries and regions: in emerging markets, many are turning to cryptocurrencies to preserve their savings in the face of local currency devaluation and to send and receive remittances from other countries; while in North America, Western Europe and East Asia, the rise in cryptocurrency adoption over the past year has been driven primarily by institutional investment.
Expansion in emerging markets is growing, driven by peer-to-peer platforms
Несколько стран с развивающимися рынками, включая Kenya, Nigeria, Vietnam and Venezuela rank high in our index largely due to their enormous (PPP-adjusted) transaction volumes on peer-to-peer (p2p) platforms and widespread Internet penetration. Surveys of experts in these countries have shown that many residents use p2p platforms as the main entry point into the cryptocurrency market, often because access to centralized exchanges is difficult for them.
Knowing this, it should come as no surprise that regions with a large number of emerging economies account for a huge share of p2p web traffic.
Central and South Asia, Oceania, LatinAmerica and Africa send more web traffic to p2p platforms than regions with larger average economies such as Western Europe or East Asia.
Many emerging markets facesignificant devaluation of the local currency, which encourages residents to buy cryptocurrencies on p2p platforms to preserve their savings. Others in the same regions use cryptocurrencies for international transactions - either private money transfers or for commercial transactions, such as paying for goods imported for sale.
Many of the developingmarkets limit the amount of national currency that residents can withdraw from the country. Cryptocurrencies give residents of these countries the ability to bypass restrictions to meet their financial needs.
This creates an interesting dynamic in which P2P platforms have a larger share of the total transaction volume, consisting of private payments in the retail category under $10 thousand.
This makes sense, given theuse cases, as the cost of money transfers, as well as personal and commercial transactions, made by traders in emerging markets are likely to be less than those of professional traders or institutional investors.
The positions of China and the United States in our ranking decreased
China ranked fourth last yearof our index of global adoption of cryptocurrencies, the United States - sixth. In 2021, the United States dropped to eighth position and China to thirteenth. The main reason for the decline in the ranking of both countries is a sharp decline in the volume of p2p transactions, weighted per capita with Internet access: China fell from 53rd to 155th position in this indicator, and the USA from 16th to 109th.
Further analysis showed how much thethe volume of p2p transactions in two countries compared to the world. This is illustrated in the index chart below, which shows the relative contraction of p2p volumes in the US and China compared to the global average.
The volume of p2p transactions in the US and China has changedroughly in line with the global trend, until around June 2020 they began to diverge. At this point, the US and China saw a decline in p2p transactions, while the rest of the world was increasing. And although all three curves have been declining sharply since the beginning of March 2021, the United States and China have declined more strongly and remain significantly lower than in the world as a whole. This dynamic may reflect the growing professionalization and institutionalization of cryptocurrency trading in the United States, while in China it may be due to government bans on cryptoasset transactions.
What will drive the next wave of adoption?
Our data shows that the growing volumetransactions in centralized services and the explosive growth of DeFi are driving the use of cryptocurrencies in developed countries and those where they have already gained significant distribution, while p2p platforms are driving further adoption in emerging markets. Our biggest question for the next 12 months is how much more penetration growth in these platform categories will continue versus new emerging models that we have yet to see and evaluate. The main takeaway, however, is pretty clear: the overall level of adoption and distribution of cryptocurrencies has skyrocketed over the past twelve months, and the differences between countries and regions underline once again that cryptocurrencies are truly a global phenomenon.
DeFi Global Adoption Index
The rise of DeFi has become one of the major stories in the worldcryptocurrencies in the last 18 months. DeFi stands for Decentralized Finance and serves as the name for a class of decentralized cryptocurrency platforms that can operate autonomously, without the support of a centralized company, group of individuals, or just an individual. How is this possible? DeFi platforms, also called protocols, are built on blockchains with smart contract support - Ethereum in the first place - and allow you to automatically perform certain financial functions written in the smart contract code. Popular types of DeFi protocols include decentralized exchanges and lending platforms.
Despite concerns about security andcompliance, DeFi represent one of the fastest growing and most innovative sectors of the cryptocurrency economy. This is why we, Chainalysis, in addition to the main one, decided to create an additional geographic index that ranks countries according to the level of DeFi adoption.
Like our cryptocurrency adoption index, the indexDeFi adoption is structured to highlight the countries with the most prevalence among private users, rather than those with fewer large institutional transactions. The data shows that while cryptocurrency mass adoption is generally higher in emerging markets, for DeFi, adoption is higher in high-income countries that already have significant cryptocurrency usage, especially among traders and institutional investors. We will break down these findings in more detail below, as well as the methodology used to create the DeFi Acceptance Index.
Methodology
The DeFi Acceptance Index builds on threecomponents that we will discuss in this section. We ranked all 154 countries for each of these three indicators, took the geometric mean of each country's ranking for all three, then normalized this total on a scale from 0 to 1, and thus obtained a score for each country that determines its position in the index. The closer a country's final score is to 1, the higher the ranking.
Pillar 1: Purchasing Power Parity (PPP) weighted value of cryptocurrencies received by DeFi platforms in on-chain transactions per capita
The purpose of this indicator is toassess the overall level of DeFi activity in each country, but weigh the value in favor of those countries where this amount is more significant in relation to the welfare of its residents and the value of money in general in the country. To calculate this indicator, we assessed the total value of on-chain transactions received by DeFi protocols from residents of each country and weighted the resulting value by PPP per day. as a measure of a country's wealth per average resident. The higher the ratio of the total volume of incoming transactions to PPP per day, the higher the rating, which means that with the same volume of on-chain transactions to DeFi protocols, the country with the lower PPP per day. will rank higher.
Component 2: Total Value of Retail Size Transactions Received by DeFi Platforms
The purpose of this indicator is to assess the levelDeFi activity of non-professional private users of cryptocurrencies based on the ratio of the total value of retail cryptocurrency transactions (less than $10 thousand) addressed to DeFi protocols to the average level of wealth of residents of the corresponding country.
Component 3: Number of deposits on DeFi platforms, weighted by PPP per day.
The purpose of this indicator is to rank countries bybased on which residents carry out the most DeFi transactions. We calculate it from the ratio of the number of DeFi transactions to the total number of Internet users in the country. The higher the coefficient, the higher the rating, which means that with the same number of deposits, a country with a smaller number of Internet users is ranked higher in the index.
We deliberately did not use the number of individualdeposits when calculating the general cryptocurrency adoption index, because this indicator creates an artificial bias in favor of DeFi transactions compared to centralized exchanges, since the non-custodial nature of DeFi protocols implies that all DeFi transactions are performed on-chain, while transactions on centralized exchanges are recorded only in the journal of executed orders of the exchange. But when we only measure DeFi transactions, this is not a problem, which means we can use the number of individual deposits in a transaction to get an idea of how many users are interacting with DeFi protocols.
Top 20 DeFi Global Adoption Index 2021
What stands out here is thatthat, in contrast to our cryptocurrency adoption index, a significant portion of the top of the DeFi adoption rankings are countries with high total value of cryptocurrency transactions, both now and historically. Typically, these are countries with middle and high income or already have relatively developed cryptocurrency markets and, in particular, strong professional and institutional markets. Notable examples include the United States, China, Vietnam, the United Kingdom, and a number of other Western European countries that rank high in the DeFi adoption index.
Historical data on web traffic to DeFi protocols reflects the growth in popularity of DeFi protocols regionally over time.
From April 2019 to approximately June 2020, the mainNorth America was by far the source of web traffic for DeFi protocols. Western Europe has also added a substantial and growing percentage since September 2019. Around June 2020, we see more traffic starting to come from other regions, especially Central and South Asia, accompanied by an explosive growth in global capital directed to DeFi platforms. Although China has emerged as one of the largest countries in terms of DeFi transactions, East Asia's share of total web traffic to DeFi protocols remains low compared to the region's share of traffic to centralized cryptocurrency services.
The breakdown of cryptocurrency transactions in general and transactions to DeFi protocols by size somewhat reinforces our understanding of who is using DeFi in general.
Data shows that large transactionsmake up a much larger share of DeFi transaction volume. This suggests that DeFi is disproportionately popular among large investors compared to cryptocurrencies in general. Large institutional transactions, i.e. those larger than $10 million, accounted for more than 60% of total DeFi transaction volume, compared to less than 50% for all cryptocurrency transactions. Transactions attributable to professional, large retail and small retail market players also accounted for a larger percentage of all cryptocurrency activity compared to DeFi activity over the same period.
You can also notice that countries with historicallythe largest institutional and professional markets are responsible for most of the DeFi activity. For the chart below, we have broken all the countries in the index into five groups based on the size of their professional and institutional markets and shown in two columns for each group the volume of cryptocurrency transactions in general and to the DeFi protocols.
As clearly shown in the diagram, the countries onwhich historically accounted for the largest volume of professional and institutional-sized cryptocurrency transactions, are also responsible for most of the DeFi activity.
With these results in mind, we talkedwith David Gogel, Head of Growth at dYdX, a popular protocol targeting cryptocurrency derivatives, to learn more about DeFi's regional growth patterns. He told us that the most active supporters and users of DeFi so far have been big business people, from individuals working on a professional scale to cryptocurrency hedge funds. “Today, the DeFi space is more focused on crypto-insiders,” says Mr. Gogel. - These are people who have been working in the cryptosphere for some time and have sufficient funds to experiment with new assets. In the longer term, as the price of gas in Ethereum drops, DeFi protocols will become acceptable to more people. ” Gogel named the United States, China, Russia and several Western European countries with relatively high levels of cryptocurrency penetration as the key markets responsible for the growth of DeFi.
Two ecosystems
Our acceptance data combined with wordsDavid Gogel's talk on growing DeFi markets sheds light on the differences between the DeFi ecosystem and the larger cryptocurrency ecosystem. At the grassroots level, emerging markets are driving the proliferation and adoption of cryptocurrencies, and users in these regions are turning to this asset class as needed: either to save savings in the face of local currency devaluation, or to make international transfers otherwise unavailable to them. The adoption and distribution of DeFi, on the other hand, is driven by seasoned cryptocurrency traders and investors looking for new sources of alpha on innovative platforms. This pattern holds true even though we weigh our index in favor of grassroots adoption.
Note on estimating transaction volume:
Throughout the report, we estimate the volumestransactions of various types of cryptocurrency services - both in the world and in individual countries - based on on-chain data. It must be admitted that according to this methodology, the volume of DeFi transactions is probably overstated compared to centralized services. The reason is that all DeFi transactions take place on-chain, since DeFi protocols do not imply the storage of user funds by third parties and only route transactions between wallets.
Centralized services, on the other hand,store users' funds, which means that we cannot track transactions between users within centralized services using on-chain data. This data is only contained in their order logs, to which we do not have access. We are confident that our methodology still provides an accurate measure of country DeFi activity in relation to each other, but the overall level of DeFi activity may be slightly overestimated in relation to centralized services.
North America
Cumulative indicators of cryptocurrency activity in North America
DeFi Boosts World's Second Largest Crypto Market, But Ransomware Is A Worry
North America is the second largesta crypto economy that received more than $750 billion in cryptocurrency transactions between June 2020 and July 2021, or 18.4% of the global total during that period. Much of this activity is taking place in the United States, which also has a relatively high level of adoption of cryptocurrencies among ordinary users, ranking eighth in our global index. The United States' high ranking is largely due to its strong performance in total cryptocurrency transaction volume received and in retail-sized incoming transaction volume in proportion to the number of Internet users and purchasing power, ranking fourth and third in these categories, respectively. Simply put, more Americans are spending a higher share of their purchasing power on cryptocurrency transactions than residents of almost any other country.
The United States also tops our indexDeFi adoption, in which countries are ranked in particular by the level of adoption and adoption of DeFi platforms among ordinary users. As we will show later, DeFi has played a huge role in the strong growth in crypto adoption in North America over the past year, and several DeFi platforms are among the most popular cryptocurrencies in the region as a whole today. Below we will discuss these trends, as well as the problems of the cryptocurrency market in North America - and, in particular, the United States - with ransomware viruses.
DeFi has been a major contributor to the growth in crypto adoption in North America over the past year
Monthly volume of cryptocurrency transactions inNorth America grew significantly over the study period, increasing from $14.4 billion in July 2020 to $164 billion—more than 1,000%—in May 2021, before correcting slightly in June. Much of this growth has been driven by the growing popularity of DeFi.
This growth has made North America one of the largest DeFi markets in the world.
North Americans for the period from July 2020 to JuneIn 2021, about $276 billion was sent in cryptocurrency transactions to DeFi platforms, second only to the Central, Northern and Western Europe (CNWE) region with $389 million. DeFi transactions during the reporting period accounted for 37% of the total volume of North American cryptocurrency transactions. Only the Central and South Asia and Oceania (CSAO) countries had a higher share of DeFi activity, and in recent months DeFi volumes have eclipsed the level of activity associated with centralized cryptocurrency services.
Interestingly, while the general levelDeFi activity, judging by the size of transactions, is driven largely by large investors; the United States leads in DeFi transactions in the retail category, that is, those under $10 thousand. Canada ranks fourth on this list, which indicates a high level of DeFi penetration in North American retail market.
Several DeFi platforms are among the most popular services among North American cryptocurrency users, with Uniswap ranked first in terms of transaction volume.
Overall, 9 of the 25 largest cryptocurrenciesservices by volume of transactions in North America today are DeFi-protocols, the most popular of which are Uniswap, dYdX and Compound. Interestingly, all three of these platforms suit different DeFi use cases. Uniswap is a Decentralized Exchange (DEX), meaning it performs a function similar to traditional centralized exchanges, but does not store user funds and offers a wide variety of ERC-20 tokens that are not available for trading on centralized services. dYdX, on the other hand, is more focused on cryptocurrency derivatives, while Compound is more focused on lending at interest. The relatively high popularity of all three platforms speaks to the widespread interest in the DeFi space for several reasons, not just one particular use case.
DYdX Growth Leader David Gogel(David Gogel) gave us a little more insight into the current state of DeFi adoption and distribution, adding useful context to the explosive growth of DeFi in North America over the past year. “Today, the DeFi sphere is focused more on crypto-insiders. These are people who have been working in the cryptosphere for some time and have sufficient funds to experiment with new assets, ”says Mr. Gogel. Gogel named the United States, China, Russia and several Western European countries as growth leaders in this category, which is not surprising. A large number of professional institutional investors in North America are currently making their first significant investments in cryptocurrency markets, so DeFi projects targeting new types of coins and use cases like lending will be the logical next step in looking for opportunities to profit from investments in cryptocurrencies.
North America is the largest target for ransomware
With regard to related to cryptocurrenciescrime and illegal activities, what makes North America stand out most is that it has become the largest victim of ransomware attacks over the year under study.
North American users between JulyBetween 2020 and June 2021, $131 million worth of cryptocurrencies were sent to ransomware attackers—more than twice as much as Western Europe, which ranks second in this indicator.
The most ransomware viruses of whichNorth American casualties affected during the study period include NetWalker, Egregor, Phoenix Cryptolocker, and Doppelpaymer, all of which are associated with Russian cybercriminal groups, including Evil Corp, whose links to the Russian government were previously reported by US authorities.
This dynamic prompted US President JoeBiden to demand that the Russian president take action to curb ransomware groups, warning that the continued attacks would be viewed by the US government as incidents of national security violations, not just crimes. And as many ransomware attacks target organizations that are part of critical US infrastructure, including hospitals, energy companies and banks, in June the Justice Department raised the priority of investigating ransomware attacks to a level similar to terrorism. Comparison with terrorism also implies that counter-terrorism solutions and strategies can be applied to the investigation of cyberattacks using ransomware viruses.
Ransomware viruses are one of the fastest growingforms of crime related to cryptocurrencies, and is probably the most dangerous in terms of real consequences, given the kind of organizations that are often subjected to such attacks. However, the number of attackers responsible for these large-scale attacks is surprisingly small. Although the number of “strains” of various ransomware viruses seems to be approaching infinity, the teams of cybercriminals who actually carry out such attacks are much smaller and they often change the viruses used. In addition, the infrastructure providers that attackers rely on to launch their attacks, as well as those who launder money from victims for them, also tend to work with several different groups.
By taking action against the biggest players in each of theof these categories, law enforcement agencies can have a huge impact on the ability to use many viruses at once. We saw an example of such a strategy in action earlier this year, when the US authorities arrested the notorious NetWalker affiliate, which at the time was one of the world's most widespread ransomware viruses. The arrest stopped the distribution and use of NetWalker, and blockchain analysis shows that the same attacker carried out attacks using other viruses such as Ragnar Locker and Sodinokibi. That is, the arrest of one attacker allowed law enforcement agencies to strike at three known ransomware viruses at once. And even if many ransomware developers may be based in Russia, the “supply chain” of those involved in such attacks is global, and a blow to any of its links seriously damages the integrity of the entire chain.
Latin America
Cumulative indicators of cryptocurrency activity in Latin America
The largest markets are characterized by the widespread use of cryptocurrencies with various options for their use.
Latin America ranks sixth inthe size of the cryptocurrency economy from the eight regions studied, with $352.8 billion generated in cryptocurrency transactions from July 2020 to June 2021. Based on this figure, Latin America accounts for about 9% of all cryptocurrency transactions. However, being a relatively small market, Latin America demonstrates a high level of mass adoption of cryptocurrencies. Three Latin American countries are in the top 20 of our Global Adoption Index: Venezuela (at 7th), Argentina (10th) and Brazil (14th). However, as we will discuss below, the prevailing use cases for cryptocurrencies, as well as the maturity of these markets as a whole, vary greatly, leading to differences in the types of dominant platforms and currencies.
What drives the use of cryptocurrencies in Latin America?
Latin America is characterized by a relatively high level of p2p activity; similar dynamics can be seen in many other emerging markets.
However, the degree of dependence on p2p platforms is highlyvaries from country to country, even within the same region. Venezuela, for example, ranks seventh in the overall global cryptocurrency adoption index, largely due to its p2p activity: data shows that the country ranks sixth in total p2p transactions, adjusted for the purchasing power of residents and the number of Internet users. But this cannot be said about all countries in the region. While Venezuela leads the way in p2p activity, with $629 million in cryptocurrency transactions received, other markets in the region see significantly less p2p activity despite larger market volumes overall.
Brazil, for example, has a much largerlarger cryptocurrency market than Venezuela, with $90.9 billion received in cryptocurrency transactions over the past year, compared to Venezuela's $28.3 billion. However, Brazilian users only received $90 million in p2p transactions. In terms of the level of p2p activity, this also puts Brazil behind Colombia, Argentina, Peru and Chile, despite the fact that in terms of the overall size of the cryptocurrency market, Brazil is ahead of any of these countries.
Why in some Latin American countriesIs p2p cryptocurrency exchange much more common than others? Let's take a closer look at the Venezuelan example to better understand what Latin American users get from p2p platforms.
Venezuela: Necessity-Driven Acceptance
Valiu is a US based providercryptocurrency wallet whose mission is to allow Latin Americans, and especially Venezuelans, to make transactions and save funds in stablecoins. To better understand the adoption of cryptocurrencies in Venezuela, we spoke with Simon Chamorro (CEO), Jacob Cohen (CCO) and Tomas Fox (Product Manager) from Valiu. “Many Latin American countries have unstable economies, and these people are not interested in cryptocurrencies from a trading perspective or because Bitcoin will eventually be worth more than $100,000,” says Thomas Fox. “For them, the ability to switch between their local currency and cryptocurrencies to save money is a matter of survival.”
Scenario of using cryptocurrencies for savingsin the context of the devaluation of the local fiat currency, it is certainly relevant for Latin American countries. However, in the case of Venezuela, hyperinflation makes tracking and analysis difficult. The chart below shows the exchange rate between the US dollar and the Venezuelan Bolivar (left Y-axis) versus the Bolivar trading volume on LocalBitcoins (right Y-axis). While Venezuela's trading volumes are rising as the bolivar falls, it is difficult to say if this reflects a real change in people's behavior, as hyperinflation means that the bolivars exchanged lose value over time. In other words, even with the growth of trading activity, it is rather difficult to say unequivocally whether a higher percentage of the capital of Venezuelan users is actually flowing into cryptocurrencies.
To better understand if it is really growingtrading activity in Venezuela as the value of the bolivar falls, below we compare the Bolivar exchange rate chart with the number of visits by users from Venezuela to LocalBitcoins and Binance, whose p2p platform, according to the Valiu team, has been gaining popularity in the region over the past year.
Number of website visits as it fallsThe bolivar's value is increasing, which suggests that the use of cryptocurrencies in Venezuela is growing in response to the devaluation of the local currency, but we cannot yet confirm this completely.
It is easier to measure the relationship between the devaluation of the national currency and the use of cryptocurrencies in Argentina, where the devaluation was not so extreme.
As the Argentine peso in the exploredperiod of time gradually lost value, the volume of p2p exchange of cryptocurrencies showed growth, although such a direct relationship seems to be broken around August 2020.
These analyzes also do not take into account controls forcapital flows that governments can use to combat currency devaluation. Depending on the severity of these controls, they can either limit the demand for cryptocurrencies or push more people to use them. In addition, the volatility of cryptoassets can also influence people's decisions about whether or not to use them in the face of fiat currency devaluation. But even with these caveats, one can see a noticeable, but declining, relationship between the devaluation of the local currency and the volume of p2p exchanges of cryptocurrencies in Latin America.
Private international transfers - another onedriving force behind the adoption of cryptocurrencies in Latin America. This is not surprising, since conventional private fiat transfers are also of great importance to many countries in the region. Private international transfers in 2020 accounted for 2.4% of Latin America's GDP as a whole, according to the World Bank, more than any other region monitored by the organization except South Asia. In countries such as El Salvador and Honduras, inbound private transfers make up more than 20% of the country's GDP. Although the World Bank does not have actual data on incoming private transfers as a percentage of GDP for Venezuela, experts are sure that such payments are of great importance for this country as well. An article in The Dialogue last year said 35% of Venezuelan households receive remittances from abroad.
The Valiu team told us a little more abouthow cryptocurrencies support private money transfers to Venezuela. “The Venezuelan bolívar is essentially worthless because of hyperinflation,” says Simon Chamorro. "Cryptocurrencies allow Venezuelans who have left the country to send money to families back home, and recipients can then store that money in more stable currencies." Valiu is meeting this need with an app that allows residents of Venezuela and Colombia to deposit Colombian pesos on the platform - after registering and completing KYC. Valiu then uses those pesos to buy bitcoins through p2p platforms, which are then exchanged for Venezuelan bolivars and can be deposited into the recipient's bank account in Venezuela.
However, according to the Valiu team, in order toAs remittances using cryptocurrencies have been as useful as possible, Venezuelans need an infrastructure that will allow them to buy essential goods directly with cryptocurrencies, eliminating the need to convert to and from fiat currencies. To this end, Valiu allows Venezuelans, to better preserve their savings, to exchange bolivars for an IOU-like instrument called the USD Valiu (USDV), denominated in US dollars and backed by USDC. The ultimate goal is to enable merchants of goods and services to accept payments in USDV so that Venezuelans and residents of other Latin American countries facing inflationary pressures can save and transact with the stable digital equivalent of the US dollar.
Chainalysis data shows that private remittances to Venezuela using cryptocurrencies appear to have grown steadily over the past year.
The chart above shows monthly growthless than $ 1,000 in cryptocurrency payments both in terms of volume and number of transactions, which we regard as the upper bound for remittances sent to Latin American countries.
Brazil and Venezuela: Different levels of market maturity imply different use cases
Brazil is the largest cryptocurrencymarket in terms of transaction volume, receiving just under $91 billion in cryptocurrency transactions between July 2020 and June 2021. The Brazilian market is three times larger than Venezuela, which received about $28 billion in cryptocurrencies during the same period. Brazil also has a stronger economic infrastructure, with PPP at d. of $15,463, compared to $5,178 for Venezuela. This means that the reasons for using cryptocurrencies for Brazilian users are very different and probably have more to do with speculation and wealth growth rather than remittances and savings.
A reflection of these differences can be seen in the transaction size data for the two countries.
For Brazil, a much larger share of the totalaccounts for large institutional transactions over $10 million - 36%, versus 22% for Venezuela. The Brazilian cryptocurrency market provides an interesting comparison to the Venezuelan one. In Venezuela, retail-sized transactions account for 6.7% of transactions, which is quite close to Brazil's 4.7%. The larger transaction size in Brazil suggests that professional investors play a larger role in this market than in Venezuela.
We also see notable differences between the two countries in the relative popularity of different types of cryptocurrency platforms.
The first thing that catches your eye is how muchDeFi is more popular in Brazil. In Brazil, DeFi accounts for 39% of all cryptocurrency transactions, up from 23% in Venezuela. As we have learned from DeFi service operators, DeFi is more likely to attract already seasoned crypto investors looking for new sources of alpha, which, it seems, should be more in a country like Brazil, with a larger and more developed cryptocurrency market and a stronger economy. generally.
The level of p2p activity, on the other hand, is strongerin Venezuela, which is also in line with the patterns we see in less prosperous markets. Just under 3% of total cryptocurrency transactions in Venezuela are in p2p payments, compared to just under 0.2% in Brazil. Even taking into account the much larger Brazilian market, this means that the total volume of p2p transactions in Venezuela is much higher than in Brazil.
In any given quarter, the volume of p2p transactions in Venezuela is about five to eight times higher than in Brazil.
Overall, the data confirms what we expected.would be seen given the size of the cryptocurrency markets of the two countries and the comparative strength of their economies: the Brazilian market is made up of much larger transactions with a greater share of DeFi platforms - an activity more characteristic of large investors and traders - while the Venezuelan market is made up of transactions smaller and with a greater share of p2p activity, which indicates a wider grassroots distribution of cryptocurrencies due to the need.
Central, Northern and Western Europe
Aggregate indicators of cryptocurrency activity in Central, Northern and Western Europe
DeFi whales have made Central, Northern and Western Europe the largest cryptocurrency economy in the world
Region of Central, Northern and Western Europe(CSZE) has the largest cryptocurrency economy in the world, receiving more than $1 trillion in cryptocurrency transactions over the past year, or 25% of the global total. Following second place in the previous period, CSZE's new position at number one is the result of huge growth that began in July 2020 amid a relative decline in cryptocurrency activity in East Asia.
As we will discuss below, the total volume of transactions inCSZE has grown significantly across virtually all types of cryptocurrencies and related services, but especially in DeFi protocols. Institutional investment inflows, as evidenced by the size of transactions, accounted for much of this growth, although the level of retail activity has also increased.
Perhaps most interesting is the unique status of the CSCE as an international center for the cryptocurrency economy.
CSZE is the largest trading partner forany other region in question, being the source of at least 25% of all cryptocurrency transactions received by other regions, including a whopping 34% for North America. Below we will take a closer look at these trends and explain how the cryptocurrency economy of the CSCE was able to grow into the largest in the world over the previous year.
What explains the growth of the cryptocurrency market in Central, Northern and Western Europe in the last year?
As mentioned above, the growth of cryptocurrencyThe CSZE economy accelerated in July 2020. During this time, there was a huge increase in large institutional-sized transactions (over $10 million in value).
Total institutional transaction volume increased from$1.4 billion in July 2020 to $46.3 billion in June 2021, and at that time they accounted for more than half of the entire trading volume of the CSZE cryptocurrency market. Where were these large institutional transactions going?
The data show that over the surveyed 12 monthsmost of the large, institutional-scale capital transfers were channeled to DeFi platforms. With this in mind, it should come as no surprise that most of these transactions took place in Ethereum and Wrapped Ethereum (wETH), an ERC20 token equivalent to ETH, often used in DeFi protocols.
Looking at the top 5 services in terms of the volume of cryptocurrency transactions for each month, we can conclude how hugely influenced the growth of the cryptocurrency market in the DeFi region.
Most of the months, DeFi protocolsrepresent three or four of the top five services; Frequent members of the top five are Uniswap, Instadapp and dYdX. Binance and Coinbase, meanwhile, remain the most popular centralized exchanges.
As Cointelegraph wrote in the spring, manyInstitutional investors who have either used cryptocurrencies in the past, or even built their strategies around them, turn to DeFi for staking (PoS mining). Through staking, investors can lend their coins to the DeFi protocols, providing them with liquidity. These funds are then disbursed to the borrowers and the interest generated is transferred to the stakers. Staking allows investors to generate cash without selling their crypto assets, making it a good source of additional profit for long-term investors. Staking with DeFi protocols can be seen as analogous to the money market in traditional finance, only with lower fees due to the reduced need for human intermediaries, given that the protocols operate largely autonomously.
Central, Northern and Western Europe: the center of the global cryptocurrency economy
As the largest counterparty to any other region, CSZE is a key source of liquidity for cryptocurrency investors around the world.
The largest trading partner of CSZE isNorth America, followed by East Asia, Central and South Asia, then Eastern Europe. The region's status as the center of the global cryptocurrency market becomes even more evident when you look at the intersection of the most used services for the CSZE and for the rest of the world. The matrix below shows which regions have the greatest overlap in terms of services used. Each cell indicates the number of services for which the region indicated in the column is the main source of web traffic, and the region indicated in the row is the second for this indicator.
CSZE has a high level of intersection of services withmore regions than any of the other regions studied, showing particularly strong links to Eastern Europe, North America, and Central and South Asia. Services that facilitate this include eToro, Bitstamp, and CryptoKitties.
We believe that for some regions such asNorth America, this dynamic reflects convergence across multiple platforms of institutional investors and professional traders. On the other hand, for regions such as Eastern Europe (PDF) and Central and South Asia (PDF), we believe that the overlap in the services used is also due to the sending of private remittances from the CESE countries, since this would correspond to the situation with remittances in the world of fiat money.
Comparison of cryptocurrency activity in Central, Northern and Western Europe
Which countries are responsible for the mostcryptocurrency activity in the CSZE? In the diagram below, all countries in the region are ranked by the volume of incoming cryptocurrency transactions and the share of DeFi is highlighted in the total volume for each country.
The UK leads by a wide margintotal volume, $170 billion, 49% of which was received through DeFi protocols. France, Germany, the Netherlands and Switzerland round out the top five countries. DeFi's share of total cryptocurrency transaction volume is relatively similar across all CESE countries, although some exceptions can be seen, such as Albania, where DeFi makes up the vast majority of the total volume.
Somewhat more variability in results can be found in the types of cryptocurrencies used.
Stablecoins are consistently between 25% and 30% ofof the total volume of transactions in most countries, with the exception of such as Monaco (39%). Altcoin usage also fluctuates more or less in the same range from 8% to 11% for most regions. However, significant discrepancies can be seen in the distribution of volumes between BTC and ETH or wETH. Together, ETH and wETH are the most popular cryptocurrencies in almost every country. The region's largest markets, the UK and Germany, are similar in this regard, with Bitcoin accounting for 27% of UK transactions, ETH and wETH collectively 40%. In Germany, Bitcoin accounts for 28% of total cryptocurrency transactions, ETH and wETH for 36%. In France, on the other hand, the share of bitcoin in the total volume is only 20%, and 45% is ETH + wETH. This figure is likely due to the slightly higher proportion of transactions to the DeFi protocols in France, as Ethereum and wETH are the most used currencies on such platforms.
In general, despite small differences inthe exact distribution of cryptocurrency activity in individual countries, one thing is clear: the CSEC region has become the world's largest cryptocurrency market and its growth over the past year has been largely due to institutional investors and other "whales" switching to DeFi.
Eastern Europe
Total indicators of cryptocurrency activity in Eastern Europe
The active adoption of cryptocurrencies in Eastern Europe is hampered by the high level of cybercrime
Eastern Europe has the fifth largestcryptocurrency economy from the regions studied, with total incoming cryptocurrency transactions volume of approximately $422 billion between July 2020 and June 2021. This represents a 929% increase from $41 billion in the previous period, which, although a very significant figure, approx. consistent with the growth observed in other regions. Overall, Eastern Europe accounted for 11.8% of global cryptocurrency transaction volume during the study period.
Eastern Europe includes two countries,occupying high positions in the general index of global adoption of cryptocurrencies: Ukraine and Russia, which are on the 4th and 18th lines, respectively. However, both countries dropped in the overall rankings compared to the previous period, when Ukraine was in first place and Russia in second. What explains this decline? In both cases, there is a decrease in the volume of transactions on p2p platforms, and this is one of three key metrics on which our acceptance index is built. By this indicator, Ukraine dropped from 11th to 38th place, Russia fell even more - from 9 to 119. Although the level of p2p activity has really decreased in comparison with other countries, this significant drop is partly due to changes in the methodology for constructing the index: this year we took into account more p2p exchanges in our analysis and determined their activity mainly based on web traffic, rather than fiat currencies in the most popular p2p trading pairs, as before.
However, despite the decrease in p2p activity,Russia and Ukraine show high transaction volumes on centralized cryptocurrency platforms - both general and retail-sized transactions in particular.
What drives the use of cryptocurrencies in Eastern Europe?
One of the probable reasons for the popularitycryptocurrencies in Eastern Europe and, especially, in Russia and Ukraine, there is a low level of trust in the institutions of power and financial management. Russia, for example, is ranked last in the latest edition of the Edelman Trust Barometer (PDF), which ranks countries in terms of public trust in government, business, NGOs and the media. In particular, Russian citizens, along with Ukraine, have historically shown a high level of mistrust in banks. Many of the early adopters of cryptocurrencies were driven by much of these sentiments.
In addition, in many post-Soviet states,especially in Russia, there has traditionally been a relatively large number of qualified programmers with fewer economic opportunities than their counterparts in other countries. Observers have often cited this factor as one of the reasons for the high level of cybercrime in these countries. It is not hard to see how this imbalance of economic opportunity, combined with the level of technical skills and widespread distrust of banks and governments, can lead to the creation of crypto-friendly societies, since in these conditions there will be comparatively many people with both the motivation and the ability to become them. early supporters.
Capital flight and tax evasion
Capital flight and tax evasion can alsoplay a significant role in the adoption of cryptocurrencies in Eastern European countries, especially in Russia and Ukraine. Both countries make it difficult for citizens to send large sums of money abroad, but capital flight remains a big problem for them. Bloomberg estimates that Russia has lost more than $750 billion to capital flight since 1994, while the Kyiv Post claimed that Ukraine is losing more than $50 billion a year because of it. But while many have talked about the likely use of cryptocurrencies to withdraw capital, is such a scenario really widespread in Eastern Europe?
Maybe.We cannot provide exact figures for capital outflows through cryptocurrencies for a particular country, but the data indicate that this can be a significant factor in the use of cryptocurrencies in Eastern Europe in general and in Russia and Ukraine in particular.
International transactions account for a large sharethe volume of cryptocurrency transactions in Eastern Europe than in other regions of comparable size. It is estimated that only 14% of the volume of cryptocurrency transactions in Eastern Europe represents the movement of funds between two Eastern European addresses, compared with 22% on average worldwide, 26% in North America and 27% in East Asia. Part of this discrepancy may just be due to capital outflows.
Looking at the numbers by country, Russia and Ukraine appear to be sending to other countries a significantly higher than average share of the volume of cryptocurrency transactions.
It is estimated that 86% of the total volume of cryptocurrency transactions from Russia and 87% of the Ukrainian volume are sent to addresses belonging to other countries. Only Turkey is ahead of them in this indicator.
The largest recipient of cryptocurrency transactions from Eastern Europe appears to be Western Europe, followed by North America and East Asia.
Cryptocrime in Eastern Europe: Scammers and Ransomware
Blockchain addresses associated with Eastern Europe have the second highest level of illegal activity, behind only Africa, according to a study by Chainalysis.
It is worth keeping in mind, however, that the total volumeEastern Europe has a much larger cryptocurrency economy than Africa, as does Latin America, the region with the third-highest rate of involvement in illicit activity. In fact, Eastern Europe is the only region with a total transaction volume of $400 million or more for which illicit activity accounts for more than 0.5% of the total value of cryptocurrencies sent and received.
In terms of the net worth posted toFor cryptocurrency transactions to addresses associated with illegal activities, Eastern Europe ranks second, behind only Western Europe.
It is also noteworthy that Eastern Europe is larger,than any other region in the world sends cryptocurrencies to darknet markets. This is largely due to the Hydra trading platform. Hydra is the world's largest darknet marketplace and serves almost exclusively users from Russian-speaking countries in Eastern Europe. However, as in all regions, the largest share of funds sent from Eastern Europe to addresses associated with illegal activity is to addresses associated with fraudulent schemes. It can be assumed that most of this money is a transfer of funds from victims to scammers. Between June 2020 and July 2021, Eastern European blockchain addresses sent a total of $815 million to scammers, second only to Western Europe.
Eastern Europe also accounted for the majority of web traffic to fraudulent sites by a significant margin over the same period.
Refining the picture down to the country level, we see that Ukraine is the largest source of this web traffic, more than twice the country in second place.
What kind of scammers threaten cryptocurrency users from Eastern Europe? More than half of the value sent from the region to scam projects came from one scam: Finiko.
Finiko was a Russian financial pyramid,which collapsed in July 2021, shortly after users reported that they could no longer withdraw funds from their accounts with the company. Finiko offered users to invest in BTC or Tether, promising monthly returns of up to 30%, and eventually launched its own coin, which was traded on several exchanges.
According to The Moscow Times, Finiko headedKirill Doronin, a popular Instagram influencer, was previously associated with other Ponzi schemes. The article notes that Finiko has managed to take advantage of the difficult economic conditions in Russia, exacerbated by the Covid pandemic, attracting users desperate to make extra cash. Chainalysis's analytical tools show just how big this scam was.
Between December 2019 and August 2021 Finikoreceived over $1.5 billion worth of Bitcoin in over 800K individual transfers. While it is unclear exactly how many individual victims made these deposits, nor how much of that $1.5 billion was paid out to investors to support the scheme, it is clear that Finiko is a massive scam targeting Eastern European cryptocurrency users, predominantly from Russia and Ukraine.
Eastern European addresses also receive a large amount of funds from fraudulent addresses, which suggests that in addition to victims, there are many fraudulent operators in the region.
The diagram above shows the dynamics of receivingregions of funds from fraudulent schemes over the past year. During this period, Eastern European addresses received approximately $950 million worth of cryptocurrency from fraudulent addresses, again second only to Western Europe. However, Eastern Europe's monthly numbers have risen steadily since March 2021, while Western Europe's have declined, causing Eastern Europe to overtake Western Europe in the amount of cryptocurrency transactions originating from fraudulent addresses in June. Again, more than half of these funds come from Finiko.
Eastern European addresses also receivedsignificant amounts of funds from addresses associated with extortion: $46 million, second only to Western Europe ($51 million). However, we believe that at least some of the ransomware money sent to Western European addresses would most likely also be correctly attributed to Eastern Europe. The geographic attribution used in the study is based on web traffic to cryptocurrency services, so in cases where two regions use many of the same services, it is more difficult to properly differentiate between them. The matrix below shows which regions have the greatest overlap in terms of services used. Each cell indicates the number of services for which the region indicated in the column is the main source of web traffic, and the region indicated in the row ranks second in this indicator.
It can be seen from the matrix that of all pairs of regionsEastern and Western Europe have the greatest traffic overlap: 160 services with Western Europe as the main traffic source and Eastern Europe as the second most important traffic source and 68 services with an inverse ratio between the two regions. Therefore, we believe that some of the cryptocurrencies marked as being moved from ransomware addresses to Western European addresses are probably actually going to Eastern Europe.
Why are the authors so sure of thisdistortion and not the opposite? A study published by Chainalysis in May suggests that many of the most common ransomware strains are associated with cybercriminal groups based in or affiliated with Russia, such as the acclaimed Evil Corp, whose leadership, according to the US government, is associated with the Russian government. However, there is another way to get an idea of what part of the ransomware activity cybercriminals in Eastern Europe are responsible for, besides tracking where the ransomware operators are sending cash for cash. Many ransomware viruses affiliated with Russia and other Eastern European countries have code that prevents them from being used against operating systems in the CIS countries. The chart below shows how much of the total ransomware revenue in 2020 and 2021 came from strains associated with Evil Corp or with a code that prevents the use of these viruses in the CIS countries.
Overall, during the study period, 90% of the revenue from the top ten ransomware viruses came from “strains” associated with Eastern Europe, and this share continues to grow from year to year.
Central and South Asia, Oceania
Aggregate indicators of cryptocurrency activity in the countries of Central, South Asia and Oceania
A high level of mass distribution of cryptocurrencies in the region, but with great differences in the reasons for it between different countries
Central, South Asia and Oceania (CSAD) -fourth largest cryptocurrency market we surveyed, with $572.5 billion generated in cryptocurrency transactions from July 2020 to June 2021, representing 14% of global cryptocurrency transaction volume during the same period. From the point of view net value, the volume of cryptocurrency transactions in Central South Administrative District grew by 706% compared to last year, and the region's share of global volume increased by 2%, making Central Administrative District the third fastest growing region after the Middle East and Central, Northern and Western Europe.
But even more impressive is the levelmassive distribution of cryptocurrencies in the region. CCAO includes all of the top 3 countries in our Global Adoption Index, with Vietnam at the top of the index, India at second and Pakistan at third. Also belonging to the region, Thailand is in 12th place, and the Philippines in 15th. In this section, we explore the key trends in the region and look at the factors driving the growth in cryptocurrency adoption there.
What is driving the spread of cryptocurrencies in Central, South Asia and Oceania?
As in other regions, CJAO saw a huge increase in DeFi activity during the study period.
From around May 2020, the share of DeFi activity in totalthe volume of cryptocurrency transactions is increasing sharply, exceeding 50% by February. Most of this volume comes from Uniswap, Instadapp and dYdX, with significant activity also from Compound, Curve, AAVE and 1inch.
Capital transfers that fall into the “professional” category ($10K to $1M in value) account for the largest share of cryptocurrency transaction volume in the Central South Administrative District.
Comparison of CSCAD countries with the highest level of mass adoption of cryptocurrencies: India, Vietnam and Pakistan
While India, Vietnam, and Pakistan all have high levels of cryptocurrency mass adoption, they differ quite a bit in terms of net transaction values.
Two things stand out:Firstly, the cryptocurrency markets of India and Vietnam are much larger than the Pakistani market. Secondly, India has a much higher share of DeFi platforms in total transactions - 59%, compared to 47% in Vietnam and 33% in Pakistan. All three regions have grown significantly during the study period. The largest growth was shown by Pakistan (+ 711%), slightly ahead of India with + 641%.
Interesting differences also appear whena breakdown of the total cost of transactions by currency. For example, it can be seen that Ethereum and wETH account for a larger share of the total volume of cryptocurrency transactions in India than in Vietnam or Pakistan.
This is not surprising since Ethereum and wETH are more commonly used for DeFi transactions.
This breakdown by different cryptocurrencies canalso reflect different levels of market complexity and user preparedness. We spoke to Binh Nguyen, Fintech-Crypto Hub Coordinator and Senior Program Manager for Finance at the Royal Melbourne Institute of Technology (RMIT) Vietnam, who took a close look at the local cryptocurrency market. He described most of the cryptocurrency activity as a kind of gambling, gambling. “Most types of gambling in Vietnam are illegal, but quite popular, and I think this is one of the reasons why people here are so willing to invest in high volatility assets such as cryptocurrencies,” he says. While there is a tech-savvy contingent in the Vietnamese cryptocurrency community interested in changing the future of money and building innovative projects, including DeFi, many of those who invest in cryptocurrencies do not have high financial literacy or risk management experience, Binh said. “Low financial literacy encourages people to take excessive risks, which can bring good financial results for crypto investors during a bull market. While many more sophisticated investors can wait five or ten and miss the opportunity. "
Describing the Vietnamese cryptocurrency market asConsisting of predominantly retail users, Binh still does not think that many of them use cryptocurrencies for long-term preservation of savings or protection from inflation, noting separately that in the poor and remote areas of the country, the level of cryptocurrency adoption is relatively low. “Young people don't have many investment options here. We do not have a well-developed financial market for ETFs, options or futures, and the penetration rate of exchange brokers in Vietnam is below 5%, says Binh. "And if you have $ 5,000 to invest, then there are not so many options where you can invest." Binh expressed the hope that with clearer regulation by the government, the cryptocurrency market in Vietnam will be able to develop more. Therefore, he hopes that regulators will soon provide clearer guidance on whether cryptocurrencies are considered property or not, and advocates for the creation of a regulatory sandbox for cryptocurrency projects.
Cryptocurrency traders from Pakistan with whomwe were able to communicate, expressed similar considerations about the adoption of cryptocurrencies in their country, the use models of which are generally similar to Vietnamese in terms of commonly used types of services and assets. Muhammad, an expert trader at Paxful, told us that, in his experience, most traders are focused on trading altcoins rather than saving capital. “Obviously, everyone wants easy money. But nobody wants to take risks or suffer any losses, ”he says. Junaid, another expert trader from Paxful, described the situation in the cryptocurrency market in a similar vein: “I myself trade many altcoins - ADA, TRX, WAVES, SOL, DOT, CAKE, DLT, COMP, SC, SHIB, XRV, CRV - in pairs to USDT. As you know, ADA, WAVES, SOL, like many other coins, showed very big growth, and I made good money on it. "
The Indian cryptocurrency market looks more mature compared to the Vietnamese and Pakistani ones. This can be seen from the distribution of the total volume of cryptocurrency transactions in the region by their size.
Large institutional transfers of cryptocurrencies toamounts over $10 million account for 42% of the transaction volume from Indian addresses, compared to 28% in Pakistan and 29% in Vietnam. These numbers suggest that Indian cryptoasset investors are, on average, part of larger and more complex institutions.
As we noted above, India's DeFi market is alsomuch larger (although adjusted for population, this is not the case), and the region has also seen significant growth in cryptocurrency-related entrepreneurship and venture capital investments. Joel John, CEO of cryptocurrency investment firm LedgerPrime, told us about the gradual legitimization of the cryptocurrency business in India from his own experience: “There used to be a stigma surrounding this industry. In 2014, if at some event for venture investors you mentioned that you were working with the crypto market, then later in the evening someone might come up to you and ask if you would help him get drugs online. Now it has become cool to work with the crypto market. " While John notes that some older investors still view cryptocurrencies with suspicion, the overall perception has become much more positive.
John also told us that how hebelieves drives the majority of Indian cryptocurrency investors. “Investing in stocks in India is a long and painful process that requires you to sign many documents. The organization of this takes three or four days. Investing in cryptocurrencies, on the other hand, takes less than an hour. " John estimates that India has four times as many cryptocurrency investors as equity investors. Many of the cryptocurrency investors, he said, had previously specialized in assets such as real estate, the profitability of which has recently dropped significantly. Cryptocurrencies have become easy access for them to a new source of alpha. But this is only the upper segment of the market. On the lower end, John mentioned that many of the (numerous) Indian freelancers - mostly working in technology for overseas employers - have started asking for payments in cryptocurrencies, both for convenience and personal interest in assets.
Krishna Sriram, ManagerDirector of Quantstamp, said a little more about this: “Many Indian developers and independent freelancers working for foreign employers have begun to request payment in cryptocurrencies. This is a clear example of bottom-up acceptance,” says Sriram. He also noted that most of his friends who make this choice prefer to receive payment in ETH or USDC - through centralized exchanges or through DEX. “I think the reason is that many of these people work full time in the Ethereum and DeFi ecosystem. There is tremendous growth in this area, with many developers moving into it after working at traditional tech unicorns.”
In terms of the size of the DeFi market, a largeKrishna attributes some of its popularity to centralized exchanges, which are becoming increasingly difficult to use in regions with undefined legislation, such as India. “Centralized exchanges are becoming more demanding on users, and in certain jurisdictions it becomes more difficult to use them. DeFi doesn’t know where you’re from, and it don’t worry if they have any relationship with your bank, ”he says. "It's an open and public system." Over the past year, there have been conflicting reports of cryptocurrency regulation in India, up to and including a possible outright ban. Recently, however, it looks like Indian regulators will be looking to restrict and tax cryptocurrency transactions rather than ban them altogether.
Sriram also emphasized the importance of developmentcryptocurrency media resources in the country and the ecosystem of influence. He mentioned Kunal Kapoor, a popular Bollywood actor who promoted NFTs, as well as Akshay BD and Tanmay Bhat, online influencers who founded the educational YouTube channel Superteam Podcast. “These people don't just shout «Buy Bitcoin!», they discuss the merits of various projects in detail.”
Differences between the largest markets in Central andSouth Asia may reflect the fact that these countries are at different stages of cryptocurrency market development. Many initially turn to cryptocurrencies in search of quick profits from speculative trading in various instruments, which can be done on centralized services and regular p2p platforms, which seems to be the predominant use case in Vietnam and Pakistan. However, in markets such as India, where the cryptocurrency community has grown and already attracted external investment, we are seeing more development and use of even more innovative projects such as DeFi protocols.
East Asia
Total indicators of cryptocurrency activity in East Asia
East Asia's Cryptocurrency Economy Drops In World Rankings As A result of Chinese Bans
East Asia is the third largestcryptocurrency market of those studied, receiving $591 billion in incoming transactions from July 2020 to June 2021, representing 14% of all cryptocurrency transactions during the same period. Total transaction value in the region increased by 452% compared to the previous period, making it the slowest growing region studied. East Asia's share of global cryptocurrency transaction volume has fallen sharply, from 31% in the previous period from July 2019 to June 2020, making it the world's largest cryptocurrency economy.
East Asia also shows relativelylow level of mass distribution of cryptocurrencies over the past year. China is ranked 13th in the global adoption index and the highest in East Asia. At the same time, China fell to it from the 4th line in the previous rating - mainly due to a decrease in the volume of p2p transactions. The next country in the region after China in terms of the level of mass distribution of cryptocurrencies is Hong Kong with 39th position in the overall rating, followed by South Korea (40) and Japan (82).
What is the reason for the decline in East Asia in the globalrating? One of the reasons is obviously China's bans on mining cryptocurrencies and the cryptocurrency industry in general. China has historically been the largest mining center in the world, but last year the government decided to ban mining in the country and significantly restrict the trade in cryptoassets. At the same time, China is gearing up to launch the digital yuan, the world's first blockchain-based central bank digital currency (CBDC). The digital yuan is currently in test mode, with wider adoption expected at the 2022 Winter Olympics in Beijing. We'll look at these trends below and analyze the factors driving cryptocurrency usage in East Asia.
What is driving the spread of cryptocurrencies in East Asia?
East Asian countries differ in both the size of the cryptocurrency economy and the preferred type of cryptocurrency services.
China is still the largest todaycryptocurrency market in the region, receiving $256 billion in cryptocurrency transactions from July 2020 to June 2021, 49% of which came from DeFi protocols. Hong Kong has a slightly larger skew towards DeFi, with 55% of the $59.7 billion in incoming transactions.
However, in two other notable markets in the regionthe level of DeFi activity is much lower. For South Korea, this is only 15% of the $150 billion in cryptocurrency transactions received; in Japan, the share of DeFi protocols was 32%. The distribution of incoming transactions for each country by cryptocurrency type is also in line with these trends.
Ethereum and wETH account for 21% of the volumeSouth Korea's cryptocurrency transactions and 28% of Japanese volume, up from 38% for China and Hong Kong. This is an expected discrepancy since Ethereum and wETH are the main cryptocurrencies for DeFi transactions. In a May Cointelegraph article, DeFi's relatively low popularity in South Korea is explained by the uniquely isolated cryptocurrency market. Oleg Smagin, head of global marketing at South Korean firm Delio, specializing in cryptocurrency lending and staking, explained this phenomenon to the publication: “2019 was a turning point for the widespread adoption of DeFi throughout the world. But in Korea it was almost invisible - mainly because the majority of local retail investors lacked experience in using foreign crypto services, and because of the low level of adoption of stablecoins. " In Japan, the lag in DeFi adoption can be attributed to the industry's lack of regulation. However, the general trends in the spread and adoption of cryptocurrencies in East Asia, led by China, have resulted in several DeFi platforms becoming some of the most popular cryptocurrency services in the region.
Centralized exchange Huobi remains the largest cryptocurrency service in the region in terms of transaction volume, but DeFi protocols Uniswap and dYdX rank second and third.
Reduction of mining in China has led to a decrease in liquidity
China has historically played a dominant role inmining cryptocurrencies. For periods, Chinese miners controlled up to 65% of the global Bitcoin hash rate, resulting in increased liquidity, cryptocurrency services serving China and Asia as a whole.
However, the situation changed dramatically in May 2021.years in which the Chinese Communist Party (CCP) announced its intention to ban mining and trading in cryptocurrencies, citing concerns about financial stability and environmental impact. While this is not the first time the CCP has adopted an anti-cryptocurrency policy, previous measures have only resulted in the exclusion of exchanges and other cryptocurrency businesses from the country, while traders and miners could continue to operate. After the Chinese bans in May 2021, Bitcoin's overall hash rate fell by more than 50%, and only fully recovered in December.
Blockchain analysis can provide a better insightabout which mining pools suffered the most. The chart below shows the amount of BTC “mined” by the six largest mining pools in the months leading up to and immediately after the May mining ban in China.
AntPool, Poolin, BTC.top and F2Pool - all based predominantly in China - saw the steepest declines, while Czech SlushPool production remained stable.
In the chart below, the sample size has been expanded toThe 20 largest mining pools in the world and shows the relative growth and volume contraction for all pools based in China compared to pools from other countries.
From the beginning of the year to July inclusive at 20of the largest mining pools based outside of China, mining revenues more than doubled, while in China they fell by about 50%. However, in absolute numbers, Chinese pools still mined a lot more bitcoins simply due to the number of largest pools - 14 out of the top 20. However, their revenues have dropped significantly, while for pools outside of China, they have increased significantly.
Chinese mining pools have historically been importanta source of liquidity for the services to which they funneled their newly mined digital "coins" - mostly the most popular cryptocurrency services in China and East Asia in general. One of the important side effects of the mining ban in China is that many of these services seem to have missed the significant amounts of cryptocurrency inflows they are accustomed to receiving. The chart below shows the 20 services that underwent the largest decrease in the number of bitcoins received from mining pools in June 2021, in the first month after the introduction of new Chinese bans.
Binance was hit the hardest, with cutsmore than $200 million in net volume of BTC received from miners. Next on this list are Huobi, FTX and Genesis. All of these services, particularly Huobi, are extremely popular in East Asia. The loss of liquidity by the largest services may be partly explained by the decline in overall cryptocurrency activity in the region.
Of course, mining isn't the only partChina's cryptocurrency economy, hit by new bans. The government has taken other actions, such as a full-fledged anti-cryptocurrency campaign in state-owned media, posting official warning messages on thematic apps, and possibly pressure on social media to prevent the spread of themed content. This has certainly contributed to the decline in cryptocurrency activity in the country.
Why is China launching the digital yuan?
In April 2020, China began testingDigital yuan, becoming one of the first governments to experiment with central bank digital currencies (CBDCs). Central Banks, such as the digital yuan, are government-issued blockchain versions of national currencies. Like most conventional cryptocurrencies, CVDs generally provide more transparency about how people spend their funds, as the currency blockchain acts as a permanent, immutable ledger of all transactions. China is adopting the digital yuan through government banks and digital payment apps such as WeChat Pay and AliPay, which are far more widespread in China than their counterparts in America or Europe. Trials of the digital yuan and its infrastructure continue, with many pointing to the 2022 Winter Olympics in Beijing as an opportunity for the Chinese government to introduce its CVC to the world as it planned to issue digital yuan for athletes coming to the Olympics.
CVCBs have far-reaching implications for bothdomestic as well as foreign policy, especially when introduced by an authoritarian regime that sees itself as a growing economic rival to the United States. We spoke with Dovey Wan, founder of cryptocurrency investment firm Primitive Ventures and renowned expert on the Asian cryptocurrency market, and asked what goals she thinks the PDA is trying to achieve with the digital yuan. Dovi Wan highlighted two key goals.
The first one is relatively soft:more detailed control over the economy. Under the fractional reserve banking system used in all countries today, central banks can influence the economy only indirectly: for example, through changes in the key rate. If the money supply exists entirely in the form of central securities, and all transactions are recorded in a single central register, then central banks will have much greater control over financial flows. “This would make monetary policy programmable,” Wang says. - For example, if the government considered it necessary to somewhat «cool» stock market, it could add a few lines of code and stop the flow of new capital into it.” In addition, Wang noted that the digital yuan should be easier for senior citizens to use than the mobile payment apps that have become so common in China, and that digital currency exchange systems have the potential to make transactions cheaper for merchants by eliminating the need for third parties to in the form of traditional banks for settlement of transactions.
However, it is not difficult to imagine howthe centralized state register of citizen transactions can be used as a financial supervision tool in the hands of the CCP. Although Chinese citizens are deprived of financial confidentiality under the current banking system, the digital yuan will give the government the ability to simply exclude individuals and legal entities from the financial system for any offense. It is not yet clear whether the CCP will use this opportunity and to what extent, but it should be noted that in the digital yuan system, by definition, there is the possibility of a sentence to "financial death."
We also spoke with Yaya Fanusie,Senior Fellow at the Center for New Approaches to US Security (CNAS), who studied the digital yuan and published a report on this project in January 2021. Mr. Fanushi largely agreed that the digital yuan could be a tool of authoritarianism, but he put more emphasis on its role in the CCP's broader desire to collect as much data about citizens as possible. “The government has never had a centralized database of records of all the financial transactions of citizens,” he says. "Yes, China can request this data from payment application operators, but it takes more time, and they can sometimes refuse to provide such data."
He also outlined the ways in which financialthe data generated by the digital yuan can be combined with other types of data used in China's ethically controversial social credit system. “The CCP has issued a notice that Mongolian families who do not send their children to public schools will be blacklisted. The digital yuan would allow the government to combine such blacklists with financial data. " Fanushi mentioned that the CCP has already announced its intention to use the digital yuan to monitor government corruption. And while this sounds like a reasonable goal, it's not hard to imagine how the same technologies could be directed against ordinary citizens.
Is the digital yuan a threat to the US dollar?
Many have suggested that Chinawill promote the international use of the digital yuan to reduce dependence on the US dollar and the SWIFT transaction system. In fact, a video published by the state-owned China Global Television Network shows what this might look like; it presents the digital yuan as a way to circumvent sanctions and reduce America's influence on world trade.
We asked Mr. Fanusi if he saw inthe digital yuan is a threat to the US dollar. He replied that this is unlikely in the short term, as it is likely that it will take some time before the CCP starts promoting the use of the digital yuan outside of China. But in the long term, he believes that both the digital yuan and other future digital securities issued by other countries could harm the dollar's status in the global financial system: “I think they will try to negotiate free convertibility with other countries - like atomic swaps between TsVSB ". With such long-term agreements between countries, a resident of China will be able to send the digital yuan to someone in Malaysia, and the currency will be automatically converted, so that the user in Malaysia will receive digital Malaysian ringgits without the need for any of the users to deal with foreign currency. country. These transactions will not depend on the SWIFT system. And if they become the norm, it will significantly reduce the need for American dollars for people outside the United States. “This is not a risk for 2022, but rather for 2032 and beyond,” says Fanusi.
In the long run, Fanusi alsosees the digital yuan as part of a larger war over data ownership, in which the US risks being left behind. “So far, China has been more innovative in fintech than the United States. If this happens with blockchain technology, the American economy risks missing out on the next wave of data-driven innovation, ”Fanusi said. It is difficult to imagine exactly what these innovations will be today, but they could be critical given the huge amounts of data that the CVD will generate and how governments could potentially use this data to better manage the economy.
However, Fanusi does not believe that AmericanFor politicians, to reduce this risk, it is enough to simply create their own CVCB. While the CECB project should not be completely discounted, Fanusi believes the US needs to look wider: not be limited to the digital dollar, but push more innovation in blockchain, fintech and monetary policy across the board, as it has done in the past. “The US Federal Reserve System is quite innovative. It is different from other central banks because the United States has a special character and unique history that has led it to successfully resist centralized banking for over 100 years, ”Fanusi says. In other words, he believes that innovation should be developed organically, and not break away from what other countries are doing. One of the ways Fanusi thinks it right to encourage this innovation is through the US collaborating with universities to create a sandbox for blockchain development. “This is how the United States took the lead in the development of the Internet. Universities were instructed to create a computer networking system that the military could use. This infrastructure was then expanded for much wider civilian use and became the basis for a revolution in business solutions. ”
One thing is clear:China is developing the digital yuan for immediate domestic and possibly future international use. Improving monetary policy management and financial supervision of Chinese citizens appear to be the short-term goals of the project, but in the long-term, the spread of the digital yuan, along with other CVDs, could threaten the US dollar's status as the world's reserve currency. Any US response to this project, or the launch of a similar digital dollar, must consider the issue of financial data and how it can be used to strengthen the economy and maintain the country's position in economic competition without compromising citizens' privacy.
Near East
Cumulative indicators of cryptocurrency activity in the Middle East
Cryptocurrency market in the Middle East grows by 1500% thanks to the need to preserve savings and international transfers
The Middle East is the second smallestcrypto-economies we studied, receiving $271.7 billion in cryptocurrency transactions between July 2020 and June 2021, representing 6.6% of the global total. However, although this figure is small compared to other regions, it represents an almost 1500% increase compared to the previous period, making the Middle East one of the fastest growing cryptocurrency markets in the world.
Despite this growth, Middle Eastern countriesdemonstrate a relatively low level of mass adoption of cryptocurrencies. Of the countries in the region, Afghanistan ranks highest in the overall global cryptocurrency adoption index, at 20th. It is followed by Turkey in 26th place. However, Turkey has the highest transaction volume in the region at $132.4 billion during the study period.
Afghanistan transaction volume compared to thismiserable, but due to the relatively low rates of Internet penetration and per capita purchasing power, this volume produces a much higher level of acceptance than would be expected.
You can also see big differences betweencountries in terms of adopting DeFi. For example, in Turkey, DeFi platforms account for 33% of the total volume of cryptocurrency transactions, in Lebanon this figure reaches 95%, and in Iraq - only 16%. Below, we analyze these trends and look at what drives the adoption and spread of cryptocurrencies in the Middle East.
What is driving the spread of cryptocurrencies in the Middle East?
Research shows that many residentsregions are turning to cryptocurrencies to keep their savings from devaluing local currencies - a trend seen in other emerging markets such as Africa and Latin America. Reuters drew attention to the phenomenon in March, when the Turkish lira fell 13% after President Erdogan's decision to fire the governor of Turkey's central bank. Turkish cryptocurrency trader Izzet Emre Ari was very blunt: "If my funds are stored in lira, they quickly depreciate." The devaluation of the national currency, unfortunately, is not a new phenomenon for Turkey. Ozgur Guneri, CEO of BtcTurk, a popular cryptocurrency exchange in Turkey, noted that previous generations of Turks have mitigated this problem by investing in more stable assets such as gold and real estate. The largest cryptocurrencies appear to be the next investment to meet the need for stability.
Our data supports these findings.The chart below compares the Turkish Lira exchange rate to the trading volume in pairs with the Lira on cryptocurrency exchanges from July 2020 to June 2021.
Statistically, between the devaluation of the lira andthe volume of trading shows a very significant relationship with it, however, not strong enough to conclude that there is a causal relationship. The ratio looked strongest at the beginning of the year, when Turkish users were much more willing to trade in the lira amid its depreciation. However, this relationship faded in the second half of the year, with a significant decline in the value of cryptocurrencies, including bitcoin. This may indicate that Turkish users view cryptocurrencies as a more viable capital preservation mechanism when their price rises.
A recent CNBC article speaks outspeculation that many Afghans are turning to cryptocurrencies to save money amid similar economic uncertainty, exacerbated by the recent massive bank closures following the return of the Taliban and the resulting chaos at the Central Bank of Afghanistan. However, the available data on transactions with the Afghan dollar is insufficient to fully study such activity.
Money transfers from abroad are anotheruse case for cryptocurrencies in many countries in the Middle East - a trend that can be seen in other emerging markets. According to the World Bank, remittances account for 2.4% of GDP in the Middle East, although this figure is significantly higher for some countries in the region, such as Lebanon, where it is 18.9%, or Egypt (8.2%). Many of these transfers come from other, wealthier countries in the Middle East region such as Saudi Arabia and the UAE. Both of these countries employ many visiting workers from around the world, making them the second and third largest senders of cross-border private transfers in the world as a result. Middle Eastern countries with a significant number of foreign workers include, in particular, Egypt, Syria and Afghanistan (during the study period).
The chart below shows monthly growth in bothboth the volume and the number of transactions for cryptocurrency payments under $ 1000, which we considered as the upper bound for private cross-border transfers sent to the countries of the Middle East.
The data suggests that the amount of moneyremittances in the region are likely to grow. Who is the recipient of these transactions? The graph below shows which countries receive the largest share of all cryptocurrencies received in international payments of less than $ 1000.
Several countries - Egypt, Afghanistan, Syria, -historically heavily relied on fiat cross-border transfers, they also lead in the share of cryptocurrency transfers in this category. The data suggests that some of the cross-border payments to these countries could have gone into cryptocurrencies.
Africa
Aggregate indicators of cryptocurrency activity in African countries
P2P platforms, cross-border payments and the need for a store of value are fueling cryptocurrencies in Africa
Africa has the smallest cryptocurrencyeconomy of all the regions we studied, receiving $105.6 billion in cryptocurrency transactions between July 2020 and June 2021, but it is also one of the most dynamic and exciting.
It's not just that AfricanThe cryptocurrency market grew by more than 1200% in terms of the volume of transactions received during the study period, but the region also has one of the highest rates of mass adoption of cryptocurrencies, with Kenya, Nigeria, South Africa and Tanzania in the top 20 of our Global Adoption Index. In addition to being the third fastest growing cryptocurrency economy, Africa also has the largest share of total volume for retail-sized transfers - just over 7% compared to the global average of 5.5%.
Detailing further, Africa also has a larger share of volumes than the global average for the professional, large retail and small retail categories of cryptocurrency payments.
These numbers explain a lot why there are so manyAfrican countries rank high in our adoption index as smaller transaction sizes imply more widespread adoption among ordinary users.
As we will see, p2p platforms are especially popular inAfrica compared to other regions, and many African cryptocurrency users rely on p2p platforms not only as a point of entry into the cryptocurrency market, but also as a tool for sending cross-border transfers and participating in commercial transactions. Cross-regional transfers also account for a larger share of the cryptocurrency market in Africa than in any other region: 96% of the total volume of transactions, compared to 78% for all regions in total. Next, we'll look at the unique use cases and user needs that are driving these trends in Africa.
What is driving the use of cryptocurrencies in Africa?
One of the important trends in Africa has becomecontinued growth in the use of p2p cryptocurrency exchanges. The chart below shows how the trading volumes of multi-African currency pairs have grown since 2016 on Local Bitcoins and Paxful, the two largest p2p cryptocurrency platforms in the world by transaction volume.
: Useful Tulips
Thanks in part to this growth, no regionuses p2p platforms more actively than African users of cryptocurrencies: p2p accounts for 1.2% of the total volume of African cryptocurrency transactions and 2.6% of transactions specifically with bitcoin.
Why are p2p platforms so popular in Africa?One reason is that some countries, such as Nigeria and Kenya, have made it difficult for their citizens to send money from bank accounts to cryptocurrency companies - either through legislation or through recommendations to banks. However, this is not a problem for p2p platforms that do not store user funds and allow customers to exchange cash for cryptocurrencies directly among themselves. After that, users, if desired, can send cryptocurrencies to centralized exchanges for additional trading opportunities. Adedeji Owonibi, founder and CEO of Convexity, a Nigerian consulting firm and founder of its associated cryptocurrency community, The Hub, told us about how Nigeria's crypto economy has changed since the country's central bank banned banks from facilitating cryptocurrency transactions:
“Binance has been the most popular by farplatform, but after the Central Bank sanctions, many are switching to p2p-platforms such as Paxful and Remitano. " However, according to Owonibi, much of the p2p activity takes place in informal group chats on popular instant messengers, rather than on conventional platforms. “The volume of informal p2p-exchange through chats in WhatsApp or Telegram in Nigeria is enormous. I have seen young people and business people transact multimillion-dollar transactions with popular OTC brokers in these groups. ” It should be borne in mind that it is impossible to distinguish such informal p2p transactions in our dataset, so it must be admitted that the level of p2p activity in Africa is even higher than shown in the above diagram.
Artur Schaback, co-founder andThe COO of the popular peer-to-peer exchange Paxful, confirmed he is seeing similar trends and told us that his platform has grown 57% in Nigeria and 300% in Kenya over the past year. In many of these frontier markets, people cannot send money from their bank accounts to a centralized exchange, so they rely on p2p. " He also highlighted the important role of improving the user interface of peer-to-peer platforms in attracting new users to these markets over the past year: convenience of transactions ".
What are the needs of African users?satisfied with the help of cryptocurrencies purchased on p2p platforms? The first is private international transfers. Sub-Saharan Africa received at least $48 billion in private cross-border remittances in 2019, about half of which went to Nigeria, according to the Brookings Institution. While much of this money flows into Africa from Europe and North America, there is also a significant volume of cross-border private payments between African countries. However, some African countries have imposed strict restrictions on currency exported abroad. In Nigeria, for example, some banks limit outgoing international transactions to US$500. According to Shabak, this has created another use case for cryptocurrencies: “If the government strictly limits the amount of payments sent abroad, people get a little more creative and turn to cryptocurrencies.”
Blockchain analysis confirms that the share of privateCryptocurrency payments between African countries are likely to increase. The chart below shows the monthly growth in cryptocurrency payments of less than $ 1000 in both volume and number of transactions, which we see as the upper bound for estimates for private remittances sent to African countries.
Probable private cryptocurrency international payments have grown steadily since April 2020, with the exception of a drop in June 2021, the final month of the study period.
Many African users rely oncryptocurrencies and for commercial international transactions. Both Owonibi and Shabak cited several examples of African businesses paying for goods imported for sale with cryptocurrencies. “When importing goods from China to sell in Nigeria or Kenya, it can be difficult to send enough fiat money to China to complete a purchase,” Shabak says. "It often turns out to be easier to buy BTC on a peer-to-peer exchange and pay off the Chinese partner with it."
Finally, many African usersare turning to cryptocurrencies to preserve their savings in difficult economic conditions. Shabak noted that Paxful's growth in Nigeria accelerated last year during the devaluation of the local currency. This is confirmed by our data. The chart below compares the Nigerian Naira / USD exchange rate (left axis) to the p2p trading volumes of Naira on p2p platforms (right axis).
The data shows that when the value of naira falls, trading volumes in nira on the p2p exchanges increase. A similar trend is observed in Kenya.
Ovonibi shed a little more light on this, pointing out the difference in the use of cryptocurrenciesdifferent social groups in Nigeria: "I have heard many times fromyoung people: "You can't rely on the naira, it's too unstable, it's better to keep your savings in stablecoins."But this applies more to the middle class.make money on investments, buy bitcoin and other, more speculative cryptocurrencies."As Africa's middle class continues to grow, it will be interesting to see how it continuesThere are different options for using cryptocurrencies for groups with different income levels.
There is also the possibility that governmentsAfrican countries will follow the lead of countries like China and release their own digital currencies (DVCs) - blockchain-based versions of national currencies that can be stored and sent from digital wallets. Nigeria has already launched its e-naira in the fall, but it is questionable how much it can solve the problems of citizens, encouraging them to turn to cryptocurrencies. “Last week at the Clubhouse with users from Nigeria, I asked them if they were going to use e-naira,” Owonibi told us. "The overwhelming majority responded in the negative, as they expect it to be subject to the same stability and governance problems as regular naira."
Although we may not know for sure how it will goan experiment to implement e-naira, this rather self-evident example shows that CVCs can hardly be a magic pill for improving monetary policy, especially if citizens do not trust their central banks and the quality of their decisions. “The only reason to use e-naira instead of cryptocurrencies is trust in the government, which has been undermined by so many,” says Owonibi.
Global Cryptocurrency Adoption Index 2021: A Complete List
The table below provides a complete ranking for all countries in our Global Cryptocurrency Adoption Index.
DeFi Global Adoption Index 2021: The Complete List
The table below provides a complete ranking for all countries in our DeFi Global Adoption Index.
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