High inflation drives up crypto usage in the Middle East, report says

While the Middle East and North Africa (MENA) remain one of the smallest crypto markets in the world, it is also the fastest growing one, according to a blockchain research firm Chainanalysis.

MENA-based users received $566 billion in cryptocurrency from July 2021 to June 2022, a year-on-year jump of 48%, Chainanalysis said in a report released Wednesday. Latin America is the second fastest-growing crypto market at 40%, followed by North America at 36%.

MENA is home to three of the world's top 30 countries with the highest crypto adoption rate. The 2022 Global Crypto Adoption Index, published earlier by Chainanalysis, puts Turkey in 12th place, Egypt in 14th, and Morocco in 24th.

Image by Chainanalysis.

High inflation, the role of remittance payments in local economies, and the increasingly relaxed regulation explained the rising adoption of crypto in the region, according to Chainanalysis.

"In Turkey and Egypt, fluctuating cryptocurrency prices have coincided with rapid fiat currency devaluations, strengthening the appeal of crypto for savings preservation," the report said.

Inflation in Turkey surged above 83% this week – a 24-year-high. The Turkish lira and the Egyptian pound have dropped to record lows against the US dollar.

While Turkey is by far the largest crypto market in the MENA region, with its citizens receiving $192 billion in the year to June, Egypt is the fastest growing one. It saw almost 222% year-on-year growth in the volume of transactions, as opposed to Turkey's 10.5%.

Image by Chainanalysis.

In addition to inflationary pressures, the Egyptian diaspora plays a role in crypto adoption. Remittance payments, including crypto ones, amount to 8% of Egypt's GDP.

"The country's national bank has already begun a project to build a crypto-based remittance corridor between Egypt and the UAE, where many Egyptian natives work," Chainanalysis said in the report.

Meanwhile, it attributed Morocco's growing embrace of crypto to a change in the government's position, noting a move from "penalties and fines" to regulations that "emphasize innovation and consumer protection."

Wealthy member states of the Gulf Cooperation Council "seldom make it to the top of our grassroots crypto adoption index, as it weighs countries by purchasing power parity per capita, which favors poorer nations," Chainanalysis said.

It noted, however, that their part should not be underestimated, with Saudi Arabia and the UAE third and fifth largest crypto markets in the MENA region. At the same time, Dubai serves as a crypto "hub" for customers across Asia and Africa, not just Middle East, the report said.

Afghanistan, which was in the 20th spot in the Global Crypto Adoption Index last year, has fallen to the very bottom of the list after the Taliban took over and declared crypto "haram" – or forbidden.

"Under current conditions, crypto dealers are left with three options: flee the country, cease operations, or risk arrest," Chainanalysis said.

According to this year's index, Vietnam, the Philippines, and Ukraine are the top crypto adopters in the world, followed by India and the US.

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