Chainalysis, the blockchain data analytics platform, has released the results of the fourth chapter of the Geography of Crypto Report, dedicated to the Middle East and North Africa (MENA) region.
The report provides a comprehensive overview of the current state of crypto markets and their use around the world. Specifically, the data reveals that MENA, with Dubai at its center, is now the sixth largest crypto economy among all regions surveyed this year.
Summary
Middle East and North Africa embrace crypto with Dubai experience
As anticipated, the Middle East and North Africa (MENA) region ranks sixth in economic size in the crypto world based on data collected between July 2022 and June 2023, with an estimated on-chain value of $389.8 billion.
This figure constitutes about 7.2 percent of the global transaction volume during the period examined. In addition, MENA has three countries in the top 30 in this year’s index of crypto economies: Turkey in 12th place, Morocco in 20th and Iran in 28th.
However, Turkey leads in raw transaction volume, as highlighted below.
Overall, transaction volumes in MENA follow a similar distribution to other regions, both in terms of transaction size and platform type.
However, significant variation emerges among countries within the region. Not surprisingly, several maps compare some of the major activities in MENA’s top crypto economies by platform type over the past year.
One notable finding concerns the United Arab Emirates, which stands out for the significant percentage of cryptocurrency-related activity occurring through DeFi protocols, with the exception of Israel, among neighboring countries in the region.
This phenomenon could be attributed to the fact that the UAE has become a global hub for cryptocurrencies, thanks to innovation-friendly regulations that allow cutting-edge crypto platforms to develop in a regulated environment that ensures consumer safety.
These regulations have attracted many cryptocurrency entrepreneurs and enthusiasts to the region, potentially explaining the growing use of DeFi, a cutting-edge blockchain technology, in the area.
On the other hand, Turkey shows a greater preference for centralized exchanges, as its users seem to focus primarily on acquiring cryptocurrencies to protect themselves from currency devaluation.
UAE: an innovative ecosystem at the forefront of blockchain technology
As we know, the United Arab Emirates has a long history of attracting top financial talent, young tech entrepreneurs, and cutting-edge companies from around the world due to its emphasis on innovation-friendly regulations.
This nation is also renowned for pioneering the adoption of advanced technologies to improve business efficiency and the quality of life for its citizens, including blockchain technology.
The UAE’s progressive approach to blockchain dates back to 2016, when Dubai, the country’s most populous city, launched its first blockchain strategy. Since then, UAE regulators have continued to dictate industry trends.
In 2018, the Abu Dhabi Global Market (ADGM) introduced the world’s first regulatory framework for cryptocurrencies, aiming to establish futuristic regulations that promote innovation while protecting consumers, ensuring that the UAE is a driving force in the digital economy.
In 2022, Dubai created its Virtual Asset Regulatory Authority (VARA) with similar goals. Later this year, the UAE passed additional regulations at the federal level, giving flexibility to local regulators such as VARA to regulate and develop economic free zones in order to attract crypto innovation.
Regarding this, Akos Erzse, Senior Manager for Public Policy at BitOasis, a popular Dubai crypto trading platform, said the following:
“VARA has brought new momentum for forward-thinking regulatory clarity in the region, which has attracted a large number of crypto players to the UAE. There are separate rules for staking, broker-dealers, advisory services, custodians, making it easier for companies to understand what the specific regulatory requirements are for providing certain services.”
Turkey: a global hub for crypto, why?
In addition to its 12th place ranking in the Global Crypto Adoption Index, Turkey ranks fourth globally in terms of raw crypto transaction volume, registering a flow of about $170 billion in the past year.
This position puts it behind only the United States, India and the United Kingdom. Yasin Oral, CEO and founder of Turkish crypto exchange Paribu, pointed out that the wide adoption of cryptocurrencies in Turkey is not surprising, thanks to several factors such as the country’s recent macroeconomic environment and its young population’s interest in innovation and technology, explaining:
“A difficult global year was characterized by the impact of restrictive monetary policies, which also affected Turkey. Under such conditions, people tend to look for alternatives, such as cryptocurrencies, to preserve value, diversify their investment portfolios and venture into new asset classes. This behavior has led to growing adoption of cryptocurrencies, as each market cycle attracts new investors and adopters, helping to spread understanding of the promise and benefits of blockchain technology.”
Turkey has faced a significant increase in inflation, which reached nearly 60 percent in August 2023. In addition, the Turkish lira suffered a severe depreciation in 2021 following the central bank’s 100 basis point interest rate cut.
Since then, the currency has failed to recover, hitting record lows in mid-2023. Logically, the devaluation of the Turkish lira has affected interest in cryptocurrencies.
Indeed, we highlight significant spikes in USDT purchases of Turkish lira, particularly starting on March 30, when analysts predicted a significant devaluation of the lira regardless of the outcome of the May elections.
This interest continued after a steady decline, resuming in late July when the lira reached a new low of less than $0.04 and people were waiting for the central bank’s announcement on interest rates.
