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MIDDLE EAST & NORTH AFRICA’S CRYPTO MARKETS GROW MORE THAN ANY OTHER REGION IN
2022

October 5, 2022
October 5, 2022 | By Chainalysis Team

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This blog is an excerpt from our upcoming 2022 Geography of Cryptocurrency
Report. Sign up to reserve your copy today!

Middle East & North Africa (MENA) may be one of the smaller crypto markets in
the 2022 Global Crypto Adoption Index, but it’s also the fastest growing.
MENA-based users received $566 billion in cryptocurrency from July 2021 to June
2022, 48% more than they received the year prior. 



MENA is also home to three of the top thirty countries in this year’s index:
Turkey (12), Egypt (14), and Morocco (24). Use cases around savings preservation
and remittance payments as well as increasingly permissive crypto regulations
help explain why. 

In Turkey and Egypt, fluctuating cryptocurrency prices have coincided with rapid
fiat currency devaluations, strengthening the appeal of crypto for savings
preservation. The Turkish Lira has inflated by 80.5% in the last year; the
Egyptian Pound has weakened by 13.5%. Also significant, however, is Egypt’s
remittance market. Remittance payments account for about 8% of Egypt’s GDP, and
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. 

Egypt’s position at the intersection of growing crypto remittances and increased
inflationary pressures help explain why it’s the fastest growing crypto market
in all of MENA this year. Between July 2021 and June 2022, transaction volume in
Egypt tripled compared to the preceding year. Turkey, meanwhile, remains the
largest cryptocurrency market in the region, its citizens having received $192
billion from July 2021 to June 2022, but has seen much slower YoY growth.



In Morocco, inflation rates have been contained to a more manageable 5.3%. In
fact, the North African country’s notable levels of grassroots adoption seem to
be more tied to the government’s newly permissive crypto stance than to any
particular macroeconomic tailwinds. In 2017, the central bank of Morocco
declared that “penalties and fines” will follow any crypto transaction within
the country. But earlier this year, it struck a partnership with the IMF and the
World Bank to create crypto regulations that emphasize innovation and consumer
protection.


THE GULF COOPERATION COUNCIL AND THE RISE OF INSTITUTIONAL CRYPTO IN MENA

As key business hubs of the MENA region, the member states of the Gulf
Cooperation Council (GCC) – Saudi Arabia, Kuwait, the United Arab Emirates,
Qatar, Bahrain, and Oman – 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. Nevertheless, their role in the crypto ecosystem
should not be underestimated. Saudi Arabia, for example, is the third-largest
crypto market in all of MENA, and UAE is fifth. They also have deep ties to the
global crypto markets: in our Sub-saharan Africa and Central & Southern Asia
sections, we find that Dubai has become a hub for crypto companies that serve
customers all across Asia and Africa, not just in the Middle East. 



As Akos Erzse, Senior Manager for Public Policy at the Dubai-based crypto
exchange BitOasis, explained, the main drivers of crypto adoption in the GCC are
different from those in the rest of MENA. “When you look at markets in the GCC,
we take the view that this adoption is driven by young, tech-savvy early
adopters with relatively high disposable incomes, that are, you know, searching
for investment options, and have a conviction in crypto right now.” Moreover,
adoption is “not just on the retail or customer side, but also in the ecosystem,
with financial institutions and banks beginning to work with businesses like
us.” Erzse also emphasized the role that recent inflation has played in pushing
cryptocurrency adoption in other parts of the region.


THE TALIBAN’S CRACKDOWN BRINGS AFGHANISTAN’S CRYPTO MARKETS TO A STANDSTILL

One former MENA leader in grassroots crypto adoption has since had a major
downturn: Afghanistan.

Afghanistan placed 20th in our 2021 crypto adoption index, but since the
Taliban’s takeover last August, has fallen to the bottom of the list. Under the
Taliban’s rule, dozens of crypto dealers have been arrested, and the ruling
state agency, the Ministry for the Propagation of Virtue and the Prevention of
Vice, has equated cryptocurrency to gambling and declared it haram.

We find that in August and September – right after the Taliban’s takeover –
Afghanistan’s on-chain activity spiked to a temporary high before taking an
unprecedented nosedive. From November 2021 to today, the on-chain value received
by users based in Afghanistan has averaged less than $80,000 a month, a far cry
from the $68 million its citizens received in the average month preceding the
takeover.



The Taliban’s crackdown has had a massive chilling effect on the country’s
crypto markets. Under current conditions, crypto dealers are left with three
options: flee the country, cease operations, or risk arrest. 

As for how much of the ceased and continued crypto activity was and is
legitimate versus illicit, “A small portion of that [continued activity] is just
young people who have a few hundred bucks [available to day trade],” an
anonymous source with knowledge of the matter shared with us. “… But I would say
most of it, the only use I’ve seen is money laundering, where the source of the
money is illegal. A lot of it is either bribes or drug money.” 

As our source explained, it’s not that crypto can’t eventually be a net positive
for the region – a way to bank the unbanked, act as a store of value, or become
a means of payment. The problem is that it’s exceptionally hard to implement,
especially given Afghanistan’s small number of smartphone users and sparse
cellular networks.

> [Afghanistan] has been through so much that I can use US dollars almost
> anywhere. Even if it’s a cart on the side of the road, selling potatoes, I am
> 100% confident that they will take my dollar. They will not give me change in
> dollars, but they will always accept it, because their understanding of the
> volatility of currency is there. A crypto solution, it could work, but the
> obstacles are always overlooked when there is an initiative being planned. …
> There is such a difference between the plan and the reality that usually it
> just never works out.

Future crypto initiatives seem highly unlikely to be attempted, let alone
implemented, under the current Taliban regime, but those who manage to acquire
cryptocurrency clandestinely may be able to insulate themselves from any future
economic shocks, as we’ve seen in other countries.


THE 2022 GEOGRAPHY OF CRYPTOCURRENCY REPORT

Everything you need to know about crypto trends in MENA and beyond!

Reserve your copy now

Blockchain analysisCryptocurrencyDataGeographic trendsMENAMiddle EastNorth
Africa

Author Chainalysis Team



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