A recent report published by Chainalysis exposes the important role that regulation plays in the adoption and growth of cryptocurrencies in the MENA region.
According to this report, titled “Middle East & North Africa: Regulatory Momentum and DeFi Fuel Adoption”, a clear regulatory policy has been key to stimulating the adoption of cryptocurrencies in the Middle East and North Africa (MENA) region.
Chainalysis highlighted that this region has emerged as one of the largest cryptocurrency markets, positioning itself as the seventh largest in the world in this sector.
According to the report, the region has received an estimated $338.700 billion worth of cryptocurrencies between July 2023 and June 2024, representing 7,5% of the total global crypto transaction volume recorded in the same period.
The firm stressed that the substantial volume of operations recorded by MENA is not a coincidence, but is largely related to the increasingly clear and favorable regulatory environment in the region, which has been fostering the adoption of cryptocurrencies and digital assets, as well as decentralized financial solutions, also known as DeFi.
MENA: An evolving regulatory environment for cryptocurrencies
Türkiye, Morocco, Saudi Arabia y United Arab Emirates are currently positioned as the leading emerging cryptocurrency economies in the MENA region. According to Chainalysis, the first two dominate in terms of cryptocurrency transaction volume received, while the latter two lead the crypto market in terms of adoption, with a focus primarily on decentralized finance (DeF) platforms.
Chainalysis stressed that Saudi Arabia and the United Arab Emirates have a strong interest and involvement in the DeFi ecosystem. In the case of Saudi Arabia, the firm highlighted Its young population as an influential factor in the adoption of cryptoassets. According to the report, from a technological perspective, younger generations are more open to experimenting with emerging technologies such as cryptocurrencies, blockchain and Web3. Regarding the UAE, the firm emphasized the favorable regulatory policy that the country has implemented for the development of the crypto industry.
According to report, clarity in regulations and policies is a crucial factor that has allowed the region to attract both users and investors in the crypto and digital asset space. In particular, he singled out the United Arab Emirates (UAE) for its proactive and collaborative approach to regulating crypto assets and emerging technologies.
Dubai’s Virtual Asset Regulatory Authority (VARA) has established a framework that not only protects consumers but also encourages innovation. This approach has made the UAE a hub for cryptocurrency companies, which has also attracted a significant number of traditional financial institutions looking to integrate into the crypto ecosystem.
Regarding Saudi Arabia, Chainalysis also highlighted that the nation is in the process of developing its own regulatory framework tailored to this industry. It also noted that Qatar, which also does not have comprehensive regulation for crypto assets, has been moving in this direction. Qatar recently announced a Cryptocurrency Regime for its Qatar Financial Centre (QFCA), which seeks to foster growth and innovation. According to Chainalysis, these significant developments could transform the crypto regulatory landscape across the MENA region.
DeFi: The gateway to an alternative financial system
Chainalysis highlighted that the adoption of DeFi platforms is gaining ground in MENA, especially in countries such as Saudi Arabia and the United Arab Emirates, thanks to the fact that they offer A financial alternative for the unbanked and underbanked population, which represents a large share of the population in the region. According to the data, in 2021, less than 50% of adults in MENA had a bank account, highlighting the need for accessible financial solutions.
Chainalysis’ report noted that the value received for DeFi services in MENA grew by 74% compared to the previous year. This increase is indicative of how decentralized platforms may be providing financial services to the population without the need for intermediaries, boosting financial inclusion in the most underserved sectors.
Furthermore, Saudi Arabia’s growing involvement in DeFi activities suggests that the country is well positioned to lead in this crypto sector, especially given its young population and openness to new financial technologies.
A diversified and growing market
On the other hand, Chainalysis highlighted that the diversity in the MENA cryptocurrency ecosystem is remarkable. Even though centralized exchanges (CEXs) continue to dominate the market, The use of stablecoins and altcoins is on the rise in the regionFor example, in Turkey, high inflation has led citizens to seek refuge in more stable digital assets, driving stablecoin trading volume to record levels.
The report also noted that Turkey has now become the largest cryptocurrency market in MENA, with an annual transaction volume exceeding $136.800 billion. Crypto activity in this country is driven by the strong adoption of stablecoins, altcoins, and Bitcoin.
MENA's role in the growth of the crypto ecosystem
According to Chainalysis, the future of the cryptocurrency ecosystem in MENA looks quite promising, especially considering the regulatory advancements being implemented in the UAE and other countries in the region. The firm also indicated that as governments in the region continue to develop regulatory frameworks that balance innovation with consumer protection, we are likely to see an increase in investment and participation in the crypto sector.
In short, the combination of a favorable regulatory environment, growing DeFi adoption, and interest from traditional financial institutions are positioning MENA as a key player in the global cryptocurrency market, which is not only experiencing an increase in transaction volume but is also laying the groundwork for a more innovative, inclusive, and accessible alternative financial ecosystem for all.
