This year’s bear market has unsurprisingly stunted the sharp rises in crypto prices seen over the last few years, and volumes of trading activity on exchanges have been massively depressed. Regardless of this, when looking at payments, which is the original use case this technology was designed for, crypto has continued to go from strength to strength. In 2022, despite all the market negativity, more and more users from emerging markets have been onboarded into crypto, driven mostly by the demand for stablecoins, and they’re continuing to use them for making cross border payments.
According to Chainalysis’ yearly report “Geography of Crypto 2022”, there has been meaningful crypto activity in 142 countries, with each country having a different driving factor to meet their specific social, political, and economic needs. We’ve taken a look at the key insights from this year’s adoption data.
Emerging markets still dominate
Emerging markets still take a big lead in crypto adoption, with Vietnam topping the chart for the second year. The continued growth seen in developing countries, even in times of market volatility, has proven that people are using crypto in everyday life, and there are genuine use cases for the wider population to use crypto for day-to-day needs.
More specifically in emerging markets, the lower middle and upper middle income countries have been found to depend on crypto to send remittances, preserve savings, and fulfil other financial needs relative to their economies. Digital assets are providing tangible benefits to people living in such volatile economic conditions.
Latin America using crypto for day-to-day purchases
LATAM has seen extreme growth of 40% from 2021-2022. However, markets in this region are particularly varied in the types of transactions they’re using crypto for, three key use cases include:
• Storing value
• Sending remittances
• Speculative investing
Trends in this market show that where there is a weak economy, crypto is used mainly for remittances, where there is high inflation, it is used as a store of value. For example in Venezuela and Argentina, where there is an inflation rate of 114% and 79% respectively, fiat currencies have lost around half their value within the last 12 months. Conversely, in Brazil where the market is developed, crypto is seen and used as a speculative investment.
MENA region burst onto scene in 2022
MENA is now the fastest growing region overall, increasing 48% since last year - Egypt and Saudi Arabia particularly stand out in the report findings. Like LATAM, there are different use cases playing out across populations, all of which are driving overall adoption within MENA. For example, in Turkey and Egypt, high adoption corresponds with the devaluation of their local fiat currency. However, in the UAE , high growth has been due to many new businesses resettling here, and it becoming a hub for crypto companies that serve customers across Asia and Africa.
Excitingly, this year we saw Morocco pass crypto regulations that emphasise innovation and consumer protection, which is in sharp contrast to their stance on crypto back in 2017, when they declared that any crypto transaction within the country would result in penalties and fines.
Sub-Saharan Africa data is deceptive
Despite Africa having a low crypto transaction volume of $100.6 billion received between July 2021 and June 2022, representing 2% of global activity, it accommodates some of the most well developed cryptocurrency markets of all regions. Stablecoin adoption boasted an increase of 7% in 2019, to 40% in 2022, highlighting the fast growth of this market. It holds the largest P2P market relative to other countries, with Nigeria and Kenya leading the way.
What’s next for crypto in 2023?
2022 was a year of lessons for the industry, but crypto adoption has been able to weather the storm. We forecast several positive developments over the next 12 months:
• Regulation in the space will likely be fast tracked - we see this as a great opportunity to rebuild trust and support crypto recovery.
• Whilst inflation is still high, we expect crypto markets to continue trading sideways for a further six-months. Once the macro global economy starts to see improvements, and interest rates stop increasing, growth will return.
• More and more users from emerging markets will continue to adopt digital assets, driven by lack of trust for local currencies, and stablecoins acting as a proxy-dollar, which they are unable to access via local banks.
• After the events of last year, we expect those seeking to participate in the crypto market will be shifting their focus towards selecting service providers and counter-parties who are regulated, with complete loss of trust for offshore unregulated offerings.
The outlook is encouraging, especially around the real reason crypto was born, to facilitate digital payments. E-commerce is increasingly believing in the technology and the cost efficiencies it offers. As its true utility is illuminated, we are confident we will see crypto payments take centre stage and uptake will accelerate for merchants, consumers and the wider business landscape.