The UAE, and MENA more broadly, is quickly cementing its status as a global hub for Cryptocurrency businesses. By building out comprehensive regulation and embracing future technologies, the UAE has made itself very attractive to Web3 enthusiasts looking to establish themselves in the region.
But while anecdotes and news headlines on crypto activity in the UAE are one thing – what does the raw Blockchain data say? The beauty of the Blockchain is that no guesswork is required. There is a public ledger that displays all the value being transferred. What can the Blockchain tell us about crypto activity in MENA, and the UAE more specifically? What type of services are seeing the most activity, and how widespread is crypto adoption?
Given that Chainalysis sits on top of the most comprehensive dataset in the Cryptocurrency industry, we took it upon ourselves to examine these questions in further depth.
Gaining Insights With Blockchain Analysis
Chainalysis is the Blockchain data platform that provides data, software, services, and research. Rather than look at the Blockchain and see an indecipherable string of letters and numbers, we are able to map addresses and transactions to services. These services vary from exchanges to DeFi contracts to darknet marketplaces. Using this information, we support our customers in more than 70 countries and regions – such as the UAE. Our data platform powers investigation, compliance, and risk management tools that have been used to solve some of the world’s most high-profile cyber criminal cases and grow consumer access to Cryptocurrency safely.
Recently, Chainalysis took part in enabling UAE government employees on the fundamentals of crypto analytics. This was done in collaboration with Jahiz, the UAE platform for Future Government Talents. This initiative not only underscores the rise of Blockchain analytics as a discipline, but also the UAE’s desire to turn their nation into a leading crypto hub.
How Does MENA’s Crypto Activity Compare to the Rest of the World?
The Middle East and North Africa grew 1.51x in terms of Cryptocurrency activity, making it the world’s fastest growing region. According to our 2022 Geography Cryptocurrency index, MENA received $566bn of Cryptocurrency between June 2021 through to July 22. While we can only speculate as to the reasons, the Crypto friendly environment fostered in the UAE and other countries in the region likely played a role.
Every year, Chainalysis also publishes a Global Crypto Adoption Index to determine the level of Crypto adoption in each nation. We look at various on-chain measures – such as flows to and from Centralised exchanges – and then measure that against the country’s purchasing power.
As it stands, there are two countries from the MENA region in the top 20 – Turkey and Morocco. The UAE is not among the world’s foremost nations in terms of adoption, but this is understandable. High-income countries such as the UAE tend to have lower rates of Crypto adoption as they are economically and politically stable, leading less citizens to rely on Crypto to protect their assets.
Middle to Lower income countries often rely on Cryptocurrency to send remittances, preserve their savings in times of fiat currency volatility, and fulfill other financial needs unique to their economies. Crypto activity in the UAE is largely driven by early-adopters looking to make investments, as opposed to everyday citizens who buy Crypto out of necessity. As Crypto technology expands, don’t be surprised to see wider adoption and for the UAE to rise on this list.
How Does The UAE Compare to the Rest of MENA?
Despite its relatively small population, the UAE ranked third in the region for value of Cryptocurrency received in absolute terms. Between September 2021 and September 2022 the country received $35.23bn. In MENA, this trails only Turkey and Lebanon, whose higher Cryptocurrency activity is likely linked to economic instability. The UAE does receive more than several larger countries in the region, and is the leading nation in the Gulf.
Where do Users in the UAE Receive Most of Their Crypto From?
United Arab Emirates’ largest category of activity was with Centralised exchanges, which received 66.1% of all activity between September 2021 through to September 2022. That was less than MENA’s 69.1% going to Centralised exchanges, and also less than the 66.3% received globally. The second largest category in the United Arab Emirates was DeFi, which received 30.8%. Defi adoption in the UAE is marginally higher than the rest of MENA and the On a positive note, risky and illicit activity is lower in the UAE than the rest of the world. Illicit activity – such as interacting with darknet marketplaces – is close to non-existent. Risky activity, which includes interacting with gambling and high risk exchanges, is present at 0.3%. However, this is considerably lower than the rest of MENA at 0.9%, and also lower than the global number of 0.5%.
This is a testament to the comprehensive regulatory framework that has been built in the UAE. Due to the tight regulations in place, and the fact that services are required to use transaction monitoring solutions such as those offered by Chainalysis, criminals in the Crypto space are avoiding laundering their funds in the UAE altogether.
Breaking down the numbers month by month, we can see how inflows into UAE-based services have changed the past year. The value received reached an all time high in May of $7.6bn, and a low of $1.1bn in December 2022. The value took a significant dip from January 2022 to February 2022, but reached an annual high in May. 2022 The lowest point was in December 2022 though January 2023 did mark an uptick. We will continue to monitor Crypto activity in the nation and hope to see new heights as the industry develops.
One method to measure the grassroots level of Crypto adoption in the UAE is to look at transactions coming from UAE-based services with a value of less <$1k. As aforementioned, Crypto activity in the UAE is primarily driven by early adopters looking to make investments. However, smaller transactions are more likely to have been conducted by everyday citizens who are using Crypto for purposes such as remittance payments.
The red line in the graph above indicates the number of transactions below <$1k. As displayed, it has increased dramatically the past two years. Whereas there were just 10,737 transactions in January of 2020, by October of 2022 there were nearly 150,000. This would suggest that Crypto adoption is on the rise, and not just being used by wealthy investors.
So What Does the Data Tell us About Crypto Activity in the UAE?
The UAE has the highest level of Crypto activity in the Gulf, and surpasses most of its more populous regional neighbours. While Crypto adoption is not among the world’s highest, the dramatic rise of low value transactions since 2020 does indicate Crypto usage is very much increasing. Perhaps most importantly, Cryptocurrency crime in the UAE is lower than the global average. With its comprehensive regulatory framework and increased rate of adoption, the UAE is poised to become one of the world’s capitals of Crypto.