Cryptocurrency is becoming increasingly popular in the Middle East and North Africa (MENA) region. According to the Chainalysis 2023 Geography of Cryptocurrency report, the MENA region has the sixth largest crypto economy, with $389.8 billion in on-chain value received, accounting for 7.2% of global transaction volume.

However, this year’s transaction value still constitutes a significant drop of 17% from last year, where MENA residents received $566 billion in cryptocurrency between July 2022 and June 2023, up 48% year-over-year.

‘Almost all nations in the region recorded a decline in transactions – the UAE (17%), Qatar (26% decline), Oman (49%), Jordan (55%), and Lebanon (96%).

In contrast, Saudi Arabia’s crypto economy grew more than any other country in the past year, with transaction volume increasing by 12% year-over-year. In fact, Saudi Arabia was one of only six countries globally to see any year-over-year transaction volume growth during the study period.

Abdulmajed Alhamzah, Country General Manager for Saudi Arabia at crypto exchange Rain, said retail investors are often the largest demographic turning to crypto, seeking to diversify their portfolios. Many are eager to engage with crypto early on, anticipating significant growth in the coming years.

He also noted a rise in crypto adoption in the region and institutional interest. “Crypto is seen as an investable asset class in a diverse portfolio for clients.”

The report also showed Turkey to possess the region’s largest raw crypto transaction volume over the last year. It also ranks fourth worldwide in raw crypto transaction volume, receiving around $170 billion over the last year.

The UAE is the biggest standout in the MENA region, with nearly $34.9 billion in crypto transactions. The country has a much higher share of crypto activity on DeFi protocols than its neighbors.

The report suggests that one reason may be that the UAE has become a world crypto hub by passing innovation-friendly regulatory frameworks that allow groundbreaking crypto platforms to develop with oversight that keeps consumers safe.

The majority (42%) of transactions in the UAE were large institutional investments (over $10 million), followed by transfers for professional investments ($10,000 to $1 million) and institutional investments ($1 million to $10 million). Retail investments (up to $10,000) accounted for just 2.32% of transfers in the Emirates.

The UAE has been at the forefront of cryptocurrency regulation, with Dubai launching a blockchain strategy in 2016 and Abu Dhabi establishing the world’s first regulatory framework for cryptocurrency in 2018. 

Dubai established its own Virtual Asset Regulatory Authority (VARA) in 2022, and the UAE passed further crypto regulations at the federal level earlier this year.

“VARA has brought new momentum for forward-looking regulatory clarity in the region, which has attracted many crypto players to the UAE,” said Akos Erzse, Senior Manager for Public Policy at BitOasis.

Erzse says the UAE’s innovative and adaptable regulatory frameworks are especially important now that other countries are also starting to regulate cryptocurrency. “There’s an ongoing regulatory competition between markets looking to establish themselves as crypto hubs, and smaller markets are moving quickly.”