The value of cryptocurrency transactions received by the UAE reached nearly $35 billion between July 2022 and June this year, amid increasing regulatory clarity, a report by blockchain data platform Chainalysis has found.
While this represents a 17 per cent drop compared with the previous year, the UAE's crypto market fared much better than many other countries in the region, including Qatar, which reported a decline of 26 per cent, Oman (49 per cent), Jordan (55 per cent) and Lebanon (96 per cent), according to the Middle East and North Africa findings of Chainalysis’s fourth annual Geography of Cryptocurrency Report.
In Saudi Arabia, the crypto economy grew more over the past year than any other country, with a year-over-year transaction volume growth of 12 per cent, the report found.
“In fact, Saudi Arabia was one of just six countries to see any year-over-year transaction volume growth during the time period,” the Chainalysis report said.
The Mena region has the sixth-largest crypto economy in the world, with an estimated $389.8 billion in on-chain value received between last July and June. This represents nearly 7.2 per cent of global transaction volume during the period, the report added.
In March last year, Dubai adopted a law to regulate virtual assets to provide investors with a safe environment while embracing emerging technology as interest in cryptocurrencies grows.
The Virtual Assets Regulatory Authority was established by Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, under the Dubai Virtual Asset Regulation Law, the first law of its kind in the emirate.
The body aims to create an advanced legal framework to protect investors and provide international standards for virtual asset industry governance to enable responsible business growth.
In 2018, the Abu Dhabi Global Market established a regulatory framework for spot crypto asset activities.
It has been a tumultuous 12 months for the global cryptocurrency sector since the collapse of a number of large platforms including Celsius, Three Arrows Capital and Sam Bankman-Fried’s FTX, which filed for bankruptcy in the US on November 11.
Bitcoin was trading at about $26,344 on Tuesday morning.
In May, Bitcoin climbed above the $30,000 mark for the first time since June 2022, but is still down more than 50 per cent from its record high of more than $68,000 in November 2021.
Meanwhile, the Chainalysis report found that 67 per cent of cryptocurrency transactions in the UAE between July 2022 and June this year were driven by institutional investments valued at more than $1 million.
This was followed by crypto transfers for professional investments ($10,000 to $1 million), while retail investments (up to $10,000) accounted for 4.6 per cent of all transfers in the Emirates, the report found.
“The fact that by far the larger portion of crypto investments in the UAE is for institutional and professional-sized transactions indicates an eagerness from organisations and high-net-worth individuals to add cryptocurrency to their investment portfolios,” said Kim Grauer, director of research at Chainalysis.
“This market confidence is validation of the efforts being made by the country’s leadership to offer regulatory clarity and establish the nation as a global crypto hub.”
Also, the UAE was one of the only countries across the Mena region to see a higher share of crypto activity taking place on decentralised exchanges (48 per cent), rather than on centralised exchanges (46 per cent), according to the research.
“The outsized popularity of DeFi in the UAE further validates the success the country has had in passing innovation-friendly regulatory frameworks that allow groundbreaking crypto platforms to develop with oversight that keeps consumers safe,” the Chainalysis report said.
India emerged as the top cryptocurrency market in the world and difficulties around tax laws in the country do not appear to have dampened the enormous demand for digital tokens, the company’s Global Crypto Adoption Index found.
The Philippines and Pakistan ranked sixth and eighth, respectively, on the index for grassroots crypto adoption globally.
“This bodes especially well for the UAE, where these nationalities represent a significant portion of the expat population. The surging popularity among people of these nations is likely to correlate with increased crypto adoption in the UAE as well,” Ms Grauer said.
While the hype around non-fungible tokens peaked in early 2022 and has since sharply declined, the number of web traffic visits to NFT sites in the UAE exceeded four million from July 2022 to June this year, Chainalysis found.
“This retained interest in NFTs in the UAE offers businesses the opportunity to grow past the hype and start to introduce practical use cases based on this technology,” Ms Grauer said.
“NFTs have the potential to enhance consumer experiences in the UAE through their application in a diverse range of purposes, including title deeds, music festival ticket sales, charity donations and analysing gaming trends.”