Chainalysis unveils the ranking of the countries where cryptocurrencies are the most used
On August 18, 2021, Chainalysis, the famous blockchain analysis firm, released the 2021 Global Cryptocurrency Adoption Index. This annual ranking reveals in which countries cryptocurrencies are used the most.
“The adoption of cryptocurrencies has exploded over the last twelve months, and the variation in the countries that contribute to it shows that it is a truly global phenomenon,” explains Chainalysis.
In its report, Chainalysis claims to have seen an 881% increase in the rate of adoption of digital currencies around the world between Q2 2020 and Q2 2021. This period was marked by the start of the bull run. During this bullish phase, Bitcoin (BTC) approached $ 65,000, dragging most altcoins in its wake.
At the same time, criminal activity linked to cryptocurrencies has sharply decreased. According to a Chainalysis report published last January, transactions involving illegal activities now represent only 0.34% of digital currency exchanges. Despite the rise of ransomware, illicit and fraudulent cryptocurrency transactions are dwindling.
To develop its index, the analysis company looked at a total of 154 nations. In the section dedicated to the methodology, Chainalysis explains that it focused on the following three criteria: the value of cryptocurrencies exchanged by residents on the blockchain, the value of “retail” transfers on the blockchain (only exchanges less than 100 000 dollars) and transaction volumes on peer-to-peer platforms, such as Paxful or LocalBitcoins.
With this index, Chainalysis’s goal is to “highlight the countries where cryptocurrency is most adopted by ordinary people”. De facto, the ranking does not take into account the transactions carried out by companies and institutional investors.
“We focused on use cases related to transactions and individual savings, rather than trading and speculation,” Chainalysis details in its annual report.
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Vietnam, India and Pakistan have massively adopted cryptocurrencies
At the top of the ranking is Vietnam. As a reminder, the Southeast Asian country has banned the use of cryptocurrencies as a means of payment since 2017. The State Bank has also refused to provide a license to exchange platforms operating in the territory.
India occupies the second position in the ranking. The Indian government is openly hostile to digital currencies. India regularly utters threats against investors without ever putting legislation in place.
In third position, we find Pakistan. The Islamic Republic has never imposed a clear legislative framework regarding digital currencies, but the State Bank of Pakistan strictly prohibits cryptocurrency trading.
According to Chainalysis, the popularity of cryptocurrencies in emerging countries is explained by the devaluation of the national currency. In many countries hit by the economic crisis, Bitcoin has indeed established itself as a safe haven, just like gold or real estate. Unlike fiat currencies issued by central banks, the mother of cryptocurrencies is insensitive to inflation.
“In emerging markets, many are turning to cryptocurrency to preserve their savings in the face of currency devaluation, send and receive remittances and conduct business transactions,” Chainalysis explains.
In emerging countries, residents use P2P platforms as an “access ramp” to digital assets. These platforms are particularly popular with individuals residing in countries such as Kenya, Nigeria, Vietnam or Venezuela because “they do not have access to centralized exchange platforms”, such as Coinbase or Binance. They allow you to buy cryptocurrencies from individuals.
Finally, Chainalysis highlights the plummet of China and the United States in the ranking. China, which was still in fourth place last year, has fallen to thirteenth place in the index following attempts by authorities to crack down on crypto-assets.
For its part, Uncle Sam’s country has moved from sixth to eighth place due to a decrease in volumes traded on P2P exchanges. To explain this decline, Chainalysis points to “the increasing professionalization and institutionalization of cryptocurrency trading” in the United States.
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About the author: Florian Bayard