Much attention has been drawn to the crypto winter, but a strong case can now be made for an imminent summer as transaction volumes steadily grow. While counter-commentators may speak of crypto prices in terms of speculation and question the currencies’ ability to be stores of value, the reality is that the outlook for cryptocurrencies is positive, especially in the Middle East and North Africa (MENA).
In Chainalysis’ 2022 Global Crypto Adoption Index, MENA was the fastest growing market at $566 billion in received funds between July 2021 and June 2022. This was 48 percent more than the previous 12-month period. The region’s rise to become a half-trillion-dollar crypto market is a testament to maturing attitudes. MENA is home to a relatively young demographic that has shown a propensity to not only try new things but to look out for them, or even demand them.
The truth is that while there are exceptions — crypto assets that thrive on the hype of a handful of influencers — crypto markets now largely align with their more traditional counterparts. The crypto winter itself can even be shown to be in lockstep with the decline in stock markets’ performance. So, while media columns and social pages may broadcast fears around cryptocurrencies being devalued by the glut of new coins that seemingly anyone can create, the on-ground reality is indeed far removed.
Money myths
In the case of “devaluation by glut”, we can look at the thousands of cryptocurrencies launched since Bitcoin’s 2009 debut and we see that Bitcoin has broadly continued to trend upwards, with none of its fluctuations occurring in proximity to the emergence of a new cryptocurrency. The same can be said of the newcomers. Some have gained acceptance and gone on to become legends; others have not. The litmus test appears to hinge more on fulfilling a market need than on the presence or arrival of other cryptocurrencies.
What Chainalysis has found is consistently recurring evidence that cryptocurrency does indeed serve the function of a store of value, which is a basic requirement for any currency, whether fiat, commodity-linked, or crypto. We can see this in action if we look to economies where hyperinflation has eroded the value of fiat systems, and hence devalued peoples’ life savings. For example, Turkey saw inflation of around 80 percent in Q3 of 2022. Around the same time, Egypt experienced a rate of about 13 percent. Cryptocurrency prices, meanwhile, proved more stable, meaning those who moved quickly and presciently could preserve their savings. Between July 2021 and June 2022 — in the run-up to this period of instability for the Lira and the Pound — crypto transaction volume in Egypt tripled compared to the preceding year. And Turkey remained the largest cryptocurrency market in the region, with citizens receiving $192 billion in the same period to June 2022.
Crypto may have proved itself to the crypto watcher, who is now convinced of its value, but others remain wary of any claims of real-world benefits. The perception (read: “myth”) is that crypto communities regard virtual coins as get-rich-quick schemes. To be fair, this might have been what drew early adopters, and there is no reason to question crypto’s ongoing role as an investment vehicle. But setting aside the counter argument that even fiat currencies are used for speculation, we may simply point to the variation in modern crypto use cases as evidence of maturity.
Crypto: Key to consumer conveniences
An important one for the expat-heavy MENA region is remittances. Foreign workers from dozens of countries send money home almost exclusively through this method. A 2022 survey showed two thirds of UAE expats sent more money to their loved ones that year than previously, and 51 percent said their recipients would have struggled without the funds. But traditional methods carry hefty fees and tend to be slow. Some 54 percent of the UAE respondents ranked 24-hour delivery as their top priority. Speed and cost-efficiency are two major selling points of cryptocurrencies.
Another mature use case is retail transactions. Here we encounter another myth: that volatility makes it impossible to set prices in crypto. One solution to this is stablecoins but they are not the only option. Chainalysis customer BitPay, for example, allows merchants to cater to crypto users even if they are using more obscure currencies like Dogecoin or Shiba Inu. But BitPay goes a step further by protecting consumers and merchants from volatility. The payment processor does this by converting the crypto funds into fiat currency as soon as the transaction is complete. Merchants can then set stable prices in the fiat currency of their choice, while the payments processes handle the conversion in real-time.
The maturity of modern crypto use cases is also evidenced in the growing interest in central bank crypto currencies (CBDCs). While the centralised nature of CBDCs is at odds with the decentralisation of cryptocurrencies (which was what made them attractive to early adopters), there is no escaping the fact that central banks now see the underlying blockchain technology of crypto as viable and beneficial. The UAE government has publicised its strategy for the Digital Dirham with the aim of driving a number of benefits for businesses and individuals — enhancing financial inclusion, accelerating the move towards a cashless society, and streamlining both domestic and cross-border payments.
Future, now
If central banks no longer see crypto as a fringe rival to fiat currencies, used mainly by tech-savvy consumers and malicious actors, then consumers and businesses too must surely now consider cryptocurrencies as mainstream. Institutions are finally on board, exploring the incorporation of crypto into their businesses and portfolios. Forward-focused governments like the UAE are nurturing crypto businesses and regulating them for future acceptance. Crypto really is a future-now technology with an impressive list of benefits that speak for themselves.
