The global adoption of cryptocurrency has skyrocketed over the last year when it registered a growth of 881%. As per the 2021 Chainalysis Global Crypto Adoption Index, crypto adoption in India has been the second-largest in the world over the last year.
The crypto growth story is stronger in the developing world with Vietnam leading the chart and Pakistan and Ukraine occupying the 3rd and the 4th slots.
Chainalysis is a New York-headquartered data platform which offers blockchain forensics services to government and private companies. It is the second year that Chainalysis has released its crypto adoption index. The 2021 report ranks 154 countries and uses 3 different metrics. It uses P2P exchange trading volume instead of gross transaction volume which favors developed nations.
In a blog posted on August 18, 2021, Chainalysis said that it tried to capture crypto adoption by ordinary people and focused on use cases, transactions, and savings instead of trading and speculation. Togo, Colombia, and Afghanistan figure among the top 20 countries in crypto adoption.
China and the United States, which occupied 4th and 6th places, dropped to 13th and 8th places respectively.
The high rate of crypto adoption by developing countries such as Vietnam, Kenya, Nigeria, and Venezuela is ascribed to investors’ efforts to preserve the value of their savings amid currency devaluations. They also take to cryptocurrency to send and receive remittances. Cryptocurrency is also being used for business transactions.
“Our research suggests that reasons for this increased adoption differ around the world — in emerging markets, many turn to cryptocurrency to preserve their savings in the face of currency devaluation, send and receive remittances, and carry out business transactions, while adoption in North America, Western Europe, and Eastern Asia over the last year has been powered largely by institutional investors,” the report said.
Chainalysis ascribes the rising adoption levels in emerging markets to a few key factors.
“We heard from experts that people in Vietnam have a history of gambling, and the young, tech-savvy people don’t have much to do with their funds in terms of investing in a traditional ETF, both of which drive crypto adoption,” said Kim Grauer, Chainalysis’ director of research, who put together the report.
Grauer said the case of Nigeria is different. “It has a huge commercial market for crypto. More and more commerce is done on the rails of cryptocurrency, including international trade with counterparties in China,” he said.
Countries, where capital controls are stringent, have also seen rapid crypto adoption. The example of Afghanistan underscores this theory. It is very difficult to move money in and out of Afghanistan.