Crypto Adoption Shifts to Emerging Markets as China, US Drop in Chainalysis Global Rankings

Crypto adoption has increased 23-fold globally over the past year with India, Pakistan, Ukraine and other emerging markets driving the surge, Chainalysis said in a report Wednesday.

In its "2021 Global Crypto Adoption Index," Chainalysis found that Chinese and U.S. positions as crypto adoption leaders have been waning amid an ongoing Chinese crackdown on crypto trading and the growing role of major financial institutions in crypto markets.

The annual study underscores two major trends; namely, that crypto adoption is accelerating quickly worldwide and that its use is shifting to markets that not long ago were more moderately active on this front, while those at the previous forefront are confronting significant changes in their regulatory and financial services landscapes.

Instead of measuring crypto trading volume, which favors countries with high levels of professional and institutional adoption, Chainalysis focused on blockchain activity by non-professional and individual crypto users. This methodology encompasses crypto adoption in more ordinary activities, including savings, rather than just trading and speculation.

Based on three metrics – on-chain value received, on-chain retail value received (value under $10,000) and peer-to-peer exchange trading volume – Vietnam, India, Pakistan, the Ukraine and Kenya were the top-five ranked countries among 154 surveyed by Chainalysis.

The total of all 154 countries’ index scores for each quarter since the second quarter of 2019 has grown by more than 2,300% at the end of Q2 2021 from Q3 in 2019.

“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,” the report said.

Vietnam, Kenya, Nigeria and Venezuela, the latter two of which are also ranked high on the index, have seen particularly large transaction volumes on peer-to-peer (P2P), adjusted by purchasing power parity (PPP) per capita. That trend has occurred because many people in those countries have limited access to centralized exchanges and rely heavily on P2P crypto exchanges as their on-ramp to crypto, according to Chainalysis.

“Many emerging markets represented here limit the amount of the national currency that residents can move out of the country,” the report added. “Cryptocurrency gives those residents a way to circumvent those limits so that they can meet their financial needs.”

By contrast, China and the U.S. dropped in the Chainalysis rankings. China, which ranked fourth last year, now ranks 13th, while the U.S., which was sixth last year, is now eighth on the list.

The main reason for both countries’ decline is that their rankings in P2P trade volume weighted for the internet-using population have dropped significantly. China plunged from 53rd to 155th, while the U.S. sank from 16th to 109th.

Chainalysis data showed that smaller, retail-sized payments of under $10,000 in crypto have mostly driven transactions on P2P exchanges, indicating that China and the U.S. have seen decreased retail interest in crypto trading.

But the reasons for decreased retail market participation are different in China versus the U.S.

For example, retail traders in China have faced more restrictions during the government's crypto trading crackdown. In the U.S., the crypto market has become more institutionalized, as more professional and large investors have jumped into crypto, according to Chainalysis.

Whether it is the retail market or the increased institutional presence in more developed countries, Chainalysis wrote that “skyrocketing” crypto adoption in the past 12 months tells that crypto has become a “truly global phenomenon.”