The UAE maintained over $34.8 billion in crypto transactions between July 2022 and June 2023, and Saudi Arabia registered 12 percent growth in crypto volumes, demonstrating the two Gulf nations’ resilience amid global market turmoil.
“Compared to the $42 billion the [UAE] received in the same period last year, this represents a 17 percent drop. It’s worth noting, however, that this decline is in line with the performance of global crypto and traditional financial markets,” Director of Research at blockchain analytics firm Chainalysis, Kim Grauer, told Arabian Business.
The UAE’s crypto market fared much better than other countries in the Middle East, including Qatar (down 26 percent), Oman (down 49 percent), Jordan (down 55 percent) and Lebanon (down 96 percent) during the same period.
Business has been cooling in the turbulent waters of the cryptocurrency markets over the past year. As valuations plunged, trading volumes slowed, and the frenzied enthusiasm that gripped investors at the peak of the bull run had seemingly subsided.
However, a new Chainalysis report revealed that the tide may be turning once more for digital assets in strategically important Gulf markets like the UAE and Saudi Arabia.
Could Saudi be the Gulf’s next rising star in crypto adoption?
While total transaction volumes experienced declines across most of the region in line with the worldwide industry downturn, the report suggests that some countries bucked the cooling trend. None more so than Saudi Arabia, which saw an estimated 12 percent year-over-year growth to become “one of just six countries” globally to increase activity.
“Cryptocurrencies have something of a ‘quasi-legal’ status in Saudi Arabia. On the face of it, the government prohibits local banks from processing crypto-related transactions and crypto trading is deemed illegal,” she explained.
“While international exchanges such as Binance and Coinbase aren’t allowed to operate in the country, regional exchanges enable Saudi residents to purchase cryptocurrencies, and the government hasn’t declared any penalties for such activities.”
However, despite the ambiguity, “there is an appetite for crypto among the nation’s residents.”
Against this backdrop, the kingdom was one of six countries observed by Chainalysis to record any year-on-year increase in transaction volume – a feat which Grauer sees as “especially impressive.”
The steadily growing interest demonstrates crypto’s rising significance for Saudi investors. Should authorities establish clear rules, it could unlock untapped potential by encouraging regulated platforms to set up operations and new innovative companies to enter the market.
A more mature framework similar to neighbours in the UAE may signal Saudi’s emergence as a crypto heavyweight in the Gulf region.
UAE crypto adoption grows
While total transaction values in the Emirates experienced a 17 percent decline from the prior year’s highs, Grauer was quick to qualify this downturn mirrored losses across global financial systems.
More telling was the nature of activity within the country. A staggering 67 percent of crypto transfers involved institutional or professional investments over $10,000. This points to rising interest from large organisations and wealthy individuals seeking digital asset exposure.
“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 Grauer.
“This market confidence is validation of the efforts being made by the country’s leadership to offer commendable regulatory clarity, and establish the nation as a global crypto hub.”
As the first nation in the Middle East to introduce comprehensive virtual asset laws, the UAE paved the way for other Gulf countries to follow suit and legitimise the crypto sector.
Earlier this year, the US Securities and Exchange Commission (SEC) cracked down on crypto giants Binance and Coinbase, after hardening its stance on crypto following the catastrophic collapse of FTX in 2022. This prompted a global exodus of crypto “regulation refugees,” many of whom moved to the UAE to be under the favourable regulatory oversight of the Virtual Assets Regulatory Authority (VARA).
“I think there’s a key opportunity for the UAE right now,” Chainalysis CEO and co-founder Michael Gronager, told Arabian Business at the time.
“There’s clearly a momentum and expectation that the UAE will be a good place to operate a crypto business from. There’s a specific regulator created exactly for the purpose of virtual assets which is great and actually creates a lot of clarity and hope from the industry.”
India, the Philippines, and Pakistan all ranked among the top 10 – at positions one, six and eight respectively – in Chainalysis’ Global Crypto Adoption Index. This bodes well for the UAE where these nationalities represent a significant portion of the expat population. The surging popularity among people in these nations is likely to correlate with increased crypto adoption in the UAE as well.
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