The US economy is the largest in the world, but it is lagging behind in cryptocurrency adoption. Here’s why.
Last year, the global appetite for cryptocurrencies was further boosted by Elon Musk, who drove a Tesla in the Dogecoin electronic vehicle race. (That’s a thing, isn’t it?) Regardless, encryption is a thing, and it’s growing rapidly globally – its adoption is up 881% over the previous year.
In its second annual Global Crypto Adoption Index, Chainalysis found that the top five countries to accept cryptocurrency were Vietnam, India, Pakistan, Ukraine and Kenya. The US slipped from sixth to eighth place in the rankings, while China slipped from fourth to thirteenth place – in large part due to the ongoing crackdown on cryptocurrencies.
Emerging economies are booming
Chainalysis shows that the index’s methodology ranks 154 countries based on three weighted, multivariate metrics. These statistical models were essential to level the playing field for emerging countries such as Togo (10th), compared to developed countries such as the UK – which have not even broken into the top 20 for crypto adoption. The purpose of the classification was to “highlight the countries with the largest adoption of cryptocurrencies by ordinary people, and focus on use cases related to individual transactions and savings, rather than trading and speculation.”
Sixteen countries in the top 20 can be categorized as emerging economies – and it should be noted that the reasons and uses driving their top ranking are quite different from those in established markets such as the United States
The researchers found that countries such as Venezuela, Nigeria, Vietnam, and Kenya ranked due to their large personal transaction numbers (P2P) (after applying per capita wealth and internet usage factors). They also found that many residents in developing economies rely on P2P crypto exchanges because they lack access to any kind of centralized exchange.
The index also indicates that many developing markets are experiencing a sharp devaluation of funds, forcing residents to convert their fiat currencies into crypto to preserve value. In addition, many of the emerging markets in the report restrict the amount of sovereign currency that can be moved outside the country. Residents of those countries are adopting cryptocurrencies to get around restrictions on cross-border money transfers.
The use of encryption is increasing all over the world
By contrast, North America, Western Europe, and East Asia have seen a decline in P2P transactions, and the increased use of cryptocurrencies in those developed regions has been primarily driven by institutional investment.
Data shows that the increase in transaction volumes for central services and the booming growth of Decentralized Finance (DeFi) has injected cryptocurrency use into countries that already have a heavy adoption, while emerging markets are experiencing exponential growth thanks to P2P actions.
The global adoption of cryptocurrencies over the past year has been explosive, and the drivers of progress reinforce that cryptocurrency is a global phenomenon that is here to stay.
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