Cryptocurrencies, “the digital age money”, are commonly associated with the most advanced technologies and other features of a modern developed country. However, the reality of their mass adoption indicates quite the opposite: crypto is mostly in demand in poor countries with weak economies.
The Chainalysis analytical company has put out its second report (https://blog.chainalysis.com/reports/2021-global-crypto-adoption-index) on cryptocurrencies’ popularity (mass adoption) in 154 countries of the world. The report rates them based on the cryptocurrency transaction volume among ordinary users. And we must say, the figures in the report are impressive: between the third quarter of 2019 and June 2021, global crypto adoption has grown by more than 2300%, and in 2020 – by more than 881%.
Chainalysis experts based their global cryptocurrency adoption index on three indicators. The first is the cost of cryptocurrency, weighted by purchasing power parity (PPP) per capita. The second is the so-called “on-chain retail value” weighted by PPP per capita. The third is the peer-to-peer (P2P) exchange trading volume, weighted by PPP per capita and the number of Internet users.
«We rank all 154 countries according to each of these three indicators, take every country’s ranking average across all three, and then normalize that final number on a scale of 0 to 1 to give each of them a score that determines the overall order. The closer the final score is to 1, the higher the index », – the “Methodology” section explains.
The current Chainalysis report uses a different methodology: the fourth metric, “Deposits by country, weighted against the number of Internet users”, has been removed. As a result, the report now focuses on direct exchanges of cryptocurrencies between users rather than total transaction volumes, traditionally higher in developed economies. When compiling the rating, the volume of local cryptocurrency transactions is compared with the amount of savings that the country’s average citizen has. That is why poor developing nations occupy most top spots in the ranking.
«While professional and institutional markets are crucial, we want to highlight the countries where regular people use cryptocurrencies the most and focus on scenarios involving transactions and individual savings rather than trade and speculation», — the report’s authors write.
And now to the most intriguing part: which countries are leading in Chainalysis’ “2021 Global Crypto Adoption Index” report? The top ten are Vietnam, India, Pakistan, Ukraine, Kenya, Nigeria, Venezuela, USA, Togo, and Argentina (in that order).
Ahead of everyone is Vietnam, with the maximum number of points on indicators such as non-professional trading activity, overall cryptocurrency activity, and the volume of direct exchanges between users.
In the report, one of the experts explains Vietnam’s leadership by the coincidence of several factors. Namely, a significant number of young IT professionals with no other investment opportunities, massive propensity of the Vietnamese for gambling, as well as the work of a local company called Bitrefill.
The high scores of India and Pakistan are actually really surprising. In India, the country’s authorities actively oppose all cryptocurrencies in general, routinely prohibit operations with them and even impose punishment for crypto transactions. In Pakistan, the highly conservative attitude of the authorities goes hand-in-hand with criticisms coming from religious leaders, who still cannot unequivocally answer whether cryptocurrencies fit into the Islamic concept of financial relations.
Despite all that, India and Pakistan prove that the grassroots activity of crypto users can overcome any obstacles, be they legislative or ideological.
Ukraine took 4th place in the rating, which also clearly calls for an explanation. As Stepan Krioka, a Ukrainian crypto expert, told us, many users in Ukraine invest in cryptocurrencies hoping to secure their financial future. The country’s authorities are already openly declaring that citizens who are now about 30-35 years old should no longer expect to get a pension, no matter what social taxes they pay. That is, people have to take care of their own future. They don’t trust Ukrainian banks, the country has no stock market to speak of, investments in real estate require large funds… so cryptocurrencies are what they got left. The level of education in Ukraine is relatively high, and people are well aware of what blockchain and crypto are, thus they invest quite deliberately.