UAE and Saudi Arabia capitalize on Crypto Activity amidst Global Market Cooling. While conventional markets face challenges, the increasing adoption of cryptocurrencies in the Gulf region indicates a shift in favor of digital assets. This trend showcases the sustained resilience of the United Arab Emirates (UAE) and Saudi Arabia, even in the face of economic downturns.
Between July 2022 and June 2023, the United Arab Emirates (UAE) recorded crypto transactions exceeding $34.8 billion, while Saudi Arabia saw a 12 percent increase in crypto trading activity. These statistics underline the resilience of both Gulf nations in the face of global market turbulence.
Kim Grauer, Director of Research at the blockchain analytics firm Chainalysis, pointed out, “Compared to the $42 billion received by the UAE in the same period last year, this marks a 17 percent decline. It’s important to note, however, that this decrease is consistent with the performance of global cryptocurrency and traditional financial markets,” as reported by Arabian Business.
Notably, the UAE’s cryptocurrency market outperformed its counterparts in the Middle East, including Qatar (down 26 percent), Oman (down 49 percent), Jordan (down 55 percent), and Lebanon (down 96 percent) over the same period.
Amid the turbulent cryptocurrency markets of the past year, business activities have been cooling down. As valuations experienced significant declines, trading volumes decelerated, and the once-frenzied enthusiasm that captivated investors during the peak of the bull run appeared to be waning.
Nevertheless, a recent report from Chainalysis suggests that a reversal of fortunes may be underway for digital assets in strategically vital Gulf markets, particularly in the United Arab Emirates (UAE) and Saudi Arabia.
Is Saudi Arabia Emerging as the Next Crypto Adoption Leader in the Gulf?
While most countries in the region saw declines in total transaction volumes in line with the global industry downturn, the report highlights some exceptions, with Saudi Arabia being the most notable. The Kingdom experienced an estimated 12 percent year-over-year growth, making it one of just six countries worldwide to witness an increase in crypto activity.
Explaining the unique Saudi situation, she noted, “Cryptocurrencies hold a somewhat ‘quasi-legal’ status in Saudi Arabia. On the surface, the government prohibits local banks from handling crypto-related transactions, and crypto trading is officially considered illegal.”
She further clarified that international exchanges like Binance and Coinbase are not permitted to operate within the country. Nevertheless, regional exchanges provide Saudi residents with the means to purchase cryptocurrencies, and the government has not imposed penalties for such activities.
Despite this legal ambiguity, there is a clear appetite for cryptocurrencies among the nation’s residents.
In this context, Saudi Arabia stands out as one of the six countries identified by Chainalysis to exhibit year-on-year growth in transaction volume—an accomplishment that Kim Grauer finds particularly impressive.
The growing interest in cryptocurrencies reflects their increasing importance to Saudi investors. Should authorities establish clear regulatory guidelines, it could unlock untapped potential by encouraging the establishment of regulated platforms and the entry of innovative companies into the market. The development of a more mature regulatory framework, similar to that of neighboring UAE, could signal Saudi Arabia’s emergence as a significant player in the Gulf region’s crypto landscape.
Rapid Expansion of Cryptocurrency Adoption in the UAE
While the total transaction values in the United Arab Emirates (UAE) saw a 17 percent decline from the previous year’s peak, it’s important to note that this downturn was in line with losses observed across global financial systems.
What’s more revealing is the nature of crypto activity within the country. A remarkable 67 percent of crypto transfers in the UAE involved institutional or professional investments exceeding $10,000. This indicates a growing interest from large organizations and high-net-worth individuals looking to include digital assets in their investment portfolios.
Kim Grauer commented on this trend, stating, “The fact that the majority of crypto investments in the UAE are for institutional and professional-sized transactions demonstrates a strong desire among organizations and high-net-worth individuals to embrace cryptocurrencies. This market confidence validates the efforts made by the country’s leadership to provide clear regulations and position the nation as a global crypto hub.”
As the first country in the Middle East to introduce comprehensive virtual asset laws, the UAE has set an example for other Gulf countries, legitimizing the crypto sector.
Earlier this year, the U.S. Securities and Exchange Commission (SEC) took action against crypto giants Binance and Coinbase, intensifying its stance on cryptocurrencies following the significant collapse of FTX in 2022. This led to a global migration of crypto businesses seeking more favorable regulatory oversight, with many relocating to the UAE under the Virtual Assets Regulatory Authority (VARA).
Chainalysis CEO and co-founder Michael Gronager emphasized the UAE’s potential, saying, “I believe there is a significant opportunity for the UAE at this moment. There is clear momentum and an expectation that the UAE will become a favorable location for operating a crypto business. The presence of a dedicated regulator specifically for virtual assets provides clarity and optimism for the industry.”
Furthermore, in Chainalysis’ Global Crypto Adoption Index, India, the Philippines, and Pakistan ranked among the top 10 countries, holding positions one, six, and eight, respectively. This is promising for the UAE, where these nationalities constitute a significant portion of the expat population. The increasing popularity of cryptocurrencies among people from these nations is likely to correlate with a rise in crypto adoption within the UAE as well.