UAE crypto market grows 42% year-on-year

Forward-focused government regulation and increasing institutional investment boost market

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Published: Wed 25 Sep 2024, 5:09 PM

Despite a smaller population comparative to other countries in the Middle East and North Africa (Mena) region, the UAE has emerged as the region’s third largest crypto economy, receiving $34billion in cryptocurrencies between July 2023 and June 2024. This impressive 42 per cent year-on-year growth is significantly higher than the Mena average of 11.73 per cent.

Commenting on these findings, which were revealed in the 2024 edition of Chainalysis’ Geography of Crypto Report, the company’s Cybercrime Research Lead, Eric Jardine said: “The UAE continues to experience rapid growth in the crypto space, driven by a combination of regulatory innovation, institutional interest, and expanding market activity. Moreover, unlike most countries globally, the UAE’s crypto activity is growing across all transaction size brackets, signalling a more balanced and comprehensive adoption landscape.”

In the UAE, small retail (less than $1,000) and large retail ($1,000-$10,000) crypto transactions each increased by over 80 per cent. The number of professional ($10,000-$1 million) and institutional ($1 million-$10 million) sized transfers also increased by 46.30 per cent and 55.07 per cent respectively. This well-rounded growth across all value segments stands in contrast to the trend in the broader Mena region, where the majority of crypto activity was driven by institutional and professional-level activity, with 93 per cent of value transferred consisting of transactions of $10,000 or above. This suggests that a broader demographic in the UAE utilises cryptocurrencies, indicating a high degree of market maturity.

The diversity of the UAE’s crypto ecosystem was also evidenced in the significant activity that Chainalysis observed beyond Centralised Exchanges (CEXs). The total value received by DeFi services, including Decentralised Exchanges (DEXs), grew by 74 per cent compared to last year, and value received by DEXs alone grew by 87 per cent. “In many ways, DeFi represents the cutting edge of blockchain technology. So, this impressive growth in DeFi in the UAE further supports the reasoning that the country has an especially mature and advanced crypto ecosystem,” said Jardine.

Interestingly, while Bitcoin has traditionally been seen as the proxy for the crypto ecosystem as a whole, the research from Chainalysis shows that UAE investors actually have a strong preference for stablecoins. In the country, Bitcoin accounts for just 16.5 per cent of the volume of cryptocurrencies received, while the share of stablecoins stood at just over half (51.3 per cent). As the Dirham is pegged to the US Dollar, and the most popular stablecoins are also dollar pegged, the growing adoption of stablecoins likely reflects their popularity as an on-ramp to broader crypto services and trading.

“As our latest research shows, stablecoins are already the preferred crypto asset. With the clarity provided by the CBUAE we can expect further utilisation as consumers will likely soon benefit from the offerings of regulated players who innovate responsibly. With the UAE’s forward-focused regulation, larger players such as banks and major financial institutions will find it easier to integrate and accept stablecoins as part of their payment systems, fostering a more seamless financial system,” noted Arushi Goel, Policy Lead for Middle East & Africa at Chainalysis.

While the growing popularity of stablecoins bodes well for the UAE market, it is worth noting that Bitcoin did outperform all other crypto assets in year-on-year growth in the UAE, posting an over 100 per cent increase in volume of transactions. By comparison, altcoins grew by over 75 per cent and stablecoins 22.46 per cent. The transaction volume for Ethereum (ETH), which accounted for 7.8 per cent of the volume of cryptocurrencies received by the UAE, grew by 20.31 per cent. “2024 was a big year for Bitcoin as in January, the US SEC approved the launch of several BTC Exchange-Traded Funds (ETFs). Institutional investment is already a major driver of crypto market momentum in the UAE, and the data suggests that this announcement has also resonated well with these investors,” said Jardine.

“Looking ahead, the regulatory strides made in 2024 will be crucial in shaping the future of crypto in the UAE. As blockchain technology, tokenization, and cryptocurrency become more integral to the global financial landscape, the UAE — which has clearly signalled its intent to be a global crypto hub — has set a strong foundation for the ecosystem and provided industry players with the clarity to operate and innovate within the market. It will be interesting to see how these industry players then build on this and advance the nation’s crypto economy,” added Goel.