Southeast Asia leads the world in crypto adoption, powered by Play-to-Earn Gaming: Chainalysis
Vietnam leads the world in grassroots cryptocurrency adoption, according to blockchain analytics firm Chainalysis’ latest “Geography of Cryptocurrency” report. The country, which topped the ranking for the second consecutive year, was one of three Southeast Asian countries to top the 2022 list.
“Vietnam shows extremely high purchasing power and population-adjusted usage across centralized, DeFi (decentralized finance) and P2P (peer-to-peer) cryptocurrency tools,” the report said, citing a 2021 Statista survey that showed 21% of Vietnamese reported that they owned cryptocurrencies. On this measure, the country is closely followed by the Philippines with 20% penetration, and for both populations, gaming to earn money and remittances are the main adoption drivers, Chainalysis said.
Once again, the ranking is dominated by countries categorized by the World Bank as “lower middle income”, such as Vietnam, the Philippines, Ukraine, India, Pakistan and Thailand. In general, these are economies where the national currency is weak and there is little availability of services to send or receive the currency across national borders. In such countries, users “rely on cryptocurrency to send remittances, preserve their savings during times of fiat currency volatility, and fulfill other financial needs unique to their economies,” the report said.
Gaming drive
This year’s poll by financial company Finder shows that about 25% of Filipinos and 23% of Vietnamese participate in games to make money. The developer of the once highly successful online game Axie Infinity is also based in Vietnam, and its wild success in the first half of 2022 inspired several crypto gaming startups to try to find success in the country, Forbes reported.
Axie Infinity, a digital pet game where players raise, trade and battle virtual creatures using non-fungible tokens, or NFTs, for in-game assets became extremely popular in the region earlier this year, particularly in the Philippines, where some players managed to earn significantly more than the country’s average salary. The most successful players used their gambling profits to pay for their children’s school fees and even buy land and houses, CoinDesk reported.
Axie Infinity’s popularity fell in March, when North Korean hackers exploited the Ronin bridge, technology used by Axie to speed up the game. The attackers escaped with $625 million in assets, although the US government later managed to recover $30 million. In September, the number of active players was less than a third of what it was at the game’s peak in January, according to data from ActivePlayer.
Most of the top leaders in this year’s ranking are located in Central and South Asia and Oceania (CSAO). NFT-based gaming is popular and a strong factor attracting new users to crypto in the region, Chainalysis said. “NFT-related sites account for a majority share of DeFi-related web traffic in almost all CSAO countries.”
Overall, CSAO is “a hub for innovation in blockchain-based entertainment,” Chainalysis said. This region is a home for [the] headquarters of Web3 developer Polygon, game developers Immutable X, Stepn and Sky Mavis, creator of Axie Infinity.
Money bridges
Remittances (cross-border money transfers) are another force that attracts users to crypto. In Vietnam and the Philippines, both of which have a significant proportion of the population working abroad, remittances are an important source of income. According to the World Bank, remittances account for 5% and 9.6% of these countries’ respective GDPs. Given the high transfer fees with traditional remittance services such as Western Union, stablecoins may be a viable option.
Remittances remain a very important use case for crypto in Latin America, Chainalysis reported. In Mexico alone, crypto company Bitso alone processed around $1 billion in transfers from the US to Mexico in 2022, CoinDesk reported.
African populations are also actively using cryptocurrencies for money transfers. According to Ray Youssef, CEO of peer-to-peer crypto marketplace Paxful, the number of the company’s remittance users in Nigeria increased by 55% this year, and Kenyan users increased by even more – 140%.
For some nations, the benefit of using blockchain technology for money transfers is becoming obvious enough to take action. For example, Egypt, which derives 8% of its GDP from remittances, announced in May that it would begin work on a crypto-transfer bridge between Egypt and the United Arab Emirates, where many Egyptians work.
However, the picture was not entirely rosy. Where governments have taken a hostile stance towards crypto, the pace of adoption has measurably fallen. India and Pakistan, for example, were second and third in last year’s ranking, but fell in 2022 to fourth and sixth place respectively.
This year, India implemented a hefty 30% tax on crypto profits, along with a 1% tax on each transaction. Pakistan is moving towards a complete crypto ban.
Chainalysis’ ranking relies on web traffic data on various cryptocurrency websites provided by Similarweb, plus local experts’ observations, the company said. Chainalysis admits that using virtual privacy networks and other anonymization tools can mislead researchers. However, VPN use is not widespread enough “to meaningfully skew our data,” the company said.
