According to The 2022 Geography of Cryptocurrency Report, a study done by Chainalysis, emerging economies are leading in crypto adoption. Ten of the top twenty countries are classified as lower middle income and eight are upper middle income.
The study focused on the grassroots adoption of cryptocurrencies, which concentrated on the amount spent by a person in proportion to his or her income, instead of simply relying on transaction volume. This is the reason emerging economies like Vietnam and the Philippines topped the index.
The example below will give us a better understanding of Chainalysis’ methodology.
- Individuals from Country A earn an average of $1000 and usually invest $300 into crypto, which is 30% of the typical salary.
- Individuals from Country B earn an average of $20,000 and usually invest $2000 into crypto, which is 10% of the typical salary.
From the example above Country A will be ranked higher since the percentage invested in crypto is greater. The comparison above is just a simplified explanation of Chainalysis’ technical methodology.
The study shows that the top countries are classified as lower-middle income with Vietnam and the Philippines at the top. The Table from Chainalysis will show that only 2 high-income countries are included in the top 20, namely the United States and the United Kingdom.
The 2022 Global Crypto Adoption Index Top 20
The World Bank classifies world economies into four income groups – low, lower-middle, upper-middle, and high-income countries. It is based on Gross National Income (GNI) per capita. Below is the classification by income:
- LOW-INCOME ECONOMIES – $1,085 OR LESS
- LOWER-MIDDLE INCOME ECONOMIES – $1,086 TO $4,255
- UPPER-MIDDLE-INCOME ECONOMIES – $4,256 TO $13,205
- HIGH-INCOME ECONOMIES – $13,205 OR MORE
Based on the income classification we can now clearly see the breakdown per economy type:
- Ten are lower-middle income: Vietnam, Philippines, Ukraine, India, Pakistan, Nigeria, Morocco, Nepal, Kenya, and Indonesia
- Eight are upper-middle income: Brazil, Thailand, Russia, China, Turkey, Argentina, Colombia, and Ecuador
- Two are high-income: The United States and The United Kingdom
What is driving crypto adoption in low-income countries?
To answer the question, we have to understand what crypto offers. Cryptocurrency offers a way to quickly and cheaply transfer assets. Unlike traditional bank transfers, which could cost up to $50 and sometimes take days to arrive, crypto achieves money transfers in minutes and at a fraction of the cost.
Low-income countries like the Philippines have a high number of people working overseas. These workers send billions of dollars back to their home countries. They want their transactions to be fast and cheap which is exactly what crypto is offering.
Crypto also addresses the financial difficulties of the world’s unbanked population. Vietnam and the Philippines, the top 2 countries in crypto adoption, both have more than 60% of their population categorized as having limited access to banks. The convenience of digital payments and financial transactions, which were once exclusively available to bank customers, is now available to many because of crypto. Below is a visual of the top unbanked countries.
The promise of profit is also a reason why crypto is making headway in low-income countries. Many workers lost their jobs due to the pandemic and the promise of income while playing was too good to pass up. Axie Infinity, the NFT online game made by the Vietnamese studio Sky Mavis, was made popular by its play-to-earn model. The story of a 22-year buying 2 houses just by playing sparked the interest of a lot of players aiming to make some money.
Crypto was created for everybody. It is said that Bitcoin, the first crypto first minted in 2009, was created so that ordinary people can take part in a financial system that was reserved for the elite. This is now turning into reality.
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Next – Part 2