2023's Crypto Adoption Landscape

Crypto-asset adoption has been a topic of significant interest and debate in recent years. Many have wondered which nations are leading the charge when it comes to crypto ownership embracing digital currencies, and the answers might surprise you.

According to Chainalysis' "2023 Global Crypto Adoption Index", India, Nigeria, and Vietnam have taken the lead, with lower middle-income (LMI) nations showing remarkable grassroots adoption of crypto-assets. Grassroots adoption refers to those countries where average, everyday people are embracing crypto the most.

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Understanding the Global Crypto Adoption Index Methodology

The Global Crypto Adoption Index comprises five sub-indexes, each based on countries' usage of different types of crypto-asset services. To calculate the overall rankings, Chainalysis ranks all 154 countries for which sufficient data is available on each sub-index. These rankings are then weighted by characteristics such as population size and purchasing power parity (PPP). The final step involves normalizing the scores on a scale of 0 to 1, with a higher score indicating a higher rank.

Chainalysis employs a robust methodology for estimating countries' crypto payment volumes for different crypto-asset services and protocols. This estimation is based on web traffic patterns from these services' websites, although it acknowledges that web traffic data isn't perfect due to the use of VPNs and other privacy tools. Nevertheless, Chainalysis remains confident that the data, which considers millions of transactions and billions of web visits, provides a reliable overall picture of crypto adoption. Additionally, the index undergoes validation by local crypto experts and operators worldwide, further bolstering its credibility.

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Methodology

Chainalysis looked at various indicators

1. On-chain crypto-asset value received at centralized exchanges, weighted by PPP per capita. It's a measure that factors in both the volume of crypto-assets received and the wealth of the population. 
2. On-chain retail value received at centralized exchanges, weighted by PPP per capita. This metric considers non-professional, individual crypto-asset users' activity at centralized services. It measures how much crypto-asset is transacted by these users compared to the average wealth of individuals in the country.
3. Peer-to-peer (P2P) exchange trade volume, weighted by PPP per capita and number of internet users. This sub-index ranks countries by their P2P trade volume, with a weighting system that favors countries with lower PPP per capita and fewer internet users. The goal is to highlight countries where a larger share of residents engage in P2P crypto-asset transactions.
4. On-chain crypto-asset value received from DeFi protocols, weighted by PPP per capita. This sub-index ranks countries by their DeFi transaction volume, with rankings weighted to favor countries with lower PPP per capita. It's an indicator of countries where users conduct a significant portion of their financial activities using DeFi protocols.
5. On-chain retail value received from DeFi protocols, weighted by PPP per capita. Similar to the previous sub-index, this metric focuses on the DeFi activity of non-professional, individual crypto-asset users. It ranks each country by DeFi transaction volume in retail-sized transfers, weighted to favor countries with lower PPP per capita.

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Key Takeaways from the 2023 Global Crypto Adoption Index

One striking observation from the index is the dominance of the Central & Southern Asia and Oceania (CSAO) region, with six of the top ten countries located here. The CSAO region exhibits unique usage trends and breakdowns of popular services, highlighting the diversity of crypto adoption drivers across these countries.

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The Top Three Growing Nations (by Overall Index Ranking)

1. India - Central & Southern Asia and Oceania 

India stands out as a crypto-asset adoption powerhouse, securing the top spot in the overall rankings based on crypto ownership rate. It's not only the largest crypto-asset market in its region but also the world's second-largest crypto market by raw estimated transaction volume. India's ascent in the crypto landscape is attributed to factors such as a youthful population with increasing digital literacy, a surge in crypto-asset exchanges, and innovative fintech solutions. 

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2. Nigeria - Sub-Saharan Africa 

Nigeria follows closely behind, securing the second position in the overall rankings. This Sub-Saharan African nation exhibits remarkable grassroots adoption of crypto-assets. It is characterized by a growing population that is enthusiastically becoming crypto owners, showcasing the potential of crypto-asset adoption in emerging markets.

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3. Vietnam - Central & Southern Asia and Oceania 

Vietnam takes the third spot in the global rankings. Located in the Central & Southern Asia and Oceania region, Vietnam has seen a surge in crypto-asset adoption. It's a country where individuals are actively engaging in crypto transactions, reflecting the growing enthusiasm for digital currencies in the region.

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Grassroots Trend

These nations are at the forefront of the crypto adoption movement, demonstrating the diverse ways in which crypto-assets are being embraced around the world. Their ascent in the rankings highlights the dynamic nature of crypto-asset adoption and its potential to reshape financial landscapes on a global scale.

While the crypto-asset report acknowledges a decline in global grassroots crypto adoption, it's worth noting a remarkable recovery in one crucial subset of countries: Lower middle-income (LMI) countries. LMI countries, which account for 40% of the world's population, have seen robust growth in crypto adoption. They are the only category of countries where grassroots adoption remains above pre-bull market levels from Q3 2020.

This resurgence in LMI countries is particularly promising for the future of crypto. LMI countries are often characterized by growing industries, dynamic populations, and economic development. If they indeed represent the future of crypto adoption, the growth of digital currencies may continue. Additionally, institutional investors' adoption, primarily driven by high-income countries, continues to gain momentum despite market fluctuations.

The interplay between grassroots adoption in LMI countries and institutional adoption in high-income (HI) countries may lead to a dual-directional crypto-asset adoption trend. This trend could see digital assets serving the unique needs of individuals in both segments of the global population. 

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Conclusion 

In conclusion, the "2023 Global Crypto Adoption Index" by Chainalysis provides valuable insights into the ever-evolving landscape of crypto-asset adoption in countries worldwide. As highlighted above, the fastest-growing region for adoption is Central & Southern Asia and Oceania (CSAO) - with countries like India and Vietnam ranking highly. Some emerging trends are the increasing institutional adoption in HI countries as well as retail in LMI countries. 

LMI countries play a crucial role in driving grassroots adoption and the potential for crypto-assets to become an integral part of economies worldwide. As digital currencies continue to reshape the financial landscape, it's evident that their influence knows no borders, promising a transformative future for finance on a global scale.

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