Grassroots crypto adoption to follow real-world use cases, says Chainalysis APAC policy lead

Real-world use cases are essential for crypto adoption globally and the Asia Pacific region is emerging as a key driver for innovative blockchain applications, said Chengyi Ong, head of APAC policy at blockchain intelligence firm Chainalysis, on Thursday.

During an online webinar covering aspects of the Chainalysis 2023 Geography of Cryptocurrency report, Ong spoke about growing digital asset use in south and central Asian countries such as India and Vietnam, where crypto adoption is outpacing other regions. 

Much of this growth, Ong said, is driven by real-world use cases such as blockchain-based gaming, remittances and as a protection of value against currency volatility. 

“What the data tells us is that, where fundamental drivers are strong and where digital assets have real-world value to offer, adoption will follow in some way, shape or form,” she added.

Ong and Chainalysis research director Kim Grauer, who led the webinar, spoke about the popularity of cricket-themed non-fungible tokens (NFTs) in India and the Axie Infinity blockchain game developed by Vietnamese studio Sky Mavis as examples of widely used commercial applications that have onboarded users onto crypto.

The popularity of these blockchain-based apps and services “brings on a whole new cohort of users who are then now native to crypto,” Grauer said. It is those kinds of “innovation use cases” that are “going to drive the next wave of people coming on board,” she added.

The 2023 Geography of Cryptocurrency report argues that, while there’s no way of “sugarcoating” the fact that crypto adoption globally is now considerably lower than at its peak during the second quarter of 2021, low-to-middle income countries (LMIs) are an exception. 

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That bracket includes APAC nations such as Pakistan and India and makes up some 40% of the world’s population. In terms of crypto adoption, LMIs are now back to “pre-FTX levels,” Grauer said. 

The collapse of the FTX cryptocurrency exchange in November 2022 sent shockwaves throughout the digital asset industry, leading to a US$2 trillion loss to the market. Crypto adoption has since fallen significantly in both high and low income nations, Grauer said, with many high income nations reacting to the FTX collapse with increased regulatory scrutiny.

The increased level of crypto adoption in LMIs is “extremely promising,” Chainalysis’ report suggests, particularly as uptake in LMIs develops in tandem with growing institutional interest in crypto in high income countries.

“We could see a combination of bottom-up and top-down cryptocurrency adoption in the near future if these trends hold, as digital assets fulfill the unique needs of participants in both segments,” the report argues.

New York-based blockchain analysis firm Chainalysis was co-founded in 2014 by Michael Gronager, a former executive at cryptocurrency exchange Kraken. The company is backed by some of the biggest names in finance, including investment banks Blackstone and Bank of New York Mellon, and was valued at US$8.6 billion at its most recent funding round in 2022. 

However, the firm has since gone through two rounds of layoffs, including around 150 staff at the start of October.

Chainalysis’s method for measuring crypto adoption weighs total crypto activity for a country by its purchasing power, producing a comparative metric that takes into account national income levels and population size. In an index of countries ranked according to this metric, India scored highest, with Nigeria second and eight Asia Pacific countries making up the top 20.