Middle East – The Rising Star of the Crypto Market

Overview

• The Middle East is an emerging market for cryptocurrencies, with around 500,000 daily traders at present.

• In terms of regulatory environment, the UAE has the most crypto-friendly policies, while other Middle Eastern countries are gradually refining their policies, shifting from initial bans to compliance.

• In terms of chain preferences, Middle Eastern users are interested in participating in decentralized projects, familiar with on-chain DEX tools, and willing to engage in the metaverse, games, and on-chain task platforms, with a significant increase in on-chain users in recent years.

• In terms of trading preferences, institutional users in the Middle East primarily invest in core crypto assets like BTC, while retail investors have a wider range of interests and are willing to speculate on memecoins.

• In terms of centralized exchange preferences, there has been a fluctuating upward trend in traffic to centralized exchanges in the Middle East over the past year, indicating a higher demand among Middle Eastern users for centralized exchanges compared to decentralized ones. For decentralized exchanges, Middle Eastern users primarily utilize leading decentralized exchanges on various chains such as Uniswap and PancakeSwap. The most commonly used wallets include TrustWallet, Metamask, Phantom, Coinbase Wallet, and Bitget Wallet.

• Lastly, combining the above analysis, Bitget Research has made five major predictions regarding the future trends of the Middle Eastern cryptocurrency market.

Introduction

The Middle East, with its long and glorious history, was once one of the centers of ancient civilization. Its unique culture, science, and trading traditions have left a profound impact on human history. In the face of the rise of cryptocurrencies, Middle Eastern countries have not lagged behind and quickly made up for policy and industry shortcomings to become rising stars of the crypto market.

Although the prevalence of cryptocurrencies in the Middle East is not currently high, its growth rate is astonishing. The majority of Middle Eastern users participate in the crypto market through direct investments in cryptocurrencies via centralized exchanges.

This report provides a comprehensive introduction to the current state of the Middle Eastern cryptocurrency market through in-depth market research. It assists not only Middle Eastern users in finding their ecosystem positioning and like-minded communities, but also Web3 project teams and crypto institutions to better understand and expand into the Middle Eastern market.

1. Market Overview

1.1 Regional Overview

According to Wikipedia, there are 18 countries in the Middle East. In conjunction with cryptocurrency activity, this article will primarily discuss the UAE, Saudi Arabia, Egypt, Morocco, Algeria, and Jordan.

In terms of overall volume and acceptance, the Middle East's data performance is not outstanding on a global scale, with the Middle East and North Africa together accounting for about 7.2% of the global cryptocurrency volume recorded in 2023. However, due to its open policies and rapid development, the Middle East remains an extremely important part of the crypto world. Chainalysis' 2023 Adoption Index ranked Morocco, Egypt, Algeria, Saudi Arabia, Jordan, and the UAE as 20th, 35th, 47th, 57th, 66th, and 78th, respectively.

It is noteworthy that the acceptance of centralized platforms and decentralized applications varies significantly from country to country in the Middle East. Egypt, Algeria, and Jordan's rankings in terms of DeFi are much lower than their rankings for centralized platforms, Saudi Arabia and the UAE have significantly stronger global rankings in DeFi usage compared to their rankings for centralized platforms, while Morocco's data is relatively balanced, ranking in the top 20s globally in all five aspects involved in the Adoption Index.

Additionally, it's observed that in P2P trading, the UAE ranks under the top 100 globally, which may indicate that the country is less reliant on P2P for fiat currency withdrawal and deposits and has more convenient ways to access funds.

1.2 Cryptocurrency policy and cultural impact

1.2.1 Cryptocurrency policies in Middle Eastern countries

Due to varying levels of economic development and cryptocurrency adoption rates, Middle Eastern countries hold different attitudes toward cryptocurrency regulation. This section introduces the similarities and differences in the regulatory policies of Middle Eastern countries as "regulation-friendly," "policy-shifting," and "strongly regulated" types. Among the surveyed countries, the UAE is considered "regulation-friendly," countries like Saudi Arabia, Jordan, Egypt, and Morocco are "policy-shifting," and Algeria is categorized as "strongly regulated."

Regulation-friendly

The UAE is a regulation-friendly Middle Eastern country, with cryptocurrency policies including:

• The financial regulatory authority in the UAE is the Central Bank of the United Arab Emirates, which is responsible for regulating and managing the financial market. On March 9, 2022, Dubai issued Law No. 4 (the Virtual Assets Regulation Law), establishing a new regulatory authority named the Virtual Assets Regulatory Authority (VARA). The VARA's jurisdiction includes all virtual asset service providers in Dubai. By establishing free zones and the RAK DAO, the UAE has created regions friendly to cryptocurrency businesses, attracting companies, talent, and capital.

Policy-shifting

Countries in the Middle East undergoing a policy shift include Saudi Arabia, Egypt, Jordan, and Morocco, primarily reflected in the following aspects:

• Saudi Arabia: In 2018, the Saudi government declared the use of Bitcoin illegal, highlighting the potential risks associated with other cryptocurrency transactions. Nonetheless, the cryptocurrency market in the country continued to grow. By September 2022, the Saudi Central Bank hired tech entrepreneur Mohsen Al Zahrani as "Crypto Chief" to lead the digital transformation of the central banking system. Saudi Arabia has also expressed interest in diversifying its economy through nurturing Web3 and blockchain gaming projects, one of which involves a partnership with The Sandbox to explore the metaverse.

• Egypt: In 2018, the Dar al-Ifta, Egypt's primary Islamic legislator, issued a religious decree classifying Bitcoin commercial transactions as illegal. However, in 2019, the Central Bank of Egypt (CBE) announced it was drafting a bill that would only prohibit the unauthorized creation, trading, or promotion of cryptocurrencies, revealing the CBE's evolving view on digital and cryptocurrencies. In 2020, the Egyptian parliament enacted the Central Bank and Banking Sector Law to assist the digital transformation of Egypt's banking and financial sector.

• Jordan: The Central Bank of Jordan (CBJ) issued legislation prohibiting all banks, money exchange companies, financial entities, and payment service providers from facilitating any cryptocurrency transactions. Recently, Jordan expressed a positive attitude toward cryptocurrencies and blockchain technology, viewing them as opportunities for innovation and development. The CBJ has stated it encourages banks and financial institutions to explore and utilize blockchain technology and digital assets, provided they comply with relevant regulations.

• Morocco: In 2017, the Moroccan government declared cryptocurrency transactions within Morocco illegal. By June 2022, the Central Bank of Morocco prepared a draft cryptocurrency regulation bill. In January 2023, the Central Bank of Morocco published content related to the cryptocurrency draft, including "definitions related to cryptocurrencies."

Strongly regulated

Algeria is the only strongly regulated Middle Eastern country, with cryptocurrency policies including:

• Algeria: The Algerian 2018 Finance Act prohibits the use of any cryptocurrencies. It specifies the prohibition of buying, selling, using, and holding virtual currencies, characterized by the lack of physical backing for electronic products.

1.2.2 Cultural impact in Middle Eastern countries

Muslim countries in the Middle East have different policies and attitudes toward cryptocurrencies, but generally, their regulations are influenced by Islamic jurisprudence.

Islamic law has a series of regulations on financial activities, such as prohibiting usury, gambling, and transactions involving illegal and immoral behavior. Due to the high volatility and uncertainty previously experienced in the cryptocurrency market, traditional Islamic rules do not recommend Muslims participate in highly volatile cryptocurrency transactions. However, as cryptocurrencies, especially assets like Bitcoin, have become more regulated in recent years, Muslim countries' attitudes toward cryptocurrencies have begun to change.

Some Muslim countries are also striving to formulate regulations that adapt to modern financial technologies and innovations and, to some extent, accept and support the development of cryptocurrencies. For example, Dubai in the UAE plans to develop into a center of blockchain and cryptocurrency innovation, indicating openness to these emerging technologies.

1.3 Market size

In February 2023, the daily active users trading cryptocurrencies on centralized exchanges in the entire Middle Eastern region was approximately 330.000. Following the approval of spot BTC ETFs and the continuous increase in the total market cap of the cryptocurrency market, by February 2024, the daily active users trading cryptocurrencies on centralized exchanges in the Middle Eastern region reached approximately 500.000.

In February 2024, the trading DAU of several Middle Eastern countries on centralized exchanges was roughly in the range of 100,000 – 150,000 people. Notably, the population of the UAE and Morocco is about a third of Saudi Arabia and Egypt, yet their trading DAU is not significantly lower. This reflects the higher popularity and usage rate of centralized cryptocurrency exchanges in the UAE and Morocco compared to Saudi Arabia and Egypt.

Over the past year in Middle Eastern countries: Morocco saw the fastest year-on-year growth in the number of trading users, with an increase of 148%, followed by the UAE and Egypt at approximately 70%. However, the data for Saudi Arabia in February 2024 remained flat compared to February 2023, mainly because 3 of the 5 largest centralized exchanges by traffic saw a decline in traffic. This phenomenon could also be due to Saudi Arabia's growth cycle being earlier than other countries, as multiple sources indicated that Saudi Arabia had the highest year-on-year growth in cryptocurrency trading from 2022 to 2023.

2. Local User Profile

2.1 User trading habits

2.1.1 Overall user profile in Middle Eastern countries

Image: Word cloud of cryptocurrency usage habits in the Middle East

Source: Google Hot Searches

Middle Eastern users are open to cryptocurrency trading and engaging with projects, characterized by the following:

• High dependency on CEXs: Middle Eastern users are more dependent on CEXs than DEXs, as indicated by the presence of terms like "exchange" in the word cloud.

• Using cryptocurrency for transfers: The use of cryptocurrencies for transfers is relatively common among Middle Eastern users, mainly due to the rapid devaluation of local currencies and low traditional banking penetration in several Middle Eastern countries.

• Interest in memecoins: Middle Eastern users have a keen interest in speculating on memecoins, paying attention to the market's heat map, and possessing a quick grasp of the crypto market's trends.

• Attention to traditional finance: "Blackrock" becoming a hot search term among Middle Eastern users suggests an interest in the impact of TradFi behavior, such as BTC ETFs, on the crypto market.

2.1.2 Trading and interaction habits of users in Middle Eastern countries

UAE

A study by financial services firm Holborn Assets found that interest in using cryptocurrencies is growing among users in the UAE. A total of 29% of users view cryptocurrencies as a more convenient way to hold assets, 34% are cryptocurrency traders, and 22% use crypto for daily payments. In terms of investment, users in the UAE prefer BTC and ETH, and BTC is called "digital gold" by UAE users, with 72% of them investing in BTC.

In terms of interaction habits, UAE users are proficient in using DEXs for trading and lending functions and are familiar with on-chain operations. Additionally, UAE users stay updated with the latest developments in the cryptocurrency market, showing high interest in RWA, the metaverse, AI, and cross-chain bridges.

Saudi Arabia

According to a Chainalysis report, Saudi Arabia saw a 12% increase in cryptocurrency trading volume from 2022 to 2023. Saudi Arabian users invest in core cryptocurrencies like BTC and ETH in spot markets to further diversify their assets. Institutional users in Saudi Arabia are also increasingly interested in investing in cryptocurrencies.

In terms of interaction habits, the proportion of Saudi Arabian users utilizing DEXs is lower than the global average, but users in the region have shown interest in metaverse applications and NFTs. Sandbox's announcement of launching a virtual universe in collaboration with Saudi Arabia is an example of user interest.

Egypt

According to research by Triple-A, cryptocurrency adoption is relatively low in Egypt, with only 2.95% of the population having owned cryptocurrencies as of 2022. In terms of trading, Egyptian users mainly hold BTC, primarily to counter the devaluation of the Egyptian pound. Additionally, two-thirds of Egyptian users do not have a bank account, with some using cryptocurrencies for domestic and international remittance.

Due to the smaller number of user samples in Algeria, Morocco, and Jordan, aggregated results may have significant inaccuracies and are not specifically summarized.

2.2 Popular sectors and projects

2.2.1 Popular projects and sectors

UAE and Saudi Arabia user traffic for popular projects (Q1 2024)

UAE: Users primarily engage with DEXs, Web3 task platforms, and NFT trading platforms. Mainstream market websites like Dextools, DEXescreener, Poocoin, and Birdeye are quite popular. DEX trading platforms like PancakeSwap and Uniswap are particularly favored by UAE users. In terms of NFT trading platforms, OpenSea and MagicEden are highly popular, while Galxe stands out in the Web3 task platform space.

Saudi Arabia: Users show high enthusiasm for engaging in DEX trading, Web3 task platforms, NFT trading, and gaming.NFT trading mainly takes place on OpenSea and MagicEden. A smaller group of users engage with Sandbox and Axie, with Galxe and Zealy being the primary task platforms.

Egypt and Morocco user traffic for popular projects (Q1 2024)

Egypt: Users show high participation in Web3 games, DEX trading, NFTs, and task platforms.Sweat Economy is popular in Egypt, indicating the popularity of the Move to Earn (M2E) model in general. DEX websites mainly involve market websites and PancakeSwap. In terms of games, apart from Sandbox, the recently trending Pixels also garner significant attention in Egypt.

Morocco: Users have a high level of participation in NFT and DEX trading.NFT trading mainly occurs on the OpenSea and MagicEden platforms. On the other hand, there is a small group of users engaging with Sandbox and Sweat Economy.

2.2.2 Top crypto topics of interest among Middle Eastern users in the last three months

Based on Google Trends data, the interests of Middle Eastern users in cryptocurrency-related terms over the last 3 months (January 5, 2024, to April 5, 2024) have been primarily focused on:

(1) BOME:

The hype around Solana memecoins was prominent throughout Q1, and the Middle East was no exception. Pepe memecoin artist Darkfarm's BOOK OF MEME (BOME) dominated social media platforms upon its launch. The project achieved an on-chain 24-hour trading volume of over $250 million and was quickly listed on major exchanges. However, despite high levels of discussion, SLERF did not rank in any Middle Eastern countries, suggesting that Middle Eastern users' trading mainly occurs on the top centralized exchanges and substantial room for growth in DEX usage.

(2) RWA (ONDO):

BlackRock announced the launch of its first tokenized fund issued on a blockchain, marking a significant entry that revitalized the RWA segment. RWA could remain one of the most crucial narratives in this bull market cycle. Despite high search volumes for "RWA" across Middle Eastern countries, ONDO is the only token from this segment to make the list, with others like GFI and MKR not appearing. Given that ONDO was ranked the fifth most searched cryptocurrency-related term in early 2024 in Bitget Research's report on the Western European market, there are signs that ONDO may be one of the flagship tokens in this round of RWA hype.

(3) Device mining and mobile mining tokens (ICE, DePIN, Grass, and PI):

Middle Eastern users seem to have a keen interest in cryptocurrency mining, with three projects in the segment making the list:

(a) Wynd Network's flagship product, Grass. Focused on cloud computing and network sharing, the project has yet to launch its token.

(b) Mobile phone mining and Layer 1 project ICE, which has recently launched its token.

(c) Pi Network (PI), an early mobile mining project founded in 2018.

2.3 Local social media community and networks

Twitter and YouTube are the main platforms for local communities in Arab countries, with Telegram being used less frequently. Arabic is the primary language used, but English content also circulates to a certain extent.

In terms of discussion content, the degree of blockchain understanding and the focus of attention vary by country. Saudi Arabia, Egypt, and the UAE have a significant user base, covering a wide range of topics. These countries show a tendency for exchange visibility and showcasing trades, quickly catch up on trending altcoins, and have high engagement in discussions about popular exchange-listed tokens such as ENA. However, Morocco, Algeria, and Jordan, due to having smaller user bases, do not have many local influencers. Their content focus largely depends on the content creators from the other three countries.

3. Competitive Landscape and Platform Advantages

3.1 Centralized exchanges

Overall, traffic to centralized exchanges from Middle Eastern countries has been on a significant upward trend over the past year. The unique visits (UV) data for the UAE and Morocco reached 60% and 71% growth, respectively. Egypt's data showed a 25% YoY increase, whereas Saudi Arabia experienced a slight decline in traffic, possibly due to its user base's rapid growth phase being earlier compared to other countries. As mentioned previously, several sources indicated Saudi Arabia had the highest YoY growth in cryptocurrency trading from 2022 to 2023.

The difference in traffic to centralized exchanges among significant Middle Eastern countries is not significant. Despite the clear differences in total population, the monthly unique visits to centralized exchanges in the UAE, Morocco, Egypt, and Saudi Arabia all range between approximately 700,000 – 1,000,000.

Middle Eastern countries have a high dependency on global centralized exchanges, with local exchanges not breaking the top 10 in traffic volume. This may be related to the low diversity of tradable assets, poor trading depth on local exchanges, and the good availability of convenient local currency deposit and withdrawal channels on many global centralized exchanges.

February 2024 YoY growth of unique visitors to centralized exchanges in Middle Eastern countries

Note: (1) Due to the lack of mobile data for Saudi Arabia in February 2024, only desktop data is presented. Assuming the traffic structure in Saudi Arabia is similar to that of the UAE, the total UV for Saudi Arabia's web desktop and mobile would be approximately 874,721; (2) Data for Algeria and Jordan could not be collected and is therefore not presented.

3.2 Decentralized exchanges

Middle Eastern users frequently utilize decentralized exchanges, with their usage primarily focused on top decentralized exchanges on blockchains like Solana, BSC, and Ethereum, such as Uniswap, PancakeSwap, and Raydium. Decentralized exchange aggregators like 1inch and Jupiter are also used.

Most users access these decentralized exchanges directly, with some through Google search, social media links, and referrals from market websites. This indicates that Middle Eastern users place a high value on the reputation of decentralized exchanges, and once they develop a habit of using a particular platform, they tend to show a degree of brand loyalty.

Usage of decentralized exchanges among users in the UAE

UAE

DEX competitive landscape

Among Middle Eastern countries, users in the UAE have a higher proportion of decentralized exchange usage, with Uniswap, PancakeSwap, and 1inch being some of the most used DEX products. Looking at various chains, top DEXs on leading chains like BSC, Ethereum, Solana, and Cosmos show high traffic and activity. Trading habits in the UAE are gradually shifting from DEXs to aggregator products.

DEX traffic sources

Users in the UAE mainly access decentralized exchange websites through direct search, and it is worth noting that Google search is also a common entry point to decentralized exchanges for users in the UAE. CoinMarketCap, as a cryptocurrency information and news website, also has a large amount of traffic and conversions.

Usage of decentralized exchanges among users in Saudi Arabia

Saudi Arabia

DEX competitive landscape

The difference in the percentage of Saudi users trading on UniSwap, PancakeSwap, and Raydium is relatively balanced, indicating that Saudi users have a greater interest in assets on BSC, Ethereum, and Solana. Top decentralized exchanges on other chains, such as Uniswap, TraderJoe, and Osmosis, also stand out.

DEX traffic sources

Saudi users mainly access DEXs through direct login, Google search, and links on social media platforms and cryptocurrency information websites. The use of Twitter is relatively higher among Saudi users.

Usage of decentralized exchanges among users in Egypt

Usage of decentralized exchanges among users in Morocco

Egypt and Morocco

DEX competitive landscape

Trading preferences vary significantly between Egypt and Morocco. Egyptian users favor PancakeSwap, while Moroccan users prefer Jupiter. Top DEXs on other blockchains also stand out. It is worth mentioning that a higher proportion of Egyptian users utilize Astroport, indicating a keen interest in Cosmos ecosystem projects. On the other hand, Moroccan users' trading interests are primarily concentrated on the Solana chain.

DEX traffic sources

Similar to users in other Middle Eastern countries, users in Egypt and Morocco primarily access decentralized exchanges through direct login, Google search, and links on social media networks and cryptocurrency information websites. CoinGecko is more popular among Moroccan users, whereas CoinMarketCap is favored by Egyptian users.

Due to the smaller number of user samples in Algeria and Jordan, aggregated results may have significant inaccuracies and are not specifically summarized. DEX usage habits are similar to those in other Middle Eastern countries.

3.3 Wallets

Downloads of Web3 wallets in the Middle East (January 1, 2024 – March 31, 2024)

(Note: Some popular wallets, such as the Binance Wallet, share the same app with their centralized exchange, making it impossible to extract standalone traffic data, so they are not displayed in the table above.)

In terms of wallet usage, Trust Wallet, MetaMask, Phantom, Coinbase Wallet, and Bitget Wallet rank as the top 5 wallets in the Middle East.

Trust Wallet and MetaMask occupy the first and second spots, similar to many other regions. Launched in 2017, Trust Wallet enjoys a good early-mover advantage with its simple, user-friendly design that suits Middle Eastern users' habits. MetaMask also benefits from an early-mover advantage, with most EVM-compatible chain projects generally supporting it first, making these two wallets very popular in Middle East.

Due to the surge in the Solana ecosystem's popularity, Phantom, the most favored native wallet for the Solana network, has seen a significant increase in downloads, moving up to the third rank. Rumors on social media about Phantom potentially launching its token have led many users, hoping for airdrops, to preference Phantom for participating in Solana ecosystem projects.

Coinbase Wallet, ranked fourth, is backed by Coinbase. Although users in the Middle East cannot use the Coinbase exchange, the Coinbase Wallet is fully operational. In May 2023, Coinbase CEO Armstrong mentioned in an interview with Bloomberg that they are considering turning their attention to the UAE to bridge Europe and Asia. Therefore, the authority and security of Coinbase Wallet, backed by Coinbase, have made it a choice for many users in the Middle East.

Bitget Wallet, known for its fast update and iteration speed, currently supports over 90 chains. It offers users a seamless trading experience through an innovative liquidity aggregation algorithm for swaps and features like on-chain anomaly alerts and smart market trends recommendations to help users spot trending projects. Bitget Wallet's recent BWB airdrop plan and ongoing points promotion have attracted many users in the Middle East. In the NFT space, Bitget Wallet's marketplace is the first platform to allow purchasing NFTs with any cryptocurrency. Its deep understanding of user needs and quick response have brought its downloads to the fifth in the region.

Conclusion

The Middle East, with its long and illustrious history, was one of the ancient centers of civilization. Facing the global rise of the cryptocurrency market, Middle Eastern countries have reevaluated cryptocurrencies with an open and embracing attitude, making the region one of the fastest in terms of cryptocurrency adoption. This report delves into the "Market Overview," "Local Cryptocurrency User Characteristics," and "Competitive Landscape and Platform Advantages" of six Middle Eastern countries as defined by the United Nations.

From a market perspective, the overall volume and acceptance of cryptocurrencies in the Middle East are in a rapid growth phase. The "daily active users" on centralized exchanges in these six countries are about 500,000, with the UAE having the highest cryptocurrency adoption rate in the region.

From the standpoint of regulation and cultural influences, most of the surveyed countries are Muslim-majority and were initially restricted in their participation in cryptocurrency activities due to Islamic laws aimed at protecting local investors' rights. However, as core assets like Bitcoin become gradually compliant and recognized as significant alternative assets, Middle Eastern countries, led by the UAE, have gradually embraced cryptocurrencies. The UAE has become one of the most crypto-friendly countries in the world.

Middle Eastern users are open to cryptocurrency trading and engaging with projects, characterized by the following:

• A high dependency on CEXs.

• A tendency to use cryptocurrencies for transfers where traditional banking services are scarce.

• An interest in memecoins and staying abreast of market trends.

In terms of competitive landscape and platform advantages, global centralized exchanges continue to dominate the market with a more diverse and comprehensive range of services. Decentralized exchanges show little difference in data, with user habits focused on top decentralized exchanges on chains like Solana, BSC, and Ethereum. In terms of wallet usage, Trust Wallet, MetaMask, Phantom, Coinbase Wallet, and Bitget Wallet rank as the top 5 wallets in the Middle East.

Finally, based on this comprehensive study of the Middle Eastern market, Bitget Research anticipates the following developments in the Middle Eastern market for 2024, for readers' reference:

• The UAE will become the central hub for cryptocurrency talent, capital, and enterprises in the Middle East while increasing its global crypto influence.

• With the cryptocurrency market warming up and adoption among Middle Eastern users increasing, the DAU involved in crypto trading in the Middle Eastern market is expected to rise from 330,000 in 2023 to approximately 700,000 by the end of 2024.

• The adoption of various on-chain applications among Middle Eastern users will significantly increase, with "airdrop" and "on-chain mining" likely becoming hot social media topics and interest in the DePin segment continuing to grow.

• Interest in memecoin speculation will continue to rise, with the top chain DEX ecosystems becoming a popular venue for Middle Eastern users to speculate on memecoins.

• Wallets with trading aggregation features will gain more favor among Middle Eastern users.